Discover iShares iBonds ETFs | iShares

WHAT ARE iBONDS ETFs?

iBonds ETFs (Exchange Traded Funds) are an innovative suite of bond funds that have a fixed maturity date. They hold a diversified portfolio of bonds with similar maturity dates, are designed to provide regular income payments and distribute a final payment in their stated maturity year. For more information on the final payment see the below section on ‘when the iBonds ETF matures’.

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

WHAT ARE iBONDS ETFs DESIGNED TO DO?

Mature like a bond

iBonds have a specified maturity date. The ETFs distribute the final payment at maturity, similar to traditional bonds.

Trade like a stock

iBonds can be bought and sold like a share, giving flexibility to trade in and out over time.

Diversify like a fund

iBonds provide a diversified bond exposure to a desired asset class in a single trade. Diversification and asset allocation may not fully protect you from market risk.

BOND LADDERING MADE EASY WITH iBONDS ETFs

Investors like the concept of bond ladders for the predictable cash flow they provide as bonds mature at regular intervals. iBonds ETFs make bond laddering simpler and more time-efficient vs. having to research, purchase and track individual bonds.

WHAT IS BOND LADDERING?

Bond laddering is a fixed income investment strategy designed to manage cash flows and provide a consistent stream of income. The idea is you buy a series of bonds that mature in consecutive calendar years. Then when the shortest-duration bonds mature, you buy the following year, creating a "ladder" of bonds. e.g., 1 year, 3 years, 5 years, etc.

This approach helps mitigate the impact of interest rate fluctuations and ensures regular income by providing a mix of short- and long-term bonds. Bond laddering can also be applied to bond ETFs, which follow the same concept of diversifying maturity dates.

Risk: Diversification and asset allocation may not fully protect you from market risk.

WHY USE BOND LADDERING?

Regular Income stream: The bond ladder strategy could offer pre-planned income, as bonds mature at different times and generate regular distributions in addition to receiving a final payment when each iBond matures, seeking to ensure consistent cash flow for investors.

Liquidity management: With a pre-planned stream of income, investors can use bond laddering to meet their liquidity needs or outgoing cash flows using iBonds.

Flexibility: Bond laddering can allow investors to adjust their portfolio as needed to align with evolving investment goals and cash flow needs. For example, using iBonds with longer maturities can extend the ladder and can provide more stability in the future.

Manage interest rate risk: Bond ladders help mitigate the impact of interest rate changes due to the spread of duration. If interest rates rise, you can take advantage of the higher rate by reinvesting the money from the matured ETF. If rates fall, a large portion of your portfolio can still benefit from the original (higher) rates that applied when the initial investment was made.

HOW CAN I BUILD BOND LADDERS WITH iBONDS ETFs?

iBonds ETFs enable investors to build scalable bond ladders without the time-consuming and potentially costly effort to research and purchase numerous individual bonds. Each iBond ETF matures in December of its calendar year, and when it matures, you can then purchase the next calendar year, as illustrated above.

Reinvest Coupons - Use in conjunction with individual bonds to put coupons or calls to work. Instead of hunting for odd lots of small bonds, you can just sweep the extra cash into a corresponding iBonds ETFs.

BENEFITS OF iBONDS ETFs

The unique features of iBonds ETFs can help you easily access bond markets, pick points in time or could even match expected cash flow needs in the future.

Diversified access to bond markets - iBonds trade on an exchange, giving all investors access to bond markets, traditionally a market difficult to navigate, while maintaining diversification.
Pick points in time - iBonds ETFs offer diversified exposure to bonds that mature in the calendar year of the fund's name, allowing you to target specific points on the yield curve.
Match expected cash flows - iBonds ETFs mature at a specific date. So, investors could expect a final payment at maturity, which could help fund life stage planning, such as buying a car or a house, college tuition or retirement.

VIEW ALL iBONDS ETFs

iBonds ETFs combine the best features of individual bonds and ETF investing offering investors an efficient tool that matures like an individual bond while trading on an exchange at low cost like a traditional bond ETF.

Caption:
See how iBonds ETFs compare to other investment tools:
Features	iBonds	Fixed income ETFs	Individual bonds	Mutual funds
Diversified portfolio	Yes	Yes	No	Yes
Rules based methodology	Yes	Yes	No	Yes
Fixed maturity	Yes	No	Yes	No
Trading	Exchange & OTC	Exchange & OTC	OTC	-
Daily transparency	Yes	Yes	No	Yes

Two main risks related to fixed income investing are interest rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds. Credit risk refers to the possibility that the issuer of the bond will not be able to repay the principal and make interest payments.

VIEW ALL iBONDS ETFs

At time of purchase of the iBonds ETF

When you are ready to purchase an iBonds ETF, we have tools to help you understand the estimated net acquisition yield of the fund. The estimated net acquisition yield provides a yield estimate, net of fees and market price impact, if the fund is held to maturity.

On each iBonds ETFs product page, the Estimated Net Acquisition Yield Calculator can provide a yield estimate if you enter a projected market price.

Image of Estimated Net Acquisition Yield Calculator

For illustrative purposes only.

During the holding period of an iBonds ETF

iBonds ETFs are designed to provide a yield-to-maturity ("YTM") profile comparable to that of the underlying bond portfolio. The funds seek to preserve an investor’s anticipated yield-to-maturity through a combination of regular distributions and a final end-date distribution.

When the iBonds ETF matures

iBonds ETFs terminate in December of the year in the fund’s name. In the final months when the bonds in the portfolio mature (maturity transition period), the fund's holdings transition to cash and cash equivalents. After all the bonds in the portfolio mature, the ETF is closed and shareholders receive a final payment.

The final payment that an investor will receive includes the initial investment (principal amount) along with any income generated by the ETF, such as interest payments from the underlying bonds. The fund’s liabilities such as fees and accrued expenses will get deducted from this final payment.