ETF Why consider ultrashort now

If you're still sitting on a mountain of uninvested cash or overweighting long-term bonds, your timing might be a little off. The market shifted in the first quarter. Higher commodity prices and inflation expectations pushed up interest rates across the curve. If you haven't adjusted your investments, you may be leaving money and opportunity on the table. We believe now is a good time to consider ultra-short duration and short-term Treasury ETFs.

Higher-for-even-longer inflation expectations

Inflation expectations are now higher for even longer due to resilient economic growth and rising commodity prices. Those inflation expectations are well above 3% for 2026,¹ and if your cash is earning less than that, it’s losing purchasing power. Ultra-short and short-term Treasury ETFs are currently offering yields close to or more than 4%,² with near-zero duration risk and the potential protection of exposure to high-quality, investment grade credit. The high-quality and short-maturity debt held in ultra-short and short-term Treasury ETFs can provide a competitive yield while also aiming to minimize the rising risk of default that higher rates and commodity prices can inflict on lower-quality or longer-maturity bonds.

Case for high-quality US treasuries

With volatility in the Middle East and high oil prices, high-quality US Treasury bills may benefit from safe-haven flows, and rising prices and rising rates also have the potential to put pressure on highly leveraged corporate balance sheets. So, consider TBLL, Invesco Short Term Treasury ETF.

Liquidity

In times of high uncertainty, we believe liquidity is king, and with ultra-short ETFs, you can stay in the market while aiming to minimize the impact of volatility in interest rates or credit spreads. And with their daily liquidity, they’re also highly accessible. If inflation stays sticky and rates move even higher, long-term bonds may face increased pressures driven by their longer duration. Ultra-short ETFs allow you to benefit from higher rates, while helping to shelter savings from the impact of rising rates on more duration-sensitive portfolios. So, consider GSY, Invesco Ultra Short Duration ETF. 

Additional ETF resources

• Fixed income ETFs