Quick Verdict
- Our Rating: ★★★★☆ (4/5)
- Best For: Conservative investors, savers holding cash reserves, and anyone who wants a liquid, Treasury-only holding with limited interest rate sensitivity
- Not Ideal For: Cost-sensitive investors comparing near-identical funds, and those seeking growth or high income
- Expense Ratio: 0.15%
- Our Take: SHY offers high-quality, highly liquid exposure to 1–3 year U.S. Treasuries from a well-established issuer. Its main drawback is cost, since several comparable funds charge a fraction of its 0.15% fee.
Table of Contents
What Is the iShares 1-3 Year Treasury Bond ETF (SHY)?
What is SHY ETF? The iShares 1-3 Year Treasury Bond ETF (SHY) is an exchange-traded fund issued by BlackRock under its iShares brand. It seeks to track the ICE U.S. Treasury 1-3 Year Bond Index, which measures U.S. Treasury notes and bonds with remaining maturities between one and three years. Because every holding is a U.S. Treasury security, the fund carries no corporate credit risk, and its average credit quality is AA. SHY launched on July 22, 2002, making it one of the longest-running Treasury ETFs available. It is structured as an open-end fund and holds 90 securities with an average duration of 1.8 years. Investors often use funds like SHY as a lower-volatility home for cash reserves or as the defensive portion of a diversified portfolio. Its share price can still move when interest rates change.
SHY ETF Key Facts
| Item | Detail |
|---|---|
| Full name | iShares 1-3 Year Treasury Bond ETF |
| Ticker | SHY |
| Issuer | BlackRock / iShares |
| Index | ICE U.S. Treasury 1-3 Year Bond Index |
| Inception date | July 22, 2002 |
| Expense ratio | 0.15% |
| AUM | $27.2 billion |
| Average volume | ~4.3 million shares/day |
| Yield | 3.61% (12-month trailing); 4.66% SEC yield (30-day, as of Oct 22, 2026) |
| Dividend frequency | Monthly |
| Structure | Open-end fund |
SHY ETF Performance
SHY has delivered modest but steady returns, consistent with a short-term Treasury fund. The fund returned 1.47% over one year and has posted annualized returns of 3.92% over three years, 1.73% over five years and 1.62% over ten years. The weaker five- and ten-year figures reflect the period of rising interest rates that began in 2022, when bond prices fell across the Treasury market.
| Period | SHY | ICE U.S. Treasury 1-3 Year Bond Index |
|---|---|---|
| 1 year | 1.47% | 1.61% |
| 3 years (annualized) | 3.92% | 4.06% |
| 5 years (annualized) | 1.73% | 1.85% |
| 10 years (annualized) | 1.62% | 1.74% |
The fund trailed its benchmark by about 0.12 to 0.14 percentage points in every period. That gap is close to the 0.15% expense ratio, which suggests tracking error was small and that fees accounted for most of the shortfall. The 12-month trailing yield of 3.61% sat below the 30-day SEC yield of 4.66%, because trailing distributions reflect income earned over the past year, while the SEC yield reflects current holdings. Past performance is not a guarantee of future results, and these figures describe history only.
SHY Top Holdings and Sector Breakdown
SHY holds 90 U.S. Treasury notes. The index is weighted by market value of outstanding issues. The top ten positions together made up 16.62% of assets, which is a low concentration for a fund of this size.
| Holding | Weight |
|---|---|
| US Treasury Note 3.875% (Mar 31, 2028) | 2.11% |
| US Treasury Note 1.25% (Apr 30, 2028) | 1.99% |
| US Treasury Note 3.625% (Aug 31, 2029) | 1.83% |
| US Treasury Note 3.50% (Jan 31, 2028) | 1.73% |
| US Treasury Note 1.25% (Jun 30, 2028) | 1.62% |
| US Treasury Note 4.625% (Apr 30, 2029) | 1.54% |
| US Treasury Note 4.50% (May 31, 2029) | 1.51% |
| US Treasury Note 4.25% (Jun 30, 2029) | 1.49% |
| US Treasury Note 4.25% (Feb 15, 2028) | 1.41% |
| US Treasury Note 1.25% (Sep 30, 2028) | 1.39% |
| Sector | Weight |
|---|---|
| U.S. Treasury bonds (1–3 year maturities) | 99.7% |
| Cash | 0.3% |
Since the portfolio contains only Treasuries, there is no meaningful sector diversification. The holdings differ mainly by maturity date and coupon.
SHY ETF Pros and Cons
Pros
- Treasury-only credit quality. Every holding is a U.S. government security, which removes corporate default risk.
- Deep liquidity. With $27.2 billion in assets and roughly 4.3 million shares trading daily, SHY has generally been easy to buy and sell.
- Limited rate sensitivity. A 1.8-year average duration means price swings tend to be smaller than in intermediate or long-term bond funds.
- Monthly income. The fund pays monthly distributions, and its 30-day SEC yield stood at 4.66% as of October 22, 2026.
- Broad issue coverage. Its 90 holdings and low top-ten concentration (16.62%) mean no single note dominates results.
Cons
- Higher fee than peers. At 0.15%, SHY costs several times more than some competing 1–3 year Treasury ETFs.
- Modest long-term returns. The 10-year annualized return of 1.62% shows how little this category has earned when rates rose.
- Price risk remains. The 1.73% five-year annualized return shows that even short-term Treasuries can post weak results.
- Consistent benchmark lag. The fund trailed its index in all four periods, largely due to fees.
Who Should Invest in SHY?
Is SHY a good investment? That depends on the investor’s goals and time horizon.
SHY may be a good fit if you:
- Want a liquid place to hold cash you may need within a few years
- Prefer U.S. Treasuries over corporate or high-yield bonds
- Need a stable allocation to balance a stock-heavy portfolio
- Value monthly income and a long-established fund history
SHY may not be ideal if you:
- Prioritize the lowest possible fees, since cheaper comparable funds exist
- Need growth or inflation-beating returns over a long horizon
- Want a yield well above Treasury rates and can accept credit risk
SHY Alternatives
| ETF | Expense Ratio | AUM | Key Difference |
|---|---|---|---|
| Vanguard Short-Term Treasury ETF (VGSH) | 0.03% | ~$35.0B | Same 1–3 year Treasury focus at a much lower fee |
| Schwab Short-Term U.S. Treasury ETF (SCHO) | 0.03% | ~$15.6B | Similar exposure and low cost; smaller fund |
| iShares 0-3 Month Treasury Bond ETF (SGOV) | 0.09% | ~$98B | Maturities under three months; minimal rate sensitivity |
VGSH tracks a comparable Bloomberg 1–3 year Treasury index and charges 0.03%. It is the most direct substitute for investors focused on cost. SCHO offers nearly identical exposure at the same fee, though it holds fewer assets. SGOV suits those who want the least interest rate sensitivity, since it holds Treasury bills maturing in under three months, but its income can adjust quickly as short-term rates change.
Related reading: [VGSH ETF Review] | [SCHO ETF Review] | [SGOV ETF Review] | [Best Short-Term Bond ETFs]
Frequently Asked Questions
Is SHY a good long-term investment?
It depends on the goal. SHY’s 10-year annualized return was 1.62%, which fits a capital-stability role more than a growth role. Long-term investors often pair funds like SHY with stocks rather than rely on it alone.
How often does SHY pay dividends?
SHY pays dividends monthly. Its 12-month trailing yield was 3.61%, and its 30-day SEC yield was 4.66% as of October 22, 2026. Individual payments vary from month to month.
What is the difference between SHY and VGSH?
Both funds hold only 1–3 year U.S. Treasuries. VGSH charges 0.03% versus SHY’s 0.15% and is larger, at roughly $35 billion versus $27.2 billion. SHY launched in 2002 and tracks an ICE index, while VGSH launched in 2009 and tracks a Bloomberg index.
Can I lose money investing in SHY?
Yes. Treasury ETF prices change with interest rates, and SHY’s share price can fall when yields rise. Over the past five years, the fund’s annualized return was only 1.73%. Low returns after inflation are also possible.
How does SHY react to changes in interest rates?
SHY’s average duration is 1.8 years. As a rough illustration, a one-percentage-point rise in Treasury yields would be associated with a price decline of about 1.8%, all else equal. Monthly income can partly offset price changes, and falling rates would work in the opposite direction.
Data as of November 2026. Sources: issuer websites and finance.yahoo.com.
Disclaimer: The information in this article is for educational and informational purposes only. It does not constitute financial, investment, or tax advice. Past performance is not indicative of future results. Investing in ETFs involves risk, including possible loss of principal. Always consult a qualified financial advisor before making investment decisions.