Investors are piling into big, short Treasury bets with Warren Buffett
Investors are closely monitoring the movements in the bond market, with a focus on the latest trends in prices and yields to gauge the state of the economy. Currently, the consensus among experts is to stick to the shorter-end of the fixed-income market when it comes to choosing maturities.
Joanna Gallegos, CEO and founder of bond ETF company BondBloxx, emphasized the stability and lower volatility in the short to middle end of the bond market. She highlighted that yields on the 3-month T-Bill are above 4.3% annualized, while the two-year and 10-year are offering 3.9% and 4.4% respectively.
Investors have been flocking towards ultrashort opportunities, as evidenced by the significant flows into ETFs like the iShares 0-3 Month Treasury Bond ETF (SGOV) and SPDR Bloomberg 1-3 T-Bill ETF (BIL). These ETFs have garnered over $25 billion in assets, indicating a strong attraction towards short-term bonds.
On the other hand, long-duration bonds have been experiencing volatility, with the 20-year bond flipping between negative and positive territory multiple times this year. This increased bond market volatility follows the Federal Reserve’s rate cuts and concerns over inflation due to tariffs and government spending.
Todd Sohn, senior ETF and technical strategist at Strategas Securities, advised against long-duration bonds, recommending a focus on securities with durations shorter than seven years. He highlighted that long-term treasuries and long-term corporate bonds have seen negative performance since September, a rarity in modern times.
Gallegos expressed concerns that investors may be overlooking the importance of diversifying their portfolios with bonds amidst market volatility. She cautioned against an “equity addiction” to concentrated indexes, emphasizing the need to balance portfolios with fixed-income assets.
In light of the stock market’s volatility, Sohn suggested looking beyond the United States for equity opportunities. He pointed out the strong performance of international equities, particularly in European and Japanese markets, as an alternative to U.S. large-cap growth stocks.
Overall, the bond market’s current landscape underscores the importance of a balanced investment approach, with a mix of short-term bonds and diversified equity holdings. By staying informed and adapting to market conditions, investors can navigate the uncertainties and capitalize on opportunities for long-term growth.
