Investors Follow Warren Buffett to Ramp Ultrashort Treasury Bets as Longer-Term Bills Face Volatility
Investors are more attracted to the ultrashort fixed-income market opportunity as the iShares 0-3 month Treasury bond ETF and the SPDR Bloomberg 1-3 Month T-Bill ETF witnessed inflows of over £18.47 billion ($25 billion) in assets in 2025. Meanwhile, Vanguard's short-term bond ETF witnessed inflows of more than £2.95 billion ($4 billion) year-to-date.
The emerging investor trend of preferring the shorter end of the fixed-income market aligns with Warren Buffett's Berkshire Hathaway doubling its ownership of T-bills to own 5% of all short-term Treasuries.
BondBloxx CEO Joanna Gallegos told CNBC that volatility is less on the "short and middle end" with stable yields, but bond jitters remain on the long end as the 20-year treasury has 'gone from negative to positive five times so far this year.'
The 3-month T-Bill is paying 4.345% at an annualised rate, while the two-year treasury is at 3.9% and the 10-year at around 4.4%.
The current bond market volatility comes nine months after the US Federal Reserve started trimming interest rates. However, the Fed has paused its campaign due to concerns about inflation rising again on the US government's tariff play. Moreover, market concerns about federal spending and government deficit levels have further fueled the volatility in the bond market.
Strategas Securities' Todd Sohn said that 'long duration just doesn't work right now,' citing long-term treasuries and corporate bonds have recorded negative performance since September 2024, which happens to be a rare phenomenon.
'The only other time that's happened in modern times was during the Financial Crisis,' he said. 'It is hard to argue against short-term duration bonds right now.' The ETF specialist added that he recommends that clients avoid any bond instruments with a duration above seven years. Investors Overlooking Fixed-Income Assets in Their Portfolios
Gallegos is worried that investors are not adequately prioritising fixed-income instruments in their portfolio mix amid the bond market volatility.
'My fear is investors are not diversifying their portfolios with bonds today, and investors still have an equity addiction to concentrated, broad-based indexes that are overweight certain tech names. They get used to these double-digit returns,' she said.
US stock market volatility peaked this year after the S&P 500 jumped to record highs in February but tanked 20% in April amid the tariff episode before rebounding to make up for all the recent losses.
While Sohn acknowledged that bonds are a crucial part of long-term investing and offer a hedge against stock market volatility, he now thinks it might be time for investors to explore options beyond the US.
'International equities are contributing to portfolios like they haven't done in a decade,' he said. 'Last year was Japanese equities, this year, it is European equities. Investors don't have to be loaded up on US large-cap growth right now,' he said.
The S&P 500 posted over 20% returns in 2023 and 2024, but the iShares MSCI Eurozone ETF has gained 25% YTD, while the iShares MSCI Japan ETF jumped over 25% in the last two years and is up 10% in 2025.
Disclaimer: Our digital media content is for informational purposes only and not investment advice. Please conduct your own analysis or seek professional advice before investing. Remember, investments are subject to market risks and past performance doesn't indicate future returns.
Originally published on IBTimes UK
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Int'l Business Times
2 days ago
- Int'l Business Times
Stocks Climb, Dollar Holds On Trade Hopes And Rate Bets
Asian markets rose Friday on fresh trade hopes and the dollar held around three-year lows amid bets of cuts to US interest rate cuts. Easing concerns about Middle East tensions also added to the upbeat mood. With the Israel-Iran ceasefire holding for now, investors were able to turn their attention back to the economy and Donald Trump's tariffs as a deadline for countries to strike deals with Washington approaches. Bets on a Federal Reserve rate cut jumped this week after the US president said he had candidates in mind to succeed boss Jerome Powell when he leaves next year, with reports saying he would make an announcement as early as September. That was followed Thursday by data showing the world's top economy contracted more than previously estimated in the first quarter and consumer spending grew less than expected. Traders are now fully expecting two rate cuts this year, while there was a pick-up in bets on a third, according to Bloomberg News. Powell, who has faced pressure from Trump to move sooner, appeared to take a dovish turn in a deposition to lawmakers this week, while several other Fed officials have also hinted at a softer approach. All three main indexes on Wall Street rallied, with the Nasdaq hitting a record high and the S&P 500 within a whisker of a new closing peak. The buying continued into Asia, with Tokyo rallying more than one percent to break 40,000 for the first time since January, while Hong Kong, Shanghai, Sydney and Singapore were also well up. The prospect of lower borrowing costs sent the Dollar Index, which compares the greenback to a basket of major currencies, to its lowest level since March 2022. And while it edged slightly higher Friday it remained under pressure. Trade war worries were also soothed slightly Thursday after the White House said Trump could extend his deadline for agreeing deals to avert painful tariffs. The president announced a swathe of levies on trading partners at the start of April but quickly said he would pause them until July 9 to allow for talks but few agreements have been reached so far. When asked if there would be another delay, press secretary Karoline Leavitt told reporters: "Perhaps it could be extended, but that's a decision for the president to make. "The deadline is not critical. "The president can simply provide these countries with a deal if they refuse to make us one by the deadline." This means Trump can "pick a reciprocal tariff rate that he believes is advantageous for the United States", she added. The administration also signalled progress on trade with China, with US Commerce Secretary Howard Lutnick saying they had "signed and sealed" an understanding reached in Geneva last month. Those talks saw the two slash eye-watering tit-for-tat tariffs and address other key issues including China's export of rare earths used in smartphones and electric vehicles, while Beijing was keen to see an easing of restrictions on its access to tech goods. In company news, Chinese smartphone maker Xiaomi soared eight percent to a record high in Hong Kong as it enjoyed strong early orders for its latest sports utility vehicle, its second foray into the competitive electric vehicle market. Tokyo - Nikkei 225: UP 1.6 percent at 40,215.36 (break) Hong Kong - Hang Seng Index: UP 0.3 percent at 24,393.49 Shanghai - Composite: UP 0.1 percent at 3,452.71 Euro/dollar: UP at $1.1702 from $1.1701 on Thursday Pound/dollar: UP at $1.3738 from $1.3725 Dollar/yen: DOWN at 144.34 yen from 144.44 yen Euro/pound: DOWN at 85.18 pence from 85.22 pence West Texas Intermediate: UP 0.5 percent at $65.57 per barrel Brent North Sea Crude: UP 0.5 percent at $68.08 per barrel New York - Dow: UP 0.9 percent at 43,386.84 (close) London - FTSE 100: UP 0.2 percent at 8,735.60 (close)
Int'l Business Times
2 days ago
- Int'l Business Times
US Regulators Propose Looser Leverage Rules To Support Treasury Market Stability
U.S. banking regulators have unveiled a proposal to ease capital requirements on large financial institutions in an effort to bolster liquidity in the Treasury market, which has shown signs of strain in recent months. The proposal targets the enhanced supplementary leverage ratio (eSLR)—a post-2008 financial crisis safeguard that requires the largest banks to hold a set percentage of capital against all assets, including low-risk ones like U.S. Treasuries. Under the revised rule, banks would be permitted to temporarily exclude certain high-quality assets, such as Treasuries and central bank reserves, from the calculation. As reported by the Financial Times, the goal is to reduce disincentives for banks to act as intermediaries in the U.S. government bond market, especially during periods of stress. The move comes amid increased volatility in the Treasury market, driven by fiscal policy uncertainty, including repeated standoffs over the debt ceiling and speculation about future Federal Reserve interest rate cuts. According to the Wall Street Journal, regulators—including the Federal Reserve, FDIC, and OCC—believe relaxing the leverage rule could enhance banks' capacity to absorb and distribute Treasuries, ultimately supporting price stability and smoother rate movements. While industry leaders welcomed the proposal as a step toward modernizing capital rules, critics warn it could inadvertently raise systemic risks. Financial reform advocates argue that loosening capital buffers could make the banking system more vulnerable during future downturns. "This is a clear signal of regulatory retrenchment," said a senior analyst at a Washington-based watchdog group. "It's the first meaningful rollback of Dodd-Frank-era safeguards in over a decade." The proposed rule is now open for public comment through August, with final implementation potentially slated for late 2025. If adopted, the measure would represent a significant policy shift, highlighting the balance regulators are trying to strike between financial stability and market functionality.
Int'l Business Times
2 days ago
- Int'l Business Times
Tech Boom Powers US Stock Futures Ahead Of GDP Update
U.S. stock futures are surging as investors weigh the impact of tech earnings against upcoming economic data. According to Reuters, futures for the S&P 500 rose 0.4%, Nasdaq‑100 futures climbed 0.5%, and Dow futures ticked up 0.3% in early trading Thursday. This rally follows a truce in the Israel‑Iran conflict, which eased geopolitical tensions and lifted risk sentiment across markets, Investopedia reported. The strength of tech was front and center: Micron Technology's bullish revenue forecast—boosted by surging AI-driven data center demand—sent its shares up 1.3% pre-market, while Marvell and AMD also rallied around 2–3%. Notably, Nvidia hit a new all-time high, briefly becoming the world's most valuable company with a market capitalization of approximately $3.77 trillion. Microsoft, Nvidia's teammate in the AI arms race, similarly marked fresh peaks, underscoring the sector's leadership role. Economic data this morning painted a mixed picture: the Commerce Department confirmed a first-quarter GDP contraction of 0.5%, deeper than initially thought, attributed mainly to a surge in imports ahead of tariff hikes. However, jobless claims declined, hinting at a resilient labour market, as reported by Reuters. While markets digest this duality, Federal Reserve Chair Powell has urged patience on rate cuts—though President Trump is reportedly exploring a replacement before the term ends, adding political uncertainty. Nonetheless, futures now price in roughly 63 basis points of easing by year-end, with the first cut anticipated around September. Investors are now eyeing Friday's release of the Personal Consumption Expenditures report, the Fed's preferred inflation measure, for clues about monetary policy direction. In the meantime, tech earnings continue to steer the market, offering a cushion against macroeconomic ambiguity heading into the second half of 2025.
