What is duration and how does it measure interest rate risk?

Duration definition: duration is a measure of how sensitive a bond or bond portfolio's price is to changes in interest rates; expressed in years; a bond with duration of 2 years will decrease in price by approximately 2% for every 1% increase in interest rates (and increase in price by approximately 2% for every 1% decrease in rates); this 'modified duration' approximation works well for small rate changes. VGSH's duration: VGSH's portfolio of 1-3 year Treasury notes has duration of approximately 1.9 years; a 1% rate increase causes approximately -1.9% price impact on VGSH; a 2% rate increase causes approximately -3.8% price impact; this is much smaller than longer-duration bond ETFs (IEF at 7-8 years duration, TLT at 16+ years duration) but more than T-bill ETFs. BILS's duration: BILS's 3-12 month T-bill portfolio has duration of approximately 0.4 years; a 1% rate increase causes only approximately -0.4% price impact; the T-bill fund barely moves in price regardless of rate changes; the price stability is the reason some investors prefer T-bill ETFs as cash equivalents. Duration and total return: duration measures ONLY price impact, not total return; when rates rise: VGSH's price falls by approximately duration × rate change, BUT the ongoing coupons reinvested at higher rates partially offset the price loss over time; the break-even period (time to recover from the price loss through higher reinvestment income) is approximately equal to the portfolio's duration — approximately 1.9 years for VGSH.

How do VGSH and BILS compare to money market funds and HYSA?

Money market funds: money market mutual funds (MMMF) invest in very short-term, high-quality instruments (T-bills, repo, short commercial paper); government money market funds hold only T-bills and government repo; MMFs maintain a stable $1.00 NAV (price per share); MMFs are redeemable at end-of-day at $1.00 NAV with same-day or next-day settlement; no market risk (government MMFs have never broken the $1 NAV). BILS vs. government money market fund: BILS holds similar instruments (T-bills) as government MMFs but is structured as an ETF; BILS trades intraday on exchanges at market prices (though very close to NAV); settlement for ETF shares is T+1 (slightly different from MMF same-day redemption); BILS's yield may be slightly different from MMF yields due to fund expenses and portfolio construction differences; investors who want intraday ETF liquidity and don't need same-day cash access may prefer BILS; investors who need immediate access to cash may prefer MMF. High-yield savings accounts (HYSA): bank savings accounts with competitive interest rates (recently 4-5% during 2022-2023 high rate environment); HYSA money is FDIC insured up to $250,000 per depositor per bank; HYSA rates are set by banks and may lag T-bill rates; HYSA has no market risk but is not directly marketable (can't sell it to another investor); HYSA is limited to $250K FDIC insurance per bank per account type; for cash balances over $250K, T-bill ETFs (BILS) or money market funds are safer (no bank counterparty risk). VGSH's position: VGSH is not a cash equivalent — its 1-3 year maturity means price can decline 2-4% in a rising rate environment; VGSH is appropriate for bond portfolio allocation with a 1-3 year investment horizon, not for cash that might be needed in 3-6 months.

When is a short-term Treasury ETF better than holding individual Treasuries directly?

Advantages of Treasury ETFs (VGSH, BILS): diversification across many maturities (VGSH holds 2-year and 3-year notes at various points in the 1-3 year range, providing exposure across the maturity curve rather than a single bond); automatic reinvestment (maturing Treasury proceeds are automatically reinvested into new Treasuries matching the index parameters); intraday liquidity (buy and sell during market hours at market prices, unlike individual Treasury secondary market which may have wider bid-ask spreads); simplicity (no need to manage Treasury Direct accounts, track maturity dates, or select specific CUSIP numbers). Advantages of holding individual Treasuries directly: no expense ratio — holding individual Treasuries directly costs zero annually (no management fee); Treasury bills can be purchased at TreasuryDirect.gov with no fee; certainty of maturity — if you hold a 2-year Treasury to maturity, you receive exactly face value regardless of interest rate movements; an ETF never matures. Tax treatment: Treasury interest is exempt from state and local income taxes; both ETF dividends from Treasury ETFs and direct Treasury interest benefit from this state tax exemption; however, the Treasury ETF may hold some capital gains/losses from portfolio rebalancing, while direct Treasury holding realizes no gain/loss if held to maturity. Conclusion: for most investors, Treasury ETFs (VGSH, BILS) provide superior convenience at very low cost; for investors with very large balances and the sophistication to manage a Treasury ladder directly, the expense ratio savings from holding individually may be material; for most retail investors, 0.04% VGSH or 0.1355% BILS is excellent value for the simplicity provided.

brimindinvest.com / compare / vgsh-vs-bilsLIVE

VGSH

Vanguard Short-Term Treasury ETF · ETF - Short-Term U.S. Treasury Notes (1-3 Year)

$58.01

+0.25% this month

VERSUS

⟷

COMPARE

BILS

SPDR Bloomberg 3-12 Month T-Bill ETF · ETF - U.S. Treasury Bills (3-12 Month Maturity)

$99.18

+0.27% this month

Scoreboard verdict

Across expense ratio, momentum, yield, fund size, risk

VGSH

3

BILS

2

VGSH LEADS 3/5

Comparison scoreboard

VGSH LEADS 3/5

Exp. Ratio

VGSH ✓0.03%

BILS 0.14%

1Y Return

VGSH +2.80%

BILS ✓+3.53%

Div. Yield

VGSH ✓3.87%

BILS 3.80%

AUM

VGSH ✓$33.83B

BILS $3.87B

Beta

VGSH 0.05

BILS ✓0.01

Metrics last refreshed: 7/9/2026

Quick take

VGSH vs BILS ETF Comparison: AI Score, Valuation, Performance and Upside

VGSH (Vanguard Short-Term Treasury ETF) and BILS (SPDR Bloomberg 3-12 Month T-Bill ETF) are both U.S. government-guaranteed short-duration fixed income ETFs — VGSH provides 1-3 year Treasury note exposure at ultra-low cost (0.04%) with modest interest rate sensitivity and some yield pickup vs. cash, while BILS holds 3-12 month T-bills with near-zero interest rate risk functioning as a true cash equivalent that automatically rolls into current market rates.

VGSH vs BILS is short-term Treasury note ETF with near-zero cost and slight rate pickup vs. cash (Vanguard's 0.04% expense ratio on 1-3 year Treasury notes, 1.9-year duration for modest term premium, and Vanguard's structural cost advantage — underperforming vs. T-bills in rapid rate hike cycles) versus T-bill cash equivalent ETF with automatic rate rolling and near-zero duration (SPDR's 3-12 month T-bill portfolio at 0.1355% expense ratio, near-zero price volatility regardless of rate moves, and cash management utility — paying higher fees and sacrificing term premium for maximum rate flexibility).

Live analysis · updated 7/9/2026

VGSH holds the edge across 3 of 5 key metrics in this comparison. BILS has delivered stronger 1-year price return (+3.53% vs +2.80% for VGSH).

Normalized 1Y performance

VGSH

BILS

Recent returns

VGSH

BILS

Who should consider this stock?

VGSH may suit investors who:

→Want the lowest-cost U.S. Treasury exposure at 0.04% expense ratio with 1-3 year maturity and modest term premium vs. T-bills in a normal upward-sloping yield curve environment
→Plan to hold for 1-3 years or longer and can accept modest short-term price fluctuations (approximately 1.9% per 1% rate move) in exchange for the yield pickup from 2-3 year Treasuries
→Use VGSH as the highest-quality component of a diversified bond portfolio seeking U.S. government-guaranteed income at minimal cost

BILS may suit investors who:

→Want a cash equivalent that earns current T-bill market rates with near-zero interest rate risk and the convenience of ETF intraday trading vs. money market mutual funds
→Are uncertain about the direction of interest rates and want automatic adjustment to current rates as T-bills roll at maturity, avoiding the fixed-rate risk of VGSH in a rising rate scenario
→Have shorter investment horizons (days to months) or use BILS as a tactical parking vehicle between investment opportunities where capital preservation is more important than income optimization

Performance & AI score

Metric	VGSH	BILS
ETF score	46.0	35.0
Latest close	$58.01	$99.18
1M return	+0.25%	+0.27%
6M return	+0.22%	+1.36%
1Y return	+2.80%	+3.53%

$10,000 invested — hypothetical growth (dividends reinvested)

How much would $10,000 be worth today if invested at the start of each period, with all dividends reinvested?

Period	VGSH	BILS
1Y ago	$10.65K (+6.5%) started 2025-07-08	$10.72K (+7.2%) started 2025-07-08
5Y ago	$12.79K (+27.9%) started 2021-07-08	$14.17K (+41.7%) started 2021-07-08
10Y ago	$15.15K (+51.5%) started 2016-07-08	$14.17K (+41.7%) started 2020-10-07

Hypothetical — past performance does not guarantee future results.

Fund characteristics

Metric	VGSH	BILS
Expense ratio	0.03%	0.14%
Total assets (AUM)	$33.83B	$3.87B
Dividend yield	3.87%	3.80%
Trailing P/E	N/A	N/A
Beta	0.05	0.01
52-week change	2.80%	3.53%

Risk & fund metrics

Metric	VGSH	BILS
1Y return	+2.80%	+3.53%
6M return	+0.22%	+1.36%
1M return	+0.25%	+0.27%
1Y Sharpe ratio	-1.26	-2.59
Beta	0.05	0.01
Dividend yield	3.87%	3.80%
5Y CAGR	+1.78%	+3.30%

Drawdown & downside risk

Lower drawdown and smaller single-period drops generally indicate a smoother ride, though they do not guarantee lower future risk.

1Y risk snapshot

VGSH max drawdown0.88%

BILS max drawdown0.30%

VGSH max wkly drop0.53%

BILS max wkly drop0.26%

5Y risk snapshot

VGSH max drawdown5.66%

BILS max drawdown0.36%

VGSH max wkly drop1.29%

BILS max wkly drop0.26%

10Y risk snapshot

VGSH max drawdown5.70%

BILS max drawdown0.41%

VGSH max wkly drop1.29%

BILS max wkly drop0.26%

Performance metrics by period

Period	Metric	VGSH	BILS
1Y	Growth	+2.80%	+3.53%
	CAGR	+2.80%	+3.53%
	Sharpe ratio	-1.26	-2.59
	Max drawdown	0.88%	0.30%
	Max daily drop	0.38%	0.30%
	Max wkly drop	0.53%	0.26%
5Y	Growth	+9.21%	+17.64%
	CAGR	+1.78%	+3.30%
	Sharpe ratio	-1.37	-3.66
	Max drawdown	5.66%	0.36%
	Max daily drop	0.53%	0.30%
	Max wkly drop	1.29%	0.26%
10Y	Growth	+18.14%	+17.60%
	CAGR	+1.68%	+2.86%
	Sharpe ratio	-1.78	-5.15
	Max drawdown	5.70%	0.41%
	Max daily drop	0.53%	0.30%
	Max wkly drop	1.29%	0.26%

Fund overview

Category	VGSH	BILS
Fund name	Vanguard Short-Term Treasury Index Fund ETF Shares	State Street SPDR Bloomberg 3-12 Month T-Bill ETF
Type	ETF	ETF
Expense ratio	0.03%	0.14%
Total assets (AUM)	$33.83B	$3.87B
Dividend yield	3.87%	3.80%

VGSH strengths

→Extremely low expense ratio (0.04%) with Vanguard's structural cost advantage — Vanguard's investor-owned cooperative structure passes cost savings to shareholders; 0.04% on Treasury ETFs is essentially the minimum cost available for passive treasury exposure
→U.S. government full faith and credit guarantee eliminates credit risk — U.S. Treasury securities have zero credit risk (the U.S. government can always print dollars to repay dollar-denominated debt); VGSH holders bear only interest rate risk, not default risk
→1-3 year duration provides some yield pickup over T-bills with limited rate sensitivity — the yield curve normally has a positive slope (2-3 year yields above 3-month T-bill yields); VGSH typically earns this term premium; duration of approximately 1.9 years means modest sensitivity to rate changes

BILS strengths

→Near-zero interest rate risk with automatic rolling into current market T-bill yields — BILS's ultra-short maturity (3-12 months) means its price barely moves when interest rates change; as T-bills mature and are replaced by new issues, BILS automatically adjusts to prevailing interest rates
→Highest-quality, most liquid government securities — U.S. Treasury bills are the safest and most liquid financial instruments in the world; the T-bill market is the backbone of the global financial system; zero credit risk with exceptional secondary market liquidity
→Functional alternative to money market funds with ETF liquidity — money market funds typically hold similar instruments (T-bills, repo) but are structured as mutual funds that transact at end-of-day NAV; BILS trades continuously during market hours with real-time pricing

Risks to watch — VGSH

→Fixed-rate coupons mean VGSH does not automatically benefit from rising rates — unlike floating-rate instruments (loans, SOFR-based instruments), VGSH's holdings have fixed coupons; when rates rise, existing bond coupons become less attractive relative to new, higher-yielding bonds; VGSH's price declines to adjust yields upward
→In steeply rising rate environments, VGSH underperforms T-bills — during aggressive Fed rate hiking cycles, the 1.9-year duration causes meaningful price declines; T-bills outperform in rapidly rising rate environments because they mature quickly and roll into higher-yielding new bills
→Minimal differentiation from cash in very low rate environments — when short-term interest rates approach zero, VGSH and T-bills both yield near-zero; the advantage over cash equivalents nearly disappears

Risks to watch — BILS

→In falling rate environments, BILS yield declines rapidly as T-bills mature and roll into lower-yielding new issues — unlike fixed-rate bonds that maintain their coupon as rates fall (and gain in price), BILS rolls into lower-yielding T-bills; the income declines quickly when the Fed cuts rates
→Higher expense ratio than VGSH (0.1355% vs 0.04%) — BILS costs more than VGSH; the additional cost must be justified by BILS's reduced interest rate risk; in stable or declining rate environments, VGSH's lower cost and yield pickup may outperform BILS after fees
→Slightly lower yield than 1-3 year Treasury notes — the yield curve normally slopes upward; 3-12 month T-bills yield less than 1-3 year notes; VGSH typically provides somewhat higher income than BILS from the positive yield curve slope

Frequently asked questions

T-bill definition: U.S. Treasury bills are the shortest-maturity U.S. government securities, issued with maturities of 4 weeks, 8 weeks, 13 weeks (3 months), 17 weeks, 26 weeks (6 months), and 52 weeks (1 year); T-bills are issued at a discount to face value — an investor might pay $970 for a 26-week T-bill with a $1,000 face value; at maturity (26 weeks later), the investor receives $1,000; the $30 difference is the investor's return; T-bills pay no periodic coupon; the return is entirely from the price discount. Yield calculation: the T-bill discount yield is expressed as an annualized percentage of face value; a 13-week T-bill with a 5% annual discount yield would be priced at approximately $987.50 (1,000 × (1 - 5% × 91/360)); the equivalent bond yield (investment yield) is slightly different due to compounding conventions. Fed funds rate connection: the Federal Reserve's fed funds rate target directly affects T-bill yields; the 3-month T-bill yield closely tracks the fed funds rate; when the Fed raises rates, T-bill yields rise almost immediately (within days, as new T-bill auctions price at higher rates); when the Fed cuts rates, T-bill yields fall quickly; this makes T-bills the most rate-sensitive (in terms of income, not price) short-duration instrument. BILS mechanics: BILS purchases T-bills at auction and in the secondary market; as T-bills mature, BILS rolls the proceeds into new T-bill purchases; the fund always holds a 3-12 month ladder of T-bills; monthly distributions reflect the rolling T-bill coupon income; the NAV stays near $100 with minimal fluctuation.

AI Prediction SignalNext 5 trading days

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VGSH

+2.8%BUY

BILS

+1.1%HOLD

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