Short-term bonds are "both safe and profitable"! BlackRock's cash-like ETF scale surpasses that of the star long-term bond ETF for the first time
BlackRock's 0-3 Month Treasury ETF (SGOV) has become a safe haven for cautious cash holders, managing assets exceeding $50 billion, surpassing the company's star product—the 20+ Year Treasury ETF (TLT)—for the first time. This reversal reflects that ETF investors are embracing low-volatility short-term bonds while steering clear of the difficult-to-price risks associated with long-term monetary policy
Investor preference for short-term bonds continues to rise, with BlackRock's cash ETFs outperforming the "notorious" long-term bond trades.
On July 9, BlackRock's 0-3 Month Treasury ETF (SGOV) saw its assets surpass those of the company's star product—the 20+ Year Treasury ETF (TLT)—for the first time.
Reports indicate that the over $50 billion in SGOV signifies its emergence as a safe haven for cautious cash holders, reflecting that ETF investors are embracing low-volatility short-term bonds while steering clear of the hard-to-price long-term monetary policy risks.
Against the backdrop of the Federal Reserve maintaining interest rates and inflation remaining robust, many investors are content to hold cash and earn over 4%. Over the past five years, SGOV has provided modest but stable returns, with inflows into SGOV ranking among the top for 2025.
Similar funds under State Street Corporation also set asset size records earlier this year, and the allure of cash has driven money market fund assets to a historic high of over $7 trillion. In contrast, TLT attracted billions in inflows but has seen its value decline by about 40%, earning it the infamous title of "widowmaker" in the ETF world.
TLT was once the most actively traded bond ETF, favored by those looking to make aggressive bets on interest rate fluctuations. BlackRock's Rick Riede is one of the investors anticipating a steepening yield curve. In an interview last week, he stated:
Currently, the stock market offers more opportunities than long-term Treasuries, and there will come a time when we will want to hold some duration (TLT allows you to overweight duration), but I don't think that's necessary today.
Strategas Senior ETF Strategist Todd Sohn noted:
The preference for low volatility and stable returns is growing. Many investors are now realizing that holding long-term bonds comes with significant volatility.
Sohn emphasized that the volatility level of long-term bond funds is comparable to that of the S&P 500:
Unless you are extremely pessimistic about the economy and believe interest rates will collapse, the extra volatility of TLT is not worth it
