Chart: Moving beyond passive short-term bond strategies

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Investing in high yield and emerging market debt in a short-term bond strategy can open opportunities for higher yield, without increasing duration.

Bar chart showing yield to worst and duration for various short-term fixed-income asset classes, with high yield and emerging markets debt producing the most yield relative to duration.

 

  • Faced with historically low bond yields and high equity market valuations, investors have allocated significant assets to benchmark-tracking short-term bond strategies for a lack of a better solution. 

 

  • Rather than investing in traditional benchmark solutions, investors should consider a short-term bond strategy that includes high yield and emerging market debt. This can offer materially higher yield without increasing duration — something that brings a risk of volatile price changes if interest rates change. 

 

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