SGOV vs BIL vs SHV: Which Ultra-Short Treasury ETF Is Best for 2026?

Ultra-Short Treasury ETFs at a Glance

Why Ultra-Short Treasury ETFs Matter in 2026

After the Federal Reserve's aggressive rate-hiking cycle from 2022 to 2023, short-term Treasury yields climbed to levels not seen in over a decade. As of mid-2026, the Fed funds rate sits at 4.25-4.50% following two 25-basis-point cuts in late 2024. With 3-month Treasury bills yielding approximately 4.28%, ultra-short Treasury ETFs offer a compelling alternative to traditional savings accounts and money market funds.

Ultra-short Treasury ETFs like SGOV, BIL, and SHV invest almost exclusively in U.S. Treasury bills — government securities that mature in less than one year. These instruments carry effectively zero credit risk because they are backed by the full faith and credit of the U.S. government. The short duration means interest rate risk is negligible: even if the Fed cuts rates further, NAV fluctuations are minimal.

Why do investors choose these ETFs over other cash-like options?

• Higher yields than most bank savings accounts. The average savings account still pays under 0.5%, while T-bill ETFs deliver 4%+ in 2026.
• FDIC limits don't apply. Unlike bank deposits, which are only insured up to $250,000 per account, T-bills are backed by the U.S. Treasury with no cap.
• State tax exemption. Interest from U.S. Treasury securities is exempt from state and local income taxes — a meaningful benefit for investors in high-tax states like California, New York, and New Jersey.
• Intraday liquidity. Unlike CDs or savings accounts, Treasury ETFs trade on exchanges and can be bought or sold anytime during market hours with tight bid-ask spreads.
• No early withdrawal penalty. Unlike CDs that may charge penalties for early redemption, ETF shares can be sold at any time at market price.

The result is a near-perfect parking spot for cash: competitive yield, ultimate credit quality, state tax advantages, and full liquidity. The only question is which of the three main options — SGOV, BIL, or SHV — is the best fit.

SGOV: iShares 0-3 Month Treasury Bond ETF

SGOV has rapidly become the default choice for ultra-short Treasury exposure. Launched in May 2020, it tracks the ICE U.S. Treasury 0-3 Month Bond Index, investing exclusively in Treasury bills maturing within three months. Despite being the newest of the three, SGOV has grown to become the largest by assets under management — a testament to its low cost and tight tracking.

SGOV's ultra-short maturity profile — averaging about one month — means the fund essentially rolls into new T-bills every few weeks. This gives it the tightest possible tracking to the current short-term rate environment. When rates change, SGOV's yield adjusts within weeks rather than months.

The 0.07% expense ratio is the lowest among the three main competitors, which directly translates to higher net yield for investors. On a $100,000 position, SGOV costs $70 per year compared to $136 for BIL and $150 for SHV — an $80/year advantage over SHV that compounds over time.

BIL: SPDR Bloomberg 1-3 Month T-Bill ETF

BIL is the elder statesman of ultra-short Treasury ETFs. Launched in May 2007 by State Street Global Advisors, it has the longest track record among the three and tracks the Bloomberg 1-3 Month U.S. Treasury Bill Index. BIL was the original go-to product for T-bill exposure and still commands significant assets, though SGOV has overtaken it in AUM.

BIL's primary advantage is its 19-year track record. It launched before the Great Financial Crisis, so investors and advisors have live data spanning multiple rate cycles — the zero-rate era of 2008-2015, the brief hiking cycle of 2016-2019, the pandemic-era zero rates, and the current high-rate environment. For institutional portfolios or advisors who value a long history, BIL offers that peace of mind.

The downside is cost. At 0.1356%, BIL charges nearly double what SGOV does. For an identical underlying strategy — holding T-bills maturing in roughly the same window — that fee difference flows directly to the bottom line. Over a year, BIL delivers approximately 6-8 basis points less net return than SGOV purely due to fees.

SHV: iShares Short Treasury Bond ETF

SHV occupies a slightly different niche. Also managed by BlackRock, it tracks the ICE U.S. Treasury Short Bond Index and holds Treasury securities with remaining maturities of one year or less. This gives SHV a marginally longer duration profile than SGOV or BIL, though in practice the difference is small.

SHV's slightly longer average maturity (about 5 months vs. 1-2 months for SGOV and BIL) means it captures a marginally different part of the yield curve. In a normal upward-sloping curve, this could mean a slightly higher yield — but it also means SHV is a touch more sensitive to rate changes. With a duration of ~0.3 years, a 100-basis-point rate hike would cause SHV's NAV to drop roughly 0.3%, compared to ~0.1% for SGOV and BIL. In practice, these are tiny numbers, but they matter over time.

SHV also carries the highest expense ratio at 0.15%, which in the current environment fully offsets any yield advantage from its longer maturity. This makes SHV the hardest to recommend of the three unless an investor specifically wants slightly more duration exposure within the ultra-short category.

Head-to-Head Comparison: SGOV vs BIL vs SHV

Here is how the three ETFs stack up across every metric that matters for a cash management decision.

The green column highlights SGOV as the leader in the two metrics that matter most for an ultra-short Treasury ETF: expense ratio and net yield. When the underlying holdings are essentially identical Treasury bills, cost is the primary differentiator — and SGOV wins decisively.

Performance Comparison: Total Returns

Because all three ETFs hold essentially the same type of security — U.S. Treasury bills — their total returns are remarkably similar. The primary source of return divergence is the expense ratio. Here are the approximate total returns (including distributions) for each calendar year:

The pattern is consistent: SGOV edges out BIL by approximately 6-8 basis points per year, and beats SHV by 10-12 basis points. These differences are small in absolute terms — on a $100,000 position, the SGOV-vs-SHV gap is roughly $80-$120 per year. But they are persistent and predictable, because they are driven almost entirely by the expense ratio differential.

Notice that 2025 returns were lower than 2023-2024, reflecting the two 25-basis-point Fed rate cuts in September and December 2024 that brought the funds rate from 5.25-5.50% to 4.75-5.00%, with two additional cuts in early 2025 to the current 4.25-4.50% level. As rates declined, T-bill yields followed, and the total return from these ETFs declined proportionally.

SGOV's Fee Waiver: Why It Became the Default Choice

When BlackRock launched SGOV in May 2020, they implemented a fee waiver that reduced the gross expense ratio to effectively zero for the first period. This was a deliberate strategy to attract assets quickly in a competitive landscape where BIL had a multi-year head start. The fee waiver accomplished its goal spectacularly — SGOV grew from $0 to over $30 billion in AUM in just four years.

The fee waiver has since been adjusted, and SGOV now charges its stated 0.07% expense ratio. However, the growth trajectory established during the waiver period created a virtuous cycle: more assets mean tighter bid-ask spreads, better liquidity, and more attention from institutional investors — all of which attract additional assets.

For investors considering SGOV today, the relevant fact is the current 0.07% fee, not the historical waiver. Even at 0.07%, SGOV remains the cheapest option by a significant margin. The only risk worth monitoring is whether BlackRock might increase the fee in the future — but given the competitive pressure from BIL and SHV, any fee increase seems unlikely.

• SGOV launched with a temporary fee waiver that reduced the effective expense ratio to near zero.
• The strategy worked: SGOV grew to $35B+ in AUM in just six years, surpassing BIL.
• Current expense ratio of 0.07% is still the lowest among the three main T-bill ETFs.
• Competitive pressure from BIL and SHV makes future fee increases unlikely.
• The large AUM base ensures tight spreads and deep liquidity for institutional and retail investors alike.

Tax Considerations: State Exemption and Income Treatment

One of the most significant advantages of ultra-short Treasury ETFs — and one that is often overlooked — is the state and local tax exemption on interest from U.S. Treasury securities. This benefit applies to all three ETFs equally, since they all hold Treasury bills.

Consider an investor in California (13.3% top state rate) earning $4,000 per year from a $100,000 T-bill ETF position. The state tax savings versus a fully taxable alternative is approximately $532 per year. In New York City (state + city rate ~12.7%), the savings would be approximately $508. This state tax advantage is on top of the yield differential versus most savings accounts.

However, it is important to understand what is not tax-advantaged:

• Federal income tax still applies. T-bill interest is taxed as ordinary income at your federal marginal rate — it does not qualify for the lower long-term capital gains or qualified dividend rate.
• Distributions are classified as ordinary income, not qualified dividends. This means T-bill ETF income is taxed at your full federal rate (up to 37% for 2026).
• If you are in a low or zero state-income-tax state (Texas, Florida, Nevada, etc.), the state exemption provides no benefit, and a high-yield savings account might be equally attractive on an after-tax basis.
• For tax-deferred or tax-free accounts (IRA, 401k, Roth IRA), the state exemption is irrelevant since you don't pay state tax on those accounts anyway.

When to Use Each ETF

All three ETFs are excellent products for cash management. The differences are small, but they matter if you are optimizing. Here is the decision framework:

For most investors, SGOV is the default answer. The cost advantage is clear, the liquidity is excellent, and the shorter maturity profile means faster adjustment to rate changes. BIL is a perfectly reasonable second choice for those who value track record. SHV is the niche option — only worthwhile if you have a specific view on the yield curve or maturity profile.

Alternatives to Consider

SGOV, BIL, and SHV are not the only options for parking cash. Here are the main alternatives, with their trade-offs:

• USFR (WisdomTree Floating Rate Treasury Fund) — 0.15% ER, ~$19B AUM. Holds floating-rate Treasury notes (FRNs) that reset weekly based on the most recent 13-week T-bill auction. Yield adjusts even faster than SGOV's roll-based approach, but the product is less liquid and slightly more complex.
• TFLO (iShares Treasury Floating Rate Bond ETF) — 0.15% ER, ~$7B AUM. Similar to USFR but from BlackRock. Smaller AUM and similar expense ratio make it less compelling versus SGOV.

• VMFXX (Vanguard Federal Money Market Fund) — 0.11% ER, 4.25% 7-day SEC yield. A traditional money market fund with a stable $1.00 NAV. Pros: stable NAV, very safe. Cons: not traded on an exchange, must be held at Vanguard, and yields slightly less than SGOV after fees.
• SPAXX (Fidelity Government Money Market Fund) — 0.42% ER, 4.0% 7-day SEC yield. The default cash sweep at Fidelity. Higher expense ratio significantly reduces net yield. For Fidelity customers, manually buying SGOV is usually a better move than leaving cash in SPAXX.

• Best HYSAs in 2026 offer 4.0-4.25% APY (Marcus, Wealthfront, SoFi).
• Advantage: FDIC insured up to $250,000, no market risk, no bid-ask spread.
• Disadvantage: Interest is fully taxable at both federal and state levels. In high-tax states, after-tax yield is meaningfully lower than T-bill ETFs.
• Best for: Emergency fund cash where FDIC insurance and instant access matter more than a 20-50 basis point yield advantage.

For investors who want to compare their T-bill ETF allocation with broader portfolio options, see our guides on Best ETFs for Roth IRA and Best Index Funds for 2026.

How Much Cash Should You Keep in Treasury ETFs?

The right amount of cash to hold in ultra-short Treasury ETFs depends on your financial situation, goals, and risk tolerance. Here is a framework for thinking about cash allocation:

Most financial planners recommend maintaining 3-6 months of essential living expenses in highly liquid, low-risk assets. Ultra-short Treasury ETFs are an excellent vehicle for this purpose. A household spending $6,000 per month would target $18,000-$36,000 in their emergency fund. At a ~4.3% SEC yield, a $30,000 SGOV position generates roughly $1,290 per year — money that would earn almost nothing in a traditional checking account.

Some investors maintain a cash allocation specifically for buying opportunities — market dips, IPOs, or other tactical investments. This "dry powder" is typically 5-10% of a total portfolio. Parking it in SGOV or BIL means it earns a competitive yield while remaining immediately accessible. The trade-off is opportunity cost: historically, the S&P 500 returns roughly 10% per year, so every dollar in T-bills instead of equities forgoes approximately 5-6% of expected return.

An increasingly popular approach is the "barbell" strategy: hold a significant portion in ultra-safe, ultra-short Treasuries (SGOV/BIL) on one end, and high-growth equities on the other end, with little or nothing in the middle (intermediate bonds, balanced funds). This strategy maximizes the safety of the safe portion while maximizing the growth potential of the growth portion. In a 4%+ yield environment, the "safe" end of the barbell actually generates meaningful income.

Bottom Line: SGOV Is the Default Winner

Among SGOV, BIL, and SHV, the answer for most investors in 2026 is straightforward: SGOV wins on cost, yield, and AUM. Here is the summary:

Regardless of which ETF you choose, all three are excellent tools for earning a competitive yield on cash while maintaining virtually zero credit risk and full liquidity. The state tax exemption on T-bill interest is a genuine advantage over savings accounts and corporate bond funds, particularly for investors in high-tax states. In a 4%+ yield environment, there is no reason to leave significant cash sitting in a 0.01% checking account.

For more investment ideas, explore our Best ETFs for Roth IRA guide or our comprehensive Best Index Funds for 2026 analysis.

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