Good news for bond market investors: interest rates along the yield curve remain elevated in 2025.1 Higher interest rates provide investors with opportunities to generate income over longer periods of time. However, predicting the timing and magnitude of interest rate changes across the yield curve can be challenging. To manage fixed income allocations in today’s market, advisors can use bond laddering to seek more consistent outcomes for clients.
Bond laddering is a useful method to invest in the bond market. The idea is you buy a series of bonds that mature in consecutive calendar years. Then when the shortest duration bonds mature, you buy a bond that matures the following year. For example, to set up a 5-year bond ladder with $5,000 to invest, you would buy five bonds for $1000 each that mature in 2026 to 2030. Once the 2026 bond matures, you can stay invested by buying a 2031 bond with the proceeds.
iBonds ETFs enable advisors to build bond ladders without the time-consuming and potentially costly effort to research and purchase individual bonds. With iBonds, you can buy equal amounts of each ETF for clients. Each iBond ETF matures in either October or December of its calendar year. When it matures, you can then purchase the next calendar year, as illustrated below.
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.
iBonds ETFs make it easy to scale bonds across multiple client accounts. In contrast, building a bond ladder with individual bonds comes with some drawbacks. Not every bond trades every day, so when setting up client accounts with individual bonds, you may be getting different CUSIPs. Managing the cash flows, combing through bond inventory to stay fully invested can be a full-time job.
iBonds ETFs allow for a more consistent experience. All clients own the same CUSIPs and since iBonds ETFs trade on an exchange like a stock, they are block tradeable and limit orders can be used.
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.
iBonds ETFs are available in U.S. Treasuries, Treasury Inflation-Protected Securities (TIPS), municipals, investment grade and high yield corporates. Check out the iBonds Laddering Tool to get started building scalable bond ladders. This tool will allow you to see yields, durations, and the number of bonds across different bond sectors.
Alternatively, you may have clients with larger accounts that may require more complex needs and customization—enter bond SMAs. Bond SMAs allow an investor to have a professionally managed portfolio of individual bonds that can be personalized to their goals and needs. Customization options include time horizon, cash flow timing, tax status and credit ratings, to name a few. Dedicated portfolio managers help position client portfolios for developments in the bond market, and our credit research team analyzes every bond owned in the portfolio.2
*Fund expense ratio does not equal fees assessed on an SMA.
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1. Source: Bloomberg as of February 25, 2025, based on U.S. Treasury yields from 3 months to 30 years.
2. Bond SMAs allow an investor to have a professionally managed portfolio of individual bonds that can be personalized to their goals and needs. Customization options include time horizon, cash flow timing, tax status and credit ratings, to name a few. Dedicated portfolio managers help position client portfolios for developments in the bond market, and our credit research team analyzes every bond owned in the portfolio.
Important Information
This information must be preceded or accompanied by a current prospectus. Investors should read and consider it carefully before investing.
Investing involves risk, including possible loss of principal.
This material is intended for use by a third-party financial professional in consultation with their client. BlackRock Investment Management, LLC (“BlackRock”) acts as either a discretionary investment manager or a non-discretionary model provider to sponsor firms in a variety of separately managed account or wrap fee programs. BlackRock is not acting in a fiduciary capacity with regard to any client of a financial professional. Results of any account or portfolio derived from this information may vary materially from the results shown herein. There is no guarantee that any investment strategy illustrated will be successful or achieve any particular level of results. Any tax information provided herein is for illustrative purposes only and does not constitute the provision of tax advice by BlackRock. Please consult with a tax professional for more information with regard to an investor’s specific situation.
An investment in fixed income funds is not equivalent to and involves risks not associated with an investment in cash.
Fixed income risks include interest-rate and credit risk. Typically, when interest rates rise, there is a corresponding decline in the value of debt securities. Credit risk refers to the possibility that the debt issuer will not be able to make principal and interest payments. There may be less information on the financial condition of municipal issuers than for public corporations. The market for municipal bonds may be less liquid than for taxable bonds. Some investors may be subject to federal or state income taxes or the Alternative Minimum Tax (AMT). Capital gains distributions, if any, are taxable.
Shares of ETFs trade at market price, which may be greater or less than net asset value. The iShares® iBonds® ETFs (“Funds”) will terminate within the month and year in each Fund’s name. An investment in the Fund(s) is not guaranteed, and an investor may experience losses and/or tax consequences, including near or at the termination date. In the final months of each Fund's operation, its portfolio will transition to cash and cash-like instruments. As a result, its yield will tend to move toward prevailing money market rates, and may be lower than the yields of the bonds previously held by the Fund and lower than prevailing yields in the bond market.
Diversification and asset allocation may not protect against market risk or loss of principal. Buying and selling shares of ETFs may result in brokerage commissions.
The strategies discussed are strictly for illustrative and educational purposes and are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. There is no guarantee that any strategies discussed will be effective. The information provided is not intended to be tax advice. Investors should be urged to consult their tax professionals or financial advisors for more information regarding their specific tax situations.
No proprietary technology or asset allocation model is a guarantee against loss of principal. There can be no assurance that an investment strategy based on the tools will be successful.
This material contains general information only and does not take into account an individual's financial circumstances. This information should not be relied upon as a primary basis for an investment decision. Rather, an assessment should be made as to whether the information is appropriate in individual circumstances and consideration should be given to talking to a financial professional before making an investment decision.
This material represents an assessment of the market environment as of the date indicated; is subject to change; and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any issuer or security in particular.
Prepared by BlackRock Investments, LLC, member FINRA.
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