Guide · US Treasury (Short)
Best short-term Treasury ETFs
Short-term Treasury ETFs hold US government debt maturing within a few years — anywhere from 1-3 year notes down to 0-3 month bills. The shorter the maturity, the closer the fund behaves to cash: near-zero price movement, yield that tracks the current short rate. They are widely used as the cash-equivalent sleeve in lazy portfolios, as a parking spot for money with a known near-term use, and as a yield-bearing alternative to a brokerage sweep account. Because the underlying interest is Treasury interest, it is exempt from state and local income tax — unlike interest from money market funds holding non-Treasury paper or from savings accounts.
How the scoring ranks these funds
The score order here needs a caveat. The 1-3 year funds (VGSH, SCHO, SHY) hold ~90-100 notes and post low top-10 concentration, while a T-bill ladder fund like SGOV holds ~24 bills (top-10 at 77%) and a floating-rate fund like USFR holds 5 notes (top-10 near 100%) — so the concentration sub-score pushes the bill and FRN funds down the leaderboard. For a single-issuer Treasury fund, the top-10 figure measures ladder length rather than issuer diversification — every holding is the same credit. Within a maturity band the ordering reduces to a cost-and-liquidity ranking; the bands themselves are different tools (see the closing notes).
See the methodology for the full formula behind each sub-score.
Top picks
-
90
composite / 100
Vanguard's 1-3 year Treasury index fund. 3 basis points — the cheapest in the category alongside SCHO — tracking the Bloomberg US Treasury 1-3 Year Index across ~100 notes. Slightly more rate sensitivity than a bill fund (duration around two years), which means modest price movement when rates move.
- Expense
- 0.030%
- AUM
- $33.83B
- Issuer
- Vanguard
- Detail
- VGSH page →
-
74
composite / 100
iShares' 0-3 month T-bill fund and the largest fund in the category by AUM at ~$96B. 9 basis points, near-zero duration, and commonly cited on the Bogleheads forum as a brokerage cash substitute. Its 77% top-10 concentration reflects the short ladder rather than issuer diversification — see the scoring note.
- Expense
- 0.090%
- AUM
- $95.89B
- Issuer
- iShares
- Detail
- SGOV page →
-
72
composite / 100
State Street's 1-3 month T-bill fund — the original mass-market bill ETF, listed in 2007. Functionally interchangeable with SGOV at a somewhat higher fee (13.5 bp vs 9 bp); its long trading history and deep options market keep it in wide institutional use.
- Expense
- 0.14%
- AUM
- $47.08B
- Issuer
- State Street
- Detail
- BIL page →
-
71
composite / 100
WisdomTree's Treasury floating-rate note fund. Holds a handful of 2-year FRNs whose coupons reset weekly off the most recent 13-week bill auction, so yield tracks the front of the curve with effectively no duration. The 5-holding ladder reads as ~100% top-10 concentration in our composite — the same short-ladder reading described in the scoring note, only more so.
- Expense
- 0.15%
- AUM
- $17.75B
- Issuer
- WisdomTree
- Detail
- USFR page →
-
84
composite / 100
iShares' 1-3 year Treasury fund, at 15 bp the priciest of the 1-3 year trio but the one named in the published Permanent Portfolio and Golden Butterfly allocations on this site. VGSH and SCHO offer near-identical 1-3 year Treasury exposure (a different index family) at a fifth of the fee.
- Expense
- 0.15%
- AUM
- $25.36B
- Issuer
- iShares
- Detail
- SHY page →
Also in the category
Other funds in the same category, ranked by composite score.
Treasury interest is state-tax exempt
Interest on US Treasury obligations is exempt from state and local income tax, and that exemption passes through fund distributions in proportion to the fund's US-government-obligation income. For a pure Treasury fund that proportion is at or near 100%. A money market fund or high-yield savings account paying a similar headline rate delivers less after tax in states with an income tax — the gap is largest in California, New York, and other high-rate states. A few states (California, New York, Connecticut) require a fund to hold at least 50% US government obligations for the exemption to apply at all, a threshold pure Treasury funds clear easily but many prime money market funds do not.
Bill funds vs 1-3 year funds are different tools
A 0-3 month bill fund (SGOV, BIL) has near-zero duration: its price barely moves and its yield resets to the current short rate within weeks. A 1-3 year fund (VGSH, SCHO, SHY) carries roughly two years of duration — visible price declines when rates rise, gains when rates fall, and a yield that lags the front of the curve in both directions. The bill funds behave like cash; the 1-3 year funds behave like very short bonds. The published Golden Butterfly allocation on this site uses SHY for its short-term Treasury sleeve; the Permanent Portfolio's cash-equivalent sleeve also names SHY, with BIL and SGOV as closer-to-zero-duration alternates.
Floating-rate notes vs fixed bills
Treasury FRNs are 2-year notes whose coupon resets weekly to the latest 13-week bill auction rate plus a fixed spread. A fund of FRNs (USFR, TFLO) captures the current short rate continuously without rolling maturing bills, while a fixed-bill fund's yield adjusts only as its ladder turns over — a lag of a few weeks to a couple of months. When short rates are rising, the FRN funds reprice upward faster; when rates are falling, the same mechanism works in reverse. The two mechanisms differ mainly in the timing of yield adjustment; the TTM yields across SGOV, BIL, USFR, and TFLO currently sit within a few tenths of a percentage point of each other.
Why these funds score below the headline categories
Distribution profile is the other drag besides the concentration reading: short Treasury funds pay out essentially their entire return as ordinary-income distributions, which the tax-efficiency sub-score reads as a cost. That is accurate as far as it goes — in a taxable account the federal tax bill on the interest is real — but it is the nature of the asset class, not a flaw in any particular fund. Within the category, fee and liquidity are where the funds actually differ.
Common questions
- Is a T-bill ETF the same as a money market fund?
- Close but not identical. Both hold short government paper and yield roughly the front of the curve. A money market fund maintains a fixed $1.00 share price and settles same-day; a T-bill ETF has a (slightly) floating share price and trades like a stock, with normal settlement. The ETF differs in portability across brokerages, typically lower fees, and a US-government-obligation income percentage at or near 100%, which many prime money market funds do not reach.
- Can the share price of a bill fund go down?
- By small amounts, yes. SGOV and BIL hold bills with up to three months of maturity, so a sharp rate move can shift the share price by a few cents, and the price also dips by the distribution amount each ex-dividend date before rebuilding through the month. The holdings are direct obligations of the US Treasury, but these are not fixed-NAV vehicles.
- Why does SGOV score lower than VGSH if it's the bigger, more cash-like fund?
- The composite's concentration sub-score counts top-10 holdings weight, and a ~24-bill ladder concentrates 77% of assets in its ten largest positions, versus 14% for VGSH's ~100-note portfolio. For multi-issuer funds that metric flags real risk; for a single-issuer Treasury fund it mostly measures how short the ladder is. The composite applies the same top-10 metric across all categories; the scoring note above describes why it reads differently here. Within this category, rank differences are driven more by the maturity band a fund targets than by differences among funds in the same band.
Guide. Picks come from the live PlainIndex composite for this category; editorial commentary on each pick is hand-written. Re-pulled with every catalog refresh.
PlainIndex publishes data and editorial commentary — nothing here is personalized investment advice. Read the methodology for how the scores referenced here are computed.