Bond market opportunities meet ETF innovation

• Bond yields are at attractive levels not seen in decades and fixed income ETFs can help investors seek portfolio income while limiting risk.
• Bond ETF use cases for investors of all types are rapidly evolving and revolutionizing the way investors construct portfolios. We believe the assets in fixed income ETFs will grow to $6 trillion by 2030, up from $2.6 trillion at the end of 2024.
• iShares fixed income ETFs can help investors pursue the important role bonds have historically played in portfolios, offering potential income, capital preservation, and diversification benefits.

Today’s bond markets may present compelling opportunities for investors. While volatility abounds and is likely to persist, yields worldwide are at levels not seen since before the Global Financial Crisis; more than 80% of global fixed-income assets currently offer yields above 4% vs. less than 20% of global bonds from 2010 to 2021.¹

We believe ETF innovation is meeting this market moment. Investors are now equipped with a robust ETF toolkit to tap into today’s fixed income opportunities – a powerful combination that simply did not exist the last time yields were at these levels.

Today’s bond investor, from the largest institution to individuals, can access nearly every corner of the bond market via ETFs with one simple trade. And with the breadth of products available today – including indexed building blocks, systematic or actively managed exposures -- investors are empowered to create the specific, tailored bond exposures necessary to pursue their specific goals.

This combination of choice plus the benefits of the ETF wrapper – transparency, enhanced liquidity and efficiency – is resonating with investors, judging by fund flows.

• ETFs captured about 40% of last year’s total fixed income flow, pushing the category to $2.6 trillion in assets, following 18% organic asset growth in the last 5 years.²
• Inflows continued at a torrid pace to start 2025, with $132 billion into bond ETFs through March, which is 2.5x larger than the average first quarter inflows over the last decade.³
• We believe the market will continue to deliver double-digit growth, propelling fixed income ETFs to $6 trillion in AUM by 2030.

Here are some examples of how investors can use the toolkit accessible to them to harness this opportunity in fixed income and build portfolios for the future.

1. Capital Preservation: With volatile stock markets, investors may prefer to keep some money in historically lower-risk investments. Americans are sitting on nearly $18 trillion in bank deposits with an additional $7 trillion in money market funds.⁴ Bond ETFs can be used to put cash to work, mitigating risk while helping provide more yield than idle cash. An investment in fixed income funds is not equivalent to and involves risks not associated with an investment in cash or cash equivalents.

Investors interested in putting idle cash to work may consider SGOV, which invests in U.S. Treasury bonds with remaining maturities less than or equal to three months. Treasury bonds are the largest and most liquid part of the bond market.⁵ iShares offers a broad range of Treasury bond ETFs, including the iShares 0-3 Month Treasury Bond ETF (SGOV).

Source: FDIC and BlackRock as of 3/31/25. SGOV’s yield represents Yield to Maturity. An investment in short duration bond ETFs is not equivalent to and carries a higher degree of risk than an investment in a savings account, or bank CD. Savings accounts and bank CDs are typically FDIC insured. iShares ETFs do not have these features. Past performance does not guarantee future results. For standardized performance, see the end of this article. An investment in fixed income funds is not equivalent to and involves risks not associated with an investment in cash.

2. Seek Potential Income: Investors looking to enhance portfolio income and performance potential may consider corporate high yield bonds via the iShares Broad USD High Yield Corporate Bond ETF (USHY). This ETF seeks to track the investment results of an index composed of U.S. dollar-denominated, high yield corporate bonds.

High yield corporate bonds are rated BB+ or lower and are perceived to have higher credit risk. To compensate investors for such risks, these bonds typically offer higher yields than investment grade corporate bonds or Treasuries with similar maturities.

At present, BlackRock remains constructive on the high-yield corporate bond market.

The iShares Flexible Income Active ETF (BINC) seeks higher yield and diversification away from major fixed income sectors. Actively managed by an experienced team led by Rick Rieder, BlackRock’s Chief Investment Officer of Global Fixed Income, BINC targets so-called “plus” sectors of the fixed-income market. "Plus" refers to fixed income asset classes outside of the "core" universe of U.S. Treasury securities, U.S. agency mortgages, and U.S. investment grade corporate debt.

BINC offers investors access to hard-to-reach segments of the bond market – including U.S. high yield corporate debt, securitized products, and global debt – with the easy access of investing in an ETF.

iShares active ETFs leverage the expertise of BlackRock portfolio managers to seek superior market returns and achieve targeted outcomes. They are powered by the strength and scale of Blackrock — the world’s largest ETF provider and a global leader in active management.⁶

Bond ETF innovation has opened doors to investors to gain access to exposures previously accessible only to large, institutional investors. The convergence of an evolved fixed income ETF toolkit and the current yield environment presents opportunities in fixed income, allowing investors to harness and tailor their risk in ways that were not possible before.

From broad market exposures to precise pockets, iShares fixed income ETFs are at the forefront of this innovation – offering efficient building blocks and more modern, precise ways to reach nearly every part of the fixed income market. We aim to keep innovating so we can offer our clients more ways to pursue their investment goals and be able to navigate a quickly changing market.