Quick Answer
- All Treasury ETFs share the same credit risk (the US government) and the same state-tax exemption on their interest. Maturity is the only real variable.
- Short end (SGOV, BIL, USFR): cash substitutes. Near-zero price movement, yield tracks the Fed's current rate.
- Middle (VGSH, VGIT, GOVT): the bond allocation of a portfolio. Modest rate sensitivity, some term yield.
- Long end (TLT, EDV): rate bets. Prices swing hard in both directions; long Treasuries lost roughly a third of their value in the 2022-2023 rate cycle.
- The rule that organizes everything: price moves about 1% opposite to rates for every year of duration.
- Fees run 0.04% to 0.15% across the ladder; Vanguard's rungs are the cheapest.
The Ladder at a Glance: Eight Funds, One Borrower
| Fund | Maturity range | Expense ratio | Rate sensitivity | The job |
|---|---|---|---|---|
| SGOV | 0-3 month bills | 0.09% | Near zero | Cash parking |
| BIL | 1-3 month bills | 0.14% | Near zero | Cash parking |
| USFR | 2-year floating rate notes | 0.15% | Near zero | Cash parking, rate resets weekly |
| VGSH | 1-3 years | 0.04% | Low | Conservative bond sleeve |
| VGIT | 3-10 years | 0.04% | Moderate | Core bond allocation |
| GOVT | Whole curve, 1-30 years | 0.05% | Moderate | One-fund Treasury exposure |
| TLT | 20+ years | 0.15% | High | Rate bet, crash hedge |
| EDV | 20-30 year STRIPS | 0.06% | Highest | Amplified rate bet |
Notice what's missing from the table: any column about credit quality. Every row is the same borrower, which is exactly why maturity carries all the weight. It also means picking between funds on the same rung (SGOV vs BIL, say) is a fee-and-details decision, while picking between rungs is a completely different risk decision.
Duration Is the Whole Game
Duration measures how hard a fund's price reacts when interest rates move, and it scales with maturity. The working rule: for every year of duration, the price moves about 1% in the opposite direction of a one-point rate change.
SGOV's duration is close to a tenth of a year, so a full one-point rate move nudges its price about 0.1%: invisible. VGIT sits near five years: a one-point move is roughly a 5% price swing, noticeable but survivable. TLT runs around 17 years of duration: the same one-point move is about a 17% price swing, and EDV, which holds zero-coupon STRIPS, stretches past 20. That's the entire mechanism behind long Treasury funds losing roughly a third of their value when rates jumped in 2022 and 2023, with no default anywhere in sight. Past performance does not guarantee future results, but the arithmetic that produced it is permanent.
The flip side is symmetric: when rates fall, long duration wins just as hard. Which is why every rung of the ladder is somebody's right answer, and why "are Treasury ETFs safe" has no one-word answer. Credit-safe, always. Price-safe, only at the short end.
The Short End Is a Cash Substitute
SGOV, BIL, and USFR hold paper so close to maturity that rate moves barely register in the price. What you get is the market's current short-term rate, paid monthly, with the price pinned near its anchor. That makes them competitors to savings accounts and money market funds rather than to other bond funds, and the comparison usually turns on fees, yield lag, and taxes rather than risk.
Within the rung: SGOV is the cheapest of the bill funds at 0.09% and the one we've covered most; BIL is the oldest and most traded at 0.14%; USFR holds floating rate notes whose yield resets weekly, which makes it the quickest to follow Fed hikes. The fine-grained matchups live in SGOV vs BIL and USFR vs SGOV, and the against-the-bank comparisons in SGOV vs money market funds and SGOV vs buying T-bills directly. For the deepest dive on the category's flagship, the SGOV guide covers holdings, payouts, and mechanics.
The Middle Trades a Little Price Risk for Term Yield
VGSH (1-3 years, 0.04%) and VGIT (3-10 years, 0.04%) are what most people mean by "the bond part of my portfolio" when they want government-only credit. They move with rates, but at survivable amplitude, and they capture term premium the bill funds give up. GOVT (0.05%) skips the choice by holding the whole curve in one fund, landing at intermediate duration overall.
The middle is also where Treasury funds and total bond market funds like BND overlap. BND holds Treasuries plus corporate and mortgage bonds, picking up a bit more yield and a bit more credit risk; a Treasury-only fund keeps the government purity and the full state-tax exemption. Which trade makes sense depends on what the bonds are for, a question the bond ETF guide works through properly.
The Long End Is a Rate Bet, Not an Income Strategy
TLT holds 20+ year bonds; EDV holds 20-30 year STRIPS, zero-coupon bonds that push duration even further. At roughly 17 and 24 years of duration, these funds move like equities: double-digit annual swings in either direction are normal, driven entirely by long-term rate expectations.
People hold them for two defensible reasons. One: a deliberate view that long rates will fall, which long duration converts into large gains. Two: crash insurance, since long Treasuries have often (not always) rallied when stocks crashed. What the long end is not: a cash substitute, a savings vehicle, or a yield play, despite the monthly distributions. Anyone who bought TLT "for safety" in 2021 learned the difference the expensive way. The pairing decision between the two is covered in TLT vs EDV.
"Treasury" reads as safe, and at the short end it is. The same word on a 20-year fund describes only the credit, not the ride. Check a fund's duration before its yield; the duration is the risk disclosure.
Every Rung Shares the Same State Tax Break
Interest from US Treasuries is exempt from state and local income tax under federal law, and the exemption flows through every fund in this guide, from SGOV to EDV. Federal tax applies in full, and the exemption covers interest, not capital gains from selling shares. In a high-tax state the break is material: at California's top rate, roughly $1,330 avoided per $10,000 of interest. In the nine states with no income tax, it's worth nothing.
Two practical notes. The exemption is not automatic: you apply the fund's year-end "percentage from US government obligations" figure on your state return, and most tax software won't do it unless you feed it the number. And the same logic makes Treasury funds more attractive than corporate bond funds on an after-tax basis in high-tax states, even at equal yields. The full mechanics, state by state, are in is SGOV exempt from state tax, and the broader tax picture is in how ETFs are taxed.
Common questions
There is no single answer because Treasury ETFs do different jobs. For parking cash with near-zero price risk, the short end: SGOV (0.09%), BIL (0.14%), or USFR (0.15%). For the bond allocation of a portfolio, intermediate funds like VGIT (0.04%) or the whole-curve GOVT (0.05%). For a deliberate bet that interest rates will fall, long-duration funds like TLT (0.15%) or EDV (0.06%). Matching the maturity to the job matters far more than picking among similar funds within a rung. This is education, not a recommendation; past performance does not guarantee future results.
Credit-wise, they hold debt backed by the full faith and credit of the US government, the market's reference point for credit safety. Price-wise, safety depends entirely on maturity. A 0-3 month T-bill fund like SGOV barely moves in price. A 20+ year fund like TLT can fall hard when rates rise; long Treasuries lost roughly a third of their value during the 2022-2023 rate cycle. Same borrower, opposite risk profiles. Past performance does not guarantee future results.
The interest they pay is exempt from state and local income tax under federal law, because states cannot tax federal government obligations. Federal income tax still applies in full, and capital gains from selling shares are not covered by the exemption. The exemption is not applied automatically: you claim it on your state return using the fund's year-end percentage-of-government-obligations statement. In the nine states with no income tax it changes nothing. This is general information, not tax advice.
Maturity, which changes everything. SGOV holds Treasury bills maturing in 0 to 3 months, so its price barely moves and its yield tracks whatever the Fed's current rate implies; it behaves like cash that pays interest. TLT holds bonds maturing in 20+ years, so its price swings roughly 17% for every one-point move in long-term rates while its payout is locked to older coupons. SGOV answers "where do I park money." TLT answers "do I want to bet on rates falling." They are not substitutes.
Because bond prices fall when interest rates rise, and the longer the fund's duration, the bigger the fall. A Treasury fund never defaulting does not protect its share price from rate moves; only short maturities do that. The rough rule: a fund's price moves about 1% in the opposite direction of rates for every year of duration. If a long-term Treasury fund dropped sharply, rising rates, not credit problems, almost certainly explain it.
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