Short-term investment-grade bond strategies, with durations in the two-to-three-year range, are well positioned to capture a meaningful yield advantage without the rate sensitivity that has challenged longer duration strategies in recent months.
The yield to worst on a diversified short-term bond portfolio currently sits between 4.5% and 5.0%, more than 100 basis points above what bank savings accounts and government money market funds are currently yielding.
Although the path for rates is highly uncertain, the range of outcomes in which short-term bonds outperform cash is considerably wider than the range in which they don't.
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By Ronald Stahl, CFA, Gregory Liechty and Balaji Venkataraman
Geopolitical tensions and renewed inflation risk have unsettled fixed-income markets, pushing Treasury yields near their highest levels since mid-2025. The Federal Reserve (Fed), which held rates steady at 3.5%–3.75% at its
