Bond investing in 2025: Keep duration short and look for quality
Investors will likely enjoy attractive short-end rates for a while without incurring excessive duration risks, especially if the Fed stays hawkish
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LAST year, short-duration bonds trumped long-duration securities amid a normalisation of the yield curve, with short-end yields falling by less than initial market expectations, and long-end yields climbing significantly.
Meanwhile, high-yield bond markets outshone their investment-grade counterparts, helped by their shorter duration exposure and continued spread tightening.
For 2025, we continue to advocate a shorter-duration exposure in your portfolio, as investors can continue earning attractive yields here without incurring excessive duration risks. We also prefer higher-quality bonds such as investment-grade ones with attractive yields without going too far down the credit spectrum.
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