The Case for Keeping it Short (And Sweet) With U.S. 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.”

Getting Short With XHLF, XONE & XTWO

BondBloxx offers a suite of eight duration-specific U.S. Treasury ETFs that target duration-constrained subsets of U.S. Treasuries with more than $300 billion outstanding. They’re designed to track indexes that achieve target durations using U.S. Treasury securities instead of specific maturities or maturity ranges.

Among this suite are a few funds that focus on the shorter end of the duration curve: the BondBloxx Bloomberg Six Month Target Duration US Treasury ETF (XHLF), the BondBloxx Bloomberg One Year Target Duration US Treasury ETF (XONE), and the BondBloxx Bloomberg Two Year Target Duration US Treasury ETF (XTWO).

BondBloxx’s Treasury ETFs range in duration from six months to 20 years.

For more news, information, and analysis, visit the US Treasuries & TIPS Fixed Income Channel.