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Although Treasury yields jumped higher Monday, bond ETFs remained the best non-leveraged fund category over the past week as Trump’s “Liberation Day” tariffs sent stock prices tumbling.
Amid all the tariff-related market volatility, finding an exchange-traded fund that has remained positive without using an inverse leveraged strategy is almost as challenging as navigating the market itself.
While the stock market, as measured by the Vanguard S&P 500 ETF (VOO), dropped more than 9% in the past five trading days, the bond market has remained resilient, with many fixed income funds still in positive territory.
Until Monday’s Treasury yield spike, long-term Treasury bond ETFs like the iShares 20+ Year Treasury Bond ETF (TLT) rose 3% as fixed-income investors priced in the increasing likelihood of a recession, which would open the door to more rate cuts by the Federal Reserve in 2025.
But after the bond selloff Monday, TLT more than gave up its weekly gains, and only a few bond ETFs remained above zero.
Short- and Ultra-Short-Term Bond ETFs Still Positive
Short-term and ultra-short-term bond ETFs such as the iShares 1-3 Year Treasury Bond ETF (SHY), the iShares 0-3 Month Treasury Bond ETF (SGOV), and the SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) have remained resilient amid the recent stock market selloff triggered by escalating tariff concerns.
Gains for each over the past week were approximately 0.35% for SHY and about 0.10% for SGOV and BIL.
Just one month ago, many investors overlooked these boring ETFs but would have loved to gain just a few basis points above zero rather than drop 10% to 20% like many stock funds have in that time.
Short-term and ultra-short-term ETFs invest in high-quality, short-duration U.S. Treasury securities, which are widely considered safe-haven assets during periods of market volatility and economic uncertainty. As investors pulled money from riskier equities over the past week, demand increased for the relative safety and liquidity of Treasury bonds, helping to stabilize the prices of these short-duration ETFs.
Additionally, the extremely short maturities of the underlying bonds in SGOV and BIL shield them from the price fluctuations typically caused by changing interest rate expectations. Unlike long-term bonds, these ultra-short-term instruments are less sensitive to rate movements and geopolitical noise, allowing them to maintain steady performance even as broader financial markets react sharply.
While these ETFs have not delivered large gains, their stability and consistent yields have made them attractive to investors seeking capital preservation and a buffer against the uncertainty of the ongoing trade tensions and fears of slower global growth.