FCSH - Short-Term Bonds: A Compelling Option In The Face Of Fed Cuts

2024-03-16 00:55:00 ET

Summary

• In the face of impending Federal Reserve rate cuts, investors may want to consider extending duration from Treasury bills to short-term bonds.
• Surprisingly, the coupon on short-term bonds does not fall after the Fed begins cutting rates, whereas the yield on 3-month U.S. Treasury bills drops significantly.
• During the previous six Fed rate reduction cycles, the average coupon on short-term bonds saw a marginal increase of 1 basis point (bp) twelve months post-cut.

In the face of impending Federal Reserve rate cuts, investors may want to consider extending duration from Treasury bills to short-term bonds. ...

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