TLT vs SHY: Treasury ETF Comparison

TLT vs SHY: Long-Term vs Short-Term Treasury ETFs

Comparisons7 min readUpdated March 17, 2026

Key Takeaways

✓TLT holds 20+ year Treasuries with ~17 year duration; SHY holds 1-3 year Treasuries with ~2 year duration.
✓TLT is extremely sensitive to interest rates — it lost 33% in 2022 when rates spiked.
✓SHY provides capital stability with lower yield; TLT provides higher yield with significant volatility.
✓Both ETFs hold US government bonds with no credit risk, but very different interest rate risk.

TLT and SHY represent opposite ends of the Treasury maturity spectrum, offering dramatically different risk-reward profiles despite both holding US government bonds with zero credit risk.

Duration: The Key Difference

TLT holds 20+ year Treasury bonds with roughly 17 years of duration. SHY holds 1-3 year Treasury bonds with roughly 2 years of duration. Duration measures interest rate sensitivity — for each 1% change in rates, TLT moves approximately 17% while SHY moves approximately 2%. This makes TLT roughly 8.5x more volatile than SHY.

2022: A Case Study

When the Federal Reserve aggressively raised rates in 2022, TLT lost 33% — one of the worst years for long-term bonds in history. SHY lost about 4%. Both held US Treasuries with identical credit quality. The difference was entirely driven by duration exposure. This demonstrates why duration management is critical in fixed income investing.

The Yield Question

In a normal yield curve environment, TLT yields more than SHY because investors demand higher compensation for locking up money longer. During yield curve inversions (like 2022-2024), SHY can actually yield more than TLT. Compare current yields at TLT vs SHY comparison page.

Using Each in a Portfolio

SHY serves as a cash-like holding with modest yield and minimal risk — ideal for money you might need within 1-3 years. TLT serves as a recession hedge — it tends to rally powerfully when stocks crash and rates are cut. During COVID (March 2020), TLT gained over 20% while stocks plummeted, demonstrating its hedging value.

The Middle Ground

If both extremes seem too narrow, BND (total bond market) provides a blend of maturities with intermediate duration (~6 years). IEF (7-10 year Treasury) offers a middle-ground duration play. Your time horizon and portfolio role should drive the choice. Explore more bond strategies in our education center.

Frequently Asked Questions

When should I hold TLT vs SHY?

Hold SHY when you need capital preservation and believe rates may rise. Hold TLT when you believe rates will fall (TLT rallies powerfully in rate-cut environments) or want a hedge against stock market crashes. TLT gained over 20% during the 2020 COVID crash as rates plummeted, demonstrating its hedging power.

Which has higher yield?

Usually TLT yields more because longer maturities typically command higher yields (normal yield curve). However, during yield curve inversions, SHY can yield more than TLT. The yield spread between them fluctuates with monetary policy and economic expectations.

Can I lose money in SHY?

While unlikely to lose significantly, SHY can decline modestly when short-term rates rise rapidly. The maximum decline is limited by its short 2-year duration. In 2022's extreme rate-hiking cycle, SHY lost about 4% — painful but nothing like TLT's 33% loss. SHY is one of the safest ETFs available.