MARKET INSIGHTS

Fed Rate Cuts Coming? Seek Income with iBonds

Karen Veraa-Perry, CFA Sep 12, 2025 Fixed Income

KEY TAKEAWAYS

  • Given historical trends in fixed income markets when the Federal Reserve cuts rate, investors may consider iShares® iBonds® ETFs as part of a broader strategy to reallocate from cash.
  • iShares iBonds are term maturity bond ETFs that are designed to mature like a bond, trade like a stock, and diversify like a fund.
  • iShares iBonds ETFs can be used to put cash to work, save for a future purchase, or build a bond ladder. They offer an easy, scalable way to navigate the bond market and today’s “higher for longer”1 yield environment.

USE iBONDS ETFs TO SEEK YIELDS

With over $7 trillion in money market funds and $24.5 trillion in bank accounts, Americans have been stockpiling cash.2 However, money market funds and cash accounts will likely pay less interest when the Federal Reserve begins cutting rates again. 

The FOMC is widely expected to cut rates by 25 basis points at its September 17 meeting and market consensus is anticipating additional rate cuts in the final months of 2025.3

Investors may seek to get ahead of the Fed’s expected rate cutting cycle by using iShares iBonds term maturity ETFs. Adding some longer maturity iBonds can diversify your holdings and may offer more yield over a longer time frame.

iBonds ETFs may out-yield cash alternatives

Yields as of 6/30/2025

Bar chart illustrating how iShares iBonds Treasury ETFs offer higher yields vs. the average savings account, 12-month certificate of deposit, or money market funds.

Source: BlackRock, FDIC Bloomberg and iMoneyNet as of 6/30/2025. ETF yields represent 30-day SEC yields. National average savings account and national average 12-month certificate of deposit (CD) calculated by FDIC. Government money market yield represents the 30 day net yield for government and agency money market funds. An investment in short duration bond ETFs is not equivalent to and carries a higher degree of risk than an investment in a money market fund. Money market funds typically seek to maintain a net asset value of $1.00 per share. iShares ETFs do not have these features. Performance data represents past performance and does not guarantee future results. Investment return and principal value will fluctuate with market conditions and may be lower or higher when you sell your shares. Current performance may differ from the performance shown. For most recent month-end performance see www.iShares.com. For standardized performance, click IBTF, IBTG, and IBTH.

Chart description: Bar chart illustrating how iShares iBonds Treasury ETFs offer higher yields vs. the average savings account, 12-month certificate of deposit, or money market funds.

WHAT ARE iBONDS ETFs?

iShares iBonds ETFs are designed to mature like a bond, trade like a stock, and diversify like a fund. BlackRock launched the first term maturity ETFs in 2010 focused on municipal bonds and has since expanded the suite to include term maturity ETFs that hold U.S. Treasuries, Treasury Inflation Protected Securities (TIPS), investment grade corporate bonds and high yield bonds.

iBonds invest in bonds that mature in the calendar year in the fund’s name. For example, the iShares iBonds Dec 2026 Term Corporate ETF (Ticker: IBDR) holds investment grade corporate bonds that mature in 2026. The fund aims to offer monthly distributions and investors will receive a final distribution equivalent to the fund net asset value (NAV) in mid-December 2026 after the last bond in the ETF matures. (Maturity is the date when the bond issuer is obligated to repay the bond’s original — or principal — value to bondholders).

STEP OUT OF CASH AND INTO A BOND LADDER

Stepping out of cash could have potential benefits as markets are increasingly convinced short-term interest rates may decline in the near-to-intermediate term. Fed members project the fed funds rate will fall to 3% in 2007 from the current range of 4.25-4.50%.4

One way to step out of cash is to build a bond ladder. A bond ladder is a series of bonds that mature in consecutive calendar years. When the shortest-duration bonds mature, you can either spend the proceeds or reinvest them in new bonds that mature in the latest year of your bond ladder. For example, to set up a 5-year bond ladder with $1,000 to invest, you would buy five bonds for $200 each that mature in 2026 to 2030. Once the 2026 bonds mature, you can stay invested by buying a 2031 bond with the proceeds.

iBonds can be used in place of individual bonds to quickly build a bond ladder. Each iBond ETF holds many individual bonds and can help add diversification. For example, a 5-year (2026-2030) corporate iBonds ladder provides exposure to 3,200 corporate bonds.5 And a 5-Year municipal iBonds ladder (2026-2030) would provide exposure to over 6,000 municipal bonds.6

In addition to putting cash to work and building bond ladders, here are additional ways you can use iBonds ETFs:

  • Save for a future purchase: Let’s say you want to buy a home in three years or pay for a child’s college tuition over the next four years. This money could be invested in iBonds ETFs. The fund will then mature and your investment will be made available in the year indicated in the fund’s name.
  • Protect Purchasing Power: Inflation is still hovering above 2.7%.7 If you are not at least earning this yield on your savings, then you are likely losing purchasing power over time. TIPS iBonds offer exposure to US Treasury securities whose principal adjusts with monthly changes in the Consumer Price Index. If inflation continues to increase, the bond’s principal payment will rise to account for this change.

5-year corporate bond ladder

How to build a bond ladder
Caption:

Illustration showing how iShares iBonds can be used to build bond ladders.
        
2026IBDR
1 year
maturity		IBDS
2 year
maturity		IBDT
3 year
maturity		IBDU
4 year
maturity		IBDV
5 year
maturity
MaturityReinvest
2027 IBDS
1 year
maturity		IBDT
2 year
maturity		IBDU
3 year
maturity		IBDV
4 year
maturity		IBDW
5 year
maturity
MaturityReinvest
2028 IBDT
1 year
maturity		IBDU
2 year
maturity		IBDV
3 year
maturity		IBDW
4 year
maturity		IBDX
5 year
maturity
        
Equal weight each iBonds
over your time horizon		Seek higher yields
before interest rates fall		   
Monthly IncomeEasy to buy and sell on exchange
without early redemption penalties		   

Source: BlackRock.

This information should not be relied upon as research, investment advice or a recommendation regarding the funds or any security in particular. This information is strictly for illustrative and educational purposes and is subject to change.

CONCLUSION

As noted above, iBonds invest in a variety of different bond types:

  • US Treasuries, bonds issued by the federal government which are commonly considered very high quality.
  • Treasury Inflation Protected Securities (TIPS), which are issued by the U.S. government and provide inflation protection with an inflation adjustment that is applied to the principal value of the bonds.
  • Municipal bonds, which are issued by state and local governments and typically are high in credit quality. Income from U.S. municipal bonds is exempt from federal taxes; some 'munis' are also free from state and local taxes.
  • Investment grade and high yield corporate bonds, which are issued by companies. Corporate bonds often have more credit risk, meaning a higher possibility of default, and typically offer more yield than U.S. Treasuries with similar maturity dates.

With over $61 billion8 invested in term maturity bond ETFs, investors are using iBonds to help manage interest rate risk, seek yields and add diversification to portfolios. The higher rate environment won’t stick around forever. iBonds offer an easy, scalable way to help navigate the bond market.

To get started, first pick your time horizon or calendar year. Select a part of the bond market based on your risk tolerance. iBonds are available through any brokerage platform, often commission free. Or if you’re working with an advisor, explore with them how iBonds may fit your investing goals.

FEATURED FUNDS

  • iShares ETFs are available to purchase through a brokerage account or with a financial advisor.

    Buy through your brokerage

    iShares funds are available through online brokerage firms. All iShares ETFs and ETPs trade commission free online through Fidelity.

    By clicking on the button below, you will leave BlackRock’s website.

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    Contact your advisor

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    Carefully consider the Funds' investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds' prospectuses or, if available, the summary prospectuses, which may be obtained by visiting the iShares ETF and BlackRock Fund prospectus pages. Read the prospectus carefully before investing. Investing involves risk, including possible loss of principal.

    Any links to third-party websites are provided for use at your own discretion. Each third party is solely responsible for the content presented and availability of its website. BlackRock does not control, monitor or maintain third-party websites, their content or the products/services they offer. Content may change without notice. When you leave BlackRock’s website and enter a third-party website, you will be subject to that site’s terms, policies and/or notices, including those related to privacy and security, as applicable. Please review those policies and notices on the third-party website.

    Before engaging Fidelity or any broker-dealer, you should evaluate the overall fees and charges of the firm as well as the services provided. Free commission offer applies to online purchases of select iShares ETFs in a Fidelity account. The sale of ETFs is subject to an activity assessment fee (from $0.01 to $0.03 per $1,000 of principal). For iShares ETFs, Fidelity receives compensation from the ETF sponsor and/or its affiliates in connection with an exclusive long-term marketing program that includes promotion of iShares ETFs and inclusion of iShares funds in certain Fidelity Brokerage Services platforms and investment programs. Please note, this security will not be marginable for 30 days from the settlement date, at which time it will automatically become eligible for margin collateral. Additional information about the sources, amounts, and terms of compensation can be found in the ETF’s prospectus and related documents. Fidelity may add or waive commissions on ETFs without prior notice.

    The Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).

    ©2024 BlackRock, Inc or its affiliates. All Rights Reserved. BLACKROCK, iSHARES, iBONDS, LIFEPATH, ALADDIN and the iShares Core Graphic are trademarks of BlackRock, Inc. or its affiliates. All other trademarks are those of their respective owners.

    iCRMH1124U/S-3985892

  • iShares ETFs are available to purchase through a brokerage account or with a financial advisor.

    Buy through your brokerage

    iShares funds are available through online brokerage firms. All iShares ETFs and ETPs trade commission free online through Fidelity.

    By clicking on the button below, you will leave BlackRock’s website.

    Buy now on Fidelity

    Contact your advisor

    Contact a financial professional to discuss how iShares ETFs and ETPs can fit in your investment portfolio.

    Carefully consider the Funds' investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds' prospectuses or, if available, the summary prospectuses, which may be obtained by visiting the iShares ETF and BlackRock Fund prospectus pages. Read the prospectus carefully before investing. Investing involves risk, including possible loss of principal.

    Any links to third-party websites are provided for use at your own discretion. Each third party is solely responsible for the content presented and availability of its website. BlackRock does not control, monitor or maintain third-party websites, their content or the products/services they offer. Content may change without notice. When you leave BlackRock’s website and enter a third-party website, you will be subject to that site’s terms, policies and/or notices, including those related to privacy and security, as applicable. Please review those policies and notices on the third-party website.

    Before engaging Fidelity or any broker-dealer, you should evaluate the overall fees and charges of the firm as well as the services provided. Free commission offer applies to online purchases of select iShares ETFs in a Fidelity account. The sale of ETFs is subject to an activity assessment fee (from $0.01 to $0.03 per $1,000 of principal). For iShares ETFs, Fidelity receives compensation from the ETF sponsor and/or its affiliates in connection with an exclusive long-term marketing program that includes promotion of iShares ETFs and inclusion of iShares funds in certain Fidelity Brokerage Services platforms and investment programs. Please note, this security will not be marginable for 30 days from the settlement date, at which time it will automatically become eligible for margin collateral. Additional information about the sources, amounts, and terms of compensation can be found in the ETF’s prospectus and related documents. Fidelity may add or waive commissions on ETFs without prior notice.

    The Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).

    ©2024 BlackRock, Inc or its affiliates. All Rights Reserved. BLACKROCK, iSHARES, iBONDS, LIFEPATH, ALADDIN and the iShares Core Graphic are trademarks of BlackRock, Inc. or its affiliates. All other trademarks are those of their respective owners.

    iCRMH1124U/S-3985892

  • iShares ETFs are available to purchase through a brokerage account or with a financial advisor.

    Buy through your brokerage

    iShares funds are available through online brokerage firms. All iShares ETFs and ETPs trade commission free online through Fidelity.

    By clicking on the button below, you will leave BlackRock’s website.

    Buy now on Fidelity

    Contact your advisor

    Contact a financial professional to discuss how iShares ETFs and ETPs can fit in your investment portfolio.

    Carefully consider the Funds' investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds' prospectuses or, if available, the summary prospectuses, which may be obtained by visiting the iShares ETF and BlackRock Fund prospectus pages. Read the prospectus carefully before investing. Investing involves risk, including possible loss of principal.

    Any links to third-party websites are provided for use at your own discretion. Each third party is solely responsible for the content presented and availability of its website. BlackRock does not control, monitor or maintain third-party websites, their content or the products/services they offer. Content may change without notice. When you leave BlackRock’s website and enter a third-party website, you will be subject to that site’s terms, policies and/or notices, including those related to privacy and security, as applicable. Please review those policies and notices on the third-party website.

    Before engaging Fidelity or any broker-dealer, you should evaluate the overall fees and charges of the firm as well as the services provided. Free commission offer applies to online purchases of select iShares ETFs in a Fidelity account. The sale of ETFs is subject to an activity assessment fee (from $0.01 to $0.03 per $1,000 of principal). For iShares ETFs, Fidelity receives compensation from the ETF sponsor and/or its affiliates in connection with an exclusive long-term marketing program that includes promotion of iShares ETFs and inclusion of iShares funds in certain Fidelity Brokerage Services platforms and investment programs. Please note, this security will not be marginable for 30 days from the settlement date, at which time it will automatically become eligible for margin collateral. Additional information about the sources, amounts, and terms of compensation can be found in the ETF’s prospectus and related documents. Fidelity may add or waive commissions on ETFs without prior notice.

    The Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).

    ©2024 BlackRock, Inc or its affiliates. All Rights Reserved. BLACKROCK, iSHARES, iBONDS, LIFEPATH, ALADDIN and the iShares Core Graphic are trademarks of BlackRock, Inc. or its affiliates. All other trademarks are those of their respective owners.

    iCRMH1124U/S-3985892

Photo: Karen Veraa-Perry, CFA

Karen Veraa-Perry, CFA

Head of U.S. iShares Fixed Income Strategy

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