The Case for Keeping It Short (and Sweet) With US Treasuries

While inflation isn’t yet at the 2% range that the Federal Reserve has been targeting, it’s getting there. At least, it’s getting close enough for it to ease up on the gas on raising interest rates. In fact, the Fed could pump the brakes next year.

With the U.S. central bank announcing on Wednesday that it wasn’t planning any more rate hikes for 2023, many investors believe the Fed’s aggressive rate hike campaign is at its end. Fed Chair Jerome Powell even suggested that the FOMC could begin cutting rates in 2024.

See more: “Short-Term Treasuries Continue to Yield Over 5%

In its recently released Fixed Income Outlook, BondBloxx wrote: “We do not anticipate any further rate hikes by the Fed in 2024. Instead, we expect the Fed will cut rates once or twice starting mid-year.” Bondbloxx added: “We also think shorter-term U.S. Treasuries remain attractive.”

Shorter-duration U.S. Treasuries performed very well this year. In fact, the shorter end of the U.S. Treasury curve experienced the best performance in 2023. So, while there’s something to be said for going long, BondBloxx argues that short-term U.S. Treasuries can potentially “generate higher income, manage cash positions, and maintain liquidity.”