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.

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Originally published on IBTimes UK