Remember when money-market funds and Treasury bills were paying over 5% with basically zero risk? Yeah, those days are already fading fast.
As I write this in December 2025, the market is pricing in another Fed cut this month, and most analysts expect we’ll be down near 3% on short-term rates within the next year or two. If you’ve been sitting on a pile of cash earning juicy yields, the clock is ticking louder than ever.
But here’s the thing nobody is really shouting about yet: there’s a remarkably simple way to freeze today’s higher yields in place for 3, 5, even 10 years ahead. And you don’t need to be a bond trader or have millions to do it.
The Hidden Gem: Defined-Maturity Bond ETFs
These aren’t your typical bond ETFs that roll forever and surprise you with duration risk when rates move. Defined-maturity ETFs (sometimes called target-maturity or bullet ETFs) behave much more like individual bonds.
You pick the exact year you want your money back, buy the ETF that holds bonds maturing that year, collect monthly or quarterly dividends along the way, and when that year arrives, the fund simply hands you back your principal (minus any defaults, which are rare in investment-grade versions) and closes shop.
It’s like buying a CD, except you get the diversification of hundreds of bonds, you can sell anytime on the stock exchange if plans change, and you often get better yields than comparable Treasuries.
Why They’re Suddenly Everywhere
Over the past three years alone, investors have poured more than $46 billion into this category. That’s not pocket change.
One major provider saw their defined-maturity suite explode from roughly $10 billion to nearly $40 billion in assets. Another has launched over 50 different flavors covering corporate bonds, municipal bonds, high-yield, Treasuries, and even inflation-protected securities.
Why the sudden love affair? Simple. When rates were near zero, nobody cared about locking in yields. Now that rates finally gave us something worth locking in, smart investors are moving fast.
“Instead of buying one bond at a time and ending up with just a handful in your account, you instantly own hundreds with a single ticker.”
Head of fixed-income ETF strategy at a major asset manager
How They Actually Work in Practice
Let’s say you think rates will be significantly lower in five years. You could buy a defined-maturity corporate bond ETF maturing in 2030 that’s currently yielding around 4.8% to maturity.
Every month you’ll collect dividends. The fund manager gradually shortens duration as we approach 2030. And in December 2030, the ETF liquidates and wires the net asset value straight to your brokerage account.
No reinvestment decisions until that moment. No wondering whether you should roll into new bonds at lower rates. You locked it in today.
Want to be even more precise? Build a ladder:
- $20k in a 2027 maturity fund
- $20k in 2028
- $20k in 2029
- $20k in 2030
- $20k in 2031
Every year one rung matures, giving you cash to either spend or reinvest at whatever rates exist then, while the rest of your ladder keeps earning the higher yields you secured today.
Where the Best Opportunities Sit Right Now
Short-term rates have already fallen quite a bit from their peak, but intermediate corporate bonds still offer attractive spreads.
Many pros are pointing to the 2-5 year part of the investment-grade corporate curve as particularly compelling. Yields around 4.5-5% with relatively low duration risk.
For tax-sensitive investors, municipal defined-maturity ETFs in the 8-12 year range are throwing off tax-equivalent yields that can beat taxable alternatives by a wide margin, especially for those in higher brackets.
Even high-yield defined-maturity funds are worth a look if you’re comfortable with extra credit risk, some 2028-2030 vintages are still pricing in yields north of 6%.
The Biggest Advantage Nobody Talks About
Rate volatility immunity.
When rates fall, new bonds pay less, but your existing ladder keeps paying the higher coupon you locked in.
When rates rise? Well, you’ve got principal returned on schedule to reinvest at those higher rates. It’s genuinely a “heads you win, tails you don’t lose much” setup.
“Bond ladders make you indifferent to interest-rate moves. Some money keeps earning today’s higher rates, while maturing principal can chase tomorrow’s rates if they rise.”
Defined-Maturity vs Traditional Bond ETFs: When to Choose Which
If you’re investing money you’ll need on a specific future date, college tuition in 2032, a home down payment in 2029, required minimum distributions you want to park safely, defined-maturity funds win hands down.
If you’re just building a permanent fixed-income allocation inside a retirement account and plan to “set it and forget it” for decades, traditional perpetual bond ETFs still make sense because of their slightly lower expense ratios and automatic reinvestment.
Many investors, myself included, end up using both: core perpetual funds for the long-term bucket, and a defined-maturity ladder for the medium-term bucket.
| Goal | Best Tool |
| Known future expense date | Defined-maturity ETFs |
| Permanent portfolio allocation | Traditional bond ETFs |
| Want to stay fully invested but hate rate guessing | Laddered defined-maturity |
| Ultra-low costs matter more than precision | Traditional broad bond funds |
Real-World Example That Hits Home
A client of mine, retired engineer in his late 60s, had about $800k sitting in money-market funds earning 4.8%. He was nervous about stocks but hated the idea of watching his yield evaporate as rates fell.
We built him a simple five-year investment-grade corporate ladder. Average yield to maturity: 4.7%. Total expected income over five years: roughly $195,000 in dividends, plus return of principal.
Even if rates drop to 2% by 2030, his money will have earned 4.7% average the whole time. If rates somehow spike higher, he gets fresh cash every year to take advantage. He sleeps significantly better now.
The Bottom Line
We’re likely in the final innings of elevated interest rates. Cash yields are already rolling over, and the Fed’s next moves are overwhelmingly expected to be downward.
If you have money sitting in short-term vehicles earning rates that are about to shrink, defined-maturity bond ETFs offer one of the cleanest, most straightforward ways to extend today’s attractive yields far into the future.
No crystal ball required. No complicated options strategies. Just pick your maturity dates, buy quality bonds through an ETF wrapper, and let time do the rest.
In my experience, the investors who act decisively during these brief windows when rates are “high for this cycle” are the same ones who look like geniuses five years later.
The window won’t stay open forever. Once the cutting cycle is well underway and everyone realizes cash yields have permanently reset lower, these funds will still work, but you’ll be locking in tomorrow’s lower rates instead of today’s higher ones.
Sometimes the simplest moves are the most powerful.
