The Federal Reserve’s target range is now 3.50% to 3.75%, down from 4.25% to 4.50% a year ago after three rate cuts in late 2025. But the Fed has held rates steady throughout 2026, including at its July meeting. For anyone relying on money market funds, Treasury bills, or other short-term income, that still raises an important question: where do you go when cash no longer pays what it once did?
Three bond ETFs stand out for investors looking for income above 6%: the iShares Broad USD High Yield Corporate Bond ETF (USHY), the Eldridge BBB-B CLO ETF (CLOZ), formerly the Panagram BBB-B CLO ETF, and the iShares 20+ Year Treasury Bond BuyWrite Strategy ETF (TLTW). But they do not earn that income the same way. One takes corporate credit risk, another moves into structured floating-rate debt, and the third combines long-term Treasuries with an options strategy. For retirees especially, the important question isn’t simply which one pays the most. It’s what can happen to your principal while you’re collecting that income.
Why 6%+ Income Comes With a Trade-Off
On Aug. 14, 2026, Treasury’s par yield curve showed 4.17% on the 2-year note, 4.68% on the 10-year, and 5.25% on the 20-year. So an ETF paying more than 6% is not simply handing investors “extra interest.” That extra income usually comes from taking more credit risk, accepting more price sensitivity, moving into a more complex structure, or selling options. The yield label matters, too. A 30-day SEC yield is a standardized measure of recent portfolio income, while a distribution rate reflects what a fund is paying out and can tell a very different story. For retirees spending the income, the bigger question is what may happen to the principal while those checks are coming in.
USHY: The Straightforward High-Yield Bond Play
USHY is the easiest of the three to understand. The iShares Broad USD High Yield Corporate Bond ETF owns a broad portfolio of below-investment-grade corporate bonds, often called high-yield or junk bonds. As of July 30, iShares reported 1,907 holdings, a 7.04% 30-day SEC yield, a 6.93% trailing 12-month yield, and an effective duration of about three years. The expense ratio is just 0.08%, and the fund pays monthly. That diversification helps reduce the damage from any single issuer, but it does not remove credit risk. If the economy weakens and defaults rise, high-yield bond prices can fall. For retirees, USHY makes more sense as a deliberate income allocation than as a substitute for cash.
CLOZ: More Yield Without Taking the Same Interest-Rate Risk
CLOZ is the more specialized choice. Now called the Eldridge BBB-B CLO ETF, the fund was formerly the Panagram BBB-B CLO ETF and invests primarily in BBB- and BB-rated slices of collateralized loan obligations, or CLOs. Those securities are backed by pools of leveraged corporate loans, many of which carry floating rates. As of July 2, the fund reported a 6.84% 30-day SEC yield, a 0.50% expense ratio, and monthly distributions. Floating rates can limit duration risk, but they also reset lower when short-term rates fall. The fund’s own disclosures warn that mezzanine CLO tranches can suffer substantial losses and become harder to trade in stressed markets. This is not a cash replacement, especially for retirees who may need to sell during a downturn.
TLTW: A Big Distribution With a Very Different Risk Profile
TLTW is where the headline payout can be misleading if you don’t look underneath it. The iShares 20+ Year Treasury Bond BuyWrite Strategy ETF owns long-duration Treasury exposure through TLT and sells covered calls against it. As of July 30, its distribution rate was 7.54%, but its 30-day SEC yield was only 4.55%. Its effective duration was about 15 years, the expense ratio was 0.35%, and the year-to-date NAV total return was negative 0.82%. The fund avoids corporate credit risk, but it takes substantial interest-rate risk, while the call strategy can limit upside when long bonds rally. BlackRock also plans to rename the fund and change its strategy around Sept. 17, 2026. For retirees, that makes the updated prospectus required reading before treating the payout as dependable income.