Get back into bonds with iBonds® ETFs

• iShares® iBonds® ETFs (iBonds ETFs) are term maturity bond ETFs that are designed to mature like a bond, trade like a stock, and diversify like a fund.
• iBonds ETFs can be used to put cash to work, invest for a future purchase, or build a bond ladder. They offer an easy, scalable way to help navigate the bond market and seek to capture today’s relatively high yields for longer periods of time.
• With the current interest rate backdrop and knowing the history of what has happened when the Fed pivots from rate hikes to rate cuts, investors may want to consider stepping out of cash and into iBonds ETFs.

Term maturity bond ETFs, such as 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 (Learn more about the different types of bond ETFs).¹

iBonds invest in fixed income securities 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 make monthly distributions to investors and distribute the final 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).

Getting started with bond investing doesn’t have to be complicated. Here are three ways you can use iBonds ETFs:

• Put cash to work: With over $6 trillion in money market funds and $17 trillion in bank accounts, Americans have been stockpiling cash.² However, if interest rates drop in the future, money market funds and cash accounts will likely pay less interest.  Adding some longer maturity iBonds can diversify holdings and may offer more yield over a longer timeframe.
• Save for a future purchase: Let’s say you want to buy a home in three years or pay for a grandkid’s college tuition in the same timeframe. By investing in an iBonds ETF that matures at or prior to the expected expense, you can have that money invested rather than sitting on the sidelines.
• Build a bond ladder: A bond ladder is series of bonds that mature in consecutive calendar years. This tactic aims to minimize interest rate risk by staggering the maturity dates of each bond to potentially reduce the impact of fluctuating interest rates. 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 one per year from 2024 to 2028. Once the 2024 bond matures, you can stay invested by buying a 2029 bond with the proceeds.

Money market fund assets rose sharply in 2023, hitting a record $6 trillion as “risk-free” rates rose above 5%.³ But today’s high interest rates may not stay around forever. Furthermore, recent months have revealed the potential cost of sitting in cash — missing out on market returns.⁴

Notably, money market yields can fall rapidly when the Fed pivots from a tightening cycle to easing (Figure 1). And while the timing remains uncertain, the central bank has signaled its intention to cut rates and the market is now pricing in a possible cut in 2024 and more in 2025.⁵ We believe you may want to consider reinvesting your cash before those rate cuts happen.

Given the current backdrop and the history of what has happened when the Fed pivots from rate hikes to rate cuts, investors may consider stepping out of cash and into term maturity bond ETFs such as iBonds. You can seek access to today’s relatively high yields for longer periods of time, while limiting exposure to any single cash product. 

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 most brokerage platforms, often commission free. Or, if you’re working with an advisor, discuss how iBonds might align with your investment goals. Use iShares.com to review the latest information on bond yields and holdings.

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

• U.S. Treasuries: Issued by the federal government which are commonly considered very high quality.
• Treasury Inflation Protected Securities (TIPS): Issued by the U.S. government and can provide inflation protection with an inflation adjustment that is applied to the principal value of the bonds.
• Municipal bonds: Issued by state and local governments and typically are high in credit quality. Income from U.S. municipal bonds is typically exempt from federal taxes; some 'munis' may also be free from state and local taxes.
• Investment grade and high yield corporate bonds: 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 $45 billion invested in term maturity bond ETFs,⁶ investors are using iBonds to help manage interest rate risk, seek higher 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.