Bond market opportunities meet ETF innovation

Here are some examples of how investors can use the toolkit accessible to them to harness this opportunity in fixed income and build portfolios for the future.

Differentiated Income Opportunities

The iShares Flexible Income Active ETF (BINC) seeks potential opportunity for higher yield and diversification away from major fixed income sectors. (See: Navigate market volatility with active & flexible investing.)

Actively managed by an experienced team led by Rick Rieder, BlackRock’s Chief Investment Officer of Global Fixed Income, BINC targets so-called “plus” sectors of the fixed-income market. "Plus" refers to fixed income asset classes outside of the "core" universe of U.S. Treasury securities, U.S. agency mortgages, and U.S. investment grade corporate debt.

BINC offers investors access to hard-to-reach segments of the bond market — including U.S. high yield corporate debt, securitized products, and global debt — with the easy access of investing in an ETF.

iShares active ETFs leverage the expertise of BlackRock portfolio managers to seek superior market returns and achieve targeted outcomes. They are powered by the strength and scale of Blackrock — the world’s largest ETF provider and a global leader in active management.⁶

Capital Preservation

Americans are sitting on nearly $18 trillion in bank deposits with an additional $7 trillion in money market funds.⁷ Bonds ETFs can be used to put cash to work, mitigating risk while helping provide more yield than idle cash.

An investment in fixed income funds is not equivalent to and involves risks not associated with an investment in cash or cash equivalents. That said, historically, bonds have tended to outperform cash when interest rates are decreasing; since it began cutting rates in September 2024, the Federal Reserve has cut the fed funds rate from 5.25-5.50% to 4.25-4.50%.⁸ The Fed’s Summary of Economic Predictions shows policymakers expect the key lending rate will continue falling in 2025 to below 4%.⁹

Treasury bonds are the largest and most liquid part of the bond market.¹⁰ iShares offers a broad range of Treasury bond ETFs, including the iShares 0-3 Month Treasury Bond ETF (SGOV).

Investors interested in putting idle cash to work may consider SGOV, which invests in U.S. Treasury bonds with remaining maturities less than or equal to three months.

Seek Potential Income

Investors looking to enhance portfolio income and performance potential may consider the iShares Broad USD High Yield Corporate Bond ETF (USHY). This ETF seeks to track the investment results of an index composed of U.S. dollar-denominated, high yield corporate bonds.

High yield corporate bonds are rated BB+ or lower. These bonds are typically issued by smaller companies with potentially riskier business models or by governments with a potentially lower ability to repay investors. To compensate investors for such risks, these bonds typically offer higher yields than investment grade corporate bonds or Treasuries with similar maturities.

Both USHY and SGOV are examples of index ETFs, which seek to track the performance of a benchmark index, the ICE BofA US High Yield Constrained Index and the ICE 0-3 Month US Treasury Securities Index, respectively.

Bond ETF innovation has opened doors to investors to gain access to exposures previously accessible only to large, institutional investors — if at all. The convergence of an evolved fixed income ETF toolkit and the current yield environment presents a generational opportunity in fixed income, allowing investors to harness and tailor their risk in ways that were not possible before.

From broad market exposures to precise pockets, iShares fixed income ETFs are at the forefront of this innovation — offering efficient building blocks and more modern, precise ways to reach nearly every part of the fixed income market. We aim to keep innovating so we can offer our clients more ways to pursue their investment goals and be able to navigate a quickly changing market.