7 Best Treasury ETFs to Buy Now
U.S. Treasury bonds have long been considered the safest, highest-credit-quality fixed-income securities available, but that status took a serious hit in May when Moody’s downgraded the long-term credit rating of the U.S. from Aaa to Aa1.
The ratings agency cited a decade of rising debt and surging interest costs, alongside persistent deficits and a Congress unwilling or unable to correct these issues. Moody’s was especially pessimistic about the future, warning of structurally higher entitlement spending paired with flat revenues.
This move followed Fitch Ratings’ downgrade earlier in August 2023, which similarly knocked the U.S. off its AAA pedestal. In its decision, Fitch cited many of the same fiscal risks Moody’s did, and noted how repeated political brinkmanship around debt ceiling standoffs was a factor.
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The two downgrades together mark a turning point, a reminder that nothing in finance is permanent and that once-reliable assumptions, like U.S. debt being untouchable, can change.
While Treasury bonds are still considered low-risk overall, they no longer hold the absolute top-notch rating. In fact, investment-grade corporate bonds issued by Microsoft Corp. (ticker: MSFT) and Johnson & Johnson (JNJ) now carry higher credit ratings than the U.S. government.
That said, Treasury bonds remain valuable tools for investors seeking relatively safe income that’s exempt from state income taxes, or for those looking to hedge equity risk with duration-sensitive assets that may benefit from falling-interest-rate environments.
Here are seven of the best Treasury exchange-traded funds (ETFs) to buy in 2025:
| ETF | Expense ratio | 30-day SEC yield |
| Vanguard Ultra-Short Treasury ETF (VGUS) | 0.07% | 4.2% |
| BondBloxx Bloomberg Six Month Target Duration U.S. Treasury ETF (XHLF) | 0.03% | 4.2% |
| Xtrackers U.S. 0-1 Year Treasury ETF (TRSY) | 0.06% | 4.2% |
| iShares U.S. Treasury Bond ETF (GOVT) | 0.05% | 4.2% |
| WisdomTree Floating Rate Treasury Fund (USFR) | 0.15% | 4.3% |
| Schwab Intermediate-Term U.S. Treasury ETF (SCHR) | 0.03% | 4.1% |
| iShares 20+ Year Treasury Bond BuyWrite Strategy ETF (TLTW) | 0.35% | 4.3% |
Vanguard Ultra-Short Treasury ETF (VGUS)
“Treasury ETFs allow investors to gain exposure through a stock-like instrument that trades on market exchanges,” says Tiana Patillo, financial advisor manager at Vanguard. “A Treasury ETF can provide greater liquidity, diversification and lower transaction costs.” These ETFs trade through most brokerages with a live bid and ask price, which allows investors to easily size and enter positions.
VGUS is one of Vanguard’s newer bond ETFs, having debuted in February. This ETF tracks the Bloomberg Short Treasury Index, which includes Treasury bonds with maturities of up to 12 months. This gives the ETF minimal interest-rate sensitivity, with a duration of just 0.4 year. Because short-term interest rates remain elevated, investors owning VGUS currently receive a decent 4.2% 30-day SEC yield.
BondBloxx Bloomberg Six Month Target Duration U.S. Treasury ETF (XHLF)
“Considering ongoing U.S. economic growth, sticky inflation and the Trump administration’s policies, our view is that investors should stay short in duration in their Treasury exposure, as we expect continued heightened volatility at the long end of the Treasury curve,” says JoAnne Bianco, partner and senior investment strategist at BondBloxx. For this role, BondBloxx offers XHLF.
This ETF tracks the Bloomberg U.S. Treasury Six Month Duration Index, which has a duration of 0.5 year, around the same as VGUS. As such, XHLF is best suited for investors favoring capital preservation with the ability to earn income at prevailing short-term interest rates. Currently, that means a 4.2% 30-day SEC yield with monthly distributions. The ETF charges a low 0.03% expense ratio.
Xtrackers U.S. 0-1 Year Treasury ETF (TRSY)
“TRSY can serve as a cash management alternative to traditional savings accounts while offering a hedge against interest rate fluctuations,” says Arne Noack, regional investment head, Xtrackers, Americas, at DWS Group. “Additionally, it is competitively priced, with an expense ratio of 0.06%.” This ETF currently tracks the ICE U.S. Treasury Short Bond Index and pays a 4.2% 30-day SEC yield.
TRSY’s net asset value (NAV) is quite stable, although not fixed like a money market fund. Throughout each month, the ETF’s NAV will steadily inch upward, which reflects the underlying income accrued. On each ex-distribution date, the ETF’s NAV will drop by the amount paid, which will be credited to an investor’s account at a later date. Then, the cycle repeats all over again the following month.
iShares U.S. Treasury Bond ETF (GOVT)
The broadest Treasury ETF on the market is GOVT, which tracks the ICE U.S. Treasury Core Bond Index. Think of it as the “buy the haystack” approach to government bonds. The fund holds more than 200 Treasury securities across maturities from one to 30 years, averaging out to an intermediate duration of 5.7 years. It currently pays a 4.2% 30-day SEC yield with monthly distributions.
GOVT has historically had low correlation with the stock market, with a three-year equity beta of just 0.2. Outside of rare years like 2022 when rising rates and inflation pressured both stocks and bonds, this ETF has served as a solid diversifier for balanced portfolios. It also remains highly cost-effective, charging just a 0.05% expense ratio, and is liquid with a low bid-ask spread.
[READ: 5 Great Fixed-Income Funds to Buy for 2025]
WisdomTree Floating Rate Treasury Fund (USFR)
Focusing on short-term Treasurys isn’t the only way to manage interest rate risk and preserve capital. Another option is Treasury floating-rate notes, which reset their yields regularly. These securities are priced at a spread over the latest 3-month Treasury bill and adjust with each weekly auction. This makes them a good hedge and income generator during periods of rising interest rates.
USFR wraps these floating-rate notes into an ETF. The fund’s effective duration is virtually zero because the notes reset so frequently, minimizing interest rate sensitivity. That means USFR carries minimal price volatility even if rates rise. It currently pays a competitive 4.3% 30-day SEC yield and carries a 0.15% expense ratio. Like the other Treasury ETFs mentioned, USFR makes monthly distributions.
Schwab Intermediate-Term U.S. Treasury ETF (SCHR)
SCHR offers a more focused alternative to broad Treasury ETFs like GOVT. While GOVT’s basket of Treasurys averages out to an intermediate duration, which is typically the best balance of risk and return for most investors, SCHR is more deliberate. This ETF intentionally targets the intermediate segment of the yield curve directly by tracking the Bloomberg U.S. Treasury 3-10 Year Index.
SCHR holds just over 100 Treasury securities with similar characteristics to GOVT, including a 4.1% 30-day SEC yield and an intermediate duration of 4.9 years. It also comes in slightly cheaper, with a 0.03% expense ratio, and remains liquid with a 0.04% 30-day median bid-ask spread. SCHR also has two companion ETFs for short- and long-term Treasurys for even more precise exposure.
iShares 20+ Year Treasury Bond BuyWrite Strategy ETF (TLTW)
The iShares 20+ Year Treasury Bond ETF (TLT) is highly volatile. It tracks the long end of the yield curve, which is extremely sensitive not only to changes in interest rates but also to shifts in inflation expectations and economic growth outlook. In years like 2022, that translated into steep losses, with TLT dropping 32.4%. But that same volatility creates opportunity for covered call strategies like TLTW.
TLTW follows the CBOE TLT 2% OTM BuyWrite Index, which means each month it sells call options that are 2% out of the money on TLT. The high volatility of long-duration bonds means higher premiums for these calls, which supports TLTW’s current 22.1% distribution yield. While investors can write options on TLT manually, TLTW automates the strategy in a single ETF wrapper for a 0.35% expense ratio.
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7 Best Treasury ETFs to Buy Now originally appeared on usnews.com
Update 06/13/25: This story was published at an earlier date and has been updated with new information.