Put cash to work with short-term bond ETFs


  • Investors interested in putting idle cash to work may consider short-term bond ETFs.
  • After the Fed’s rate hikes, cash that will go unused immediately may be able to earn higher yields than any time since 2007.1
  • Short duration bond ETFs can potentially add more income while helping you diversify where your short-term assets are held.

Looking to get more out of your cash? Consider short-term bonds, which are currently offering higher yields than any time in the past 15 years.2 Investors may be able to invest in short-term bonds with ETFs to potentially earn more income with cash they don’t need in the near future.

Americans are sitting on over $17.6 trillion in bank deposits with an additional $4.8 billion in money market funds.3 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, yields on savings accounts may not keep up with interest rate increases, and certainly trail those currently available in various bond ETFs.

Short-Term bond ETF yields vs. cash and cash alternatives

Bar chart showing that yields on short-term bond ETFs are currently higher than those of conventional savings vehicles.

Source: BlackRock, FDIC, iMoneyNet, as of 2/28/2023. Govt Money Market Funds yield is the average 1-day simple net yield for government-only money market funds. Bond ETF yields are average yield to maturity. It’s important to note that there are material differences between Savings accounts, Money Market Funds, CDs and ETFs, including investment objectives, risks, fees, and expenses. CDs are fixed income investments that generally pay a set rate of interest over a fixed time period until maturity, whereupon the original principal is typically returned plus any interest earned. Early withdrawal from CDs may result in early withdrawal fees. Most savings accounts pay compound interest, meaning earnings are added to the balance to create a larger base on which future interest is paid. Most savings accounts allow you to add or withdraw money at any time without incurring a fee. Both Savings accounts and CDs principal investments are insured by the FDIC up to applicable FDIC limits, while ETFs are not FDIC insured and may lose value. Money Market funds typically seek to maintain a net asset value of $1.00 per share, but there is no guarantee they will do so and are not FDIC insured. Most ETFs seek to track an index, before fees and expenses. ETFs trade on exchanges intraday at market price, which may be greater or less than net asset value. Transactions in shares of ETFs may result in brokerage commissions and may generate tax consequences. There can be no assurance that an active trading market for shares of an ETF will develop or be maintained. Short duration bond ETFs typically carry a higher degree of risk than the other cash alternatives and should not always be used as a substitute.


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 standardized performance and most recent month end performance, click on the fund’s ticker symbol; SGOV, SHV, TFLO.

Chart description: Bar chart showing that yields on short-term bond ETFs are currently higher than those of conventional savings vehicles.


So how much cash should you put to work in different investments? For many, it may help to think of your cash in layers, and segment it based on how soon you will need to use it. For daily cash needs to pay for living expenses like gas and groceries, bank accounts are the most flexible. These accounts are also insured, up to $250,000 per account, by the Federal Deposit Insurance Corp.

For any additional cash that will go unused immediately, however, individuals have options beyond bank accounts, including certificates of deposit (CDs)4, money market funds, U.S. Treasury bills and short-term bond ETFs. 
Given events in the banking sector in March 2023, diversifying exposure to any single financial institution can help with risk management.

Investors interested in putting idle cash to work may consider these short-term bond ETFs:


Historically, bonds have served as a way for individuals and institutions to invest idle cash. The other main roles of fixed income investments are:

  • Boost income potential: Rather than rely solely on capital appreciation to grow your portfolio, bonds can help provide regular income as an important source of return. Even U.S. Treasury bonds are now yielding 4-5%, investment grade corporates 5-6% and high yield or emerging markets bonds 7-8%.5 This income can potentially be a consistent source of returns for portfolios.
  • Equity Market Diversification: During rising rate environments, the goal of the Fed is to reduce inflation and one option to do so is raising interest rates, but rate hikes may trigger a recession or a stock market downturn. Bonds have generally tended to outperform when stocks decline6, since they pay a contractual rate of interest and a flight-to-quality may occur — meaning investors turn to less risky investments and cause the prices of Treasury bonds to increase. (A bond’s price moves in the opposite direction of its yield.)

Bonds can potentially deliver 3 benefits

Illustration of the BlackRock Bond Pyramid, which shows the three key role bonds have historically played in portfolios.

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.

Chart description: Illustration of the BlackRock Bond Pyramid, which shows the three key role bonds have historically played in portfolios.

Stepping out of cash and into the world of bond investing doesn’t have to be intimidating. Whether you are an experienced investor or reallocating to fixed income, the BlackRock Bond Pyramid can help you think through the role of bonds. This framework articulates the purpose of bonds and can help you align your goals with bond investments. iShares bond ETFs offer over 115 funds to help investors pursue their fixed income goals and objectives.


Karen Veraa, CFA

Karen Veraa, CFA

Head of U.S. iShares Fixed Income Strategy