A case for getting off the sidelines and into bond ETFs

We analyze the opportunity in fixed income, why investors may want to get cash off the sidelines and move fast to capture these decades-high yields, and employ efficient, precise tools such as bond ETFs in this new market regime.


  • Yields are higher today than they were 20 years ago. If inflation indicators continue to fall, the time of elevated savings rates may be drawing to a close.
  • Investors are choosing bond ETFs in record numbers, with 2023 global bond ETF inflows at $333 billion.1
  • But investors are still significantly underweight to fixed income, with a 19% average allocation, based on total U.S. industry assets under management.2
  • We believe investors may still want to consider moving back into fixed income because, historically, the market has tended to price in rate actions before they occur.
  • ETFs can be a powerful tool for investors as they recalibrate their fixed income allocations.
In the Know


Listen and learn about the opportunity in fixed income, and why investors may want to get cash off the sidelines and move fast to capture these decades-high yields via bond ETFs.

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For bond investors, this is no time to yield


Despite an uneven descent in inflation,3 the Fed may still be nearing the end of a tightening cycle that made cash savings rates attractive. A pivot to rate cuts later in 2024 is still being debated, but investors may benefit from moving back into fixed income to capture current yields (which are at the highest levels since the early 2000s4), a particularly compelling message for investors who may be overweight cash.

Instead of trying to time the markets (which is near impossible), investors may consider beginning to move ahead of announced changes in Fed policy rates, incrementally stepping out of cash, and increasing fixed income exposure by getting back into bonds. History shows that when the U.S. central bank pivots from a hiking cycle to an easing one, bond markets have tended to do well in the pause period, as Figure 1 illustrates.

Figure 1: Bonds have historically delivered the strongest performance during the ‘hold’ period

Average annualized returns (%), 1990 - 2024

Bond performance 1990 to 2024

Source: Bloomberg as of March 29, 2024. Historical analysis calculates average performance of the Bloomberg U.S. Aggregate Bond Index (bonds) and the Bloomberg U.S. Treasury Bills: 1-3 Months TR Index (cash) over different time periods. The dates used for the last rate hike of a cycle are: Feb. 1, 1995, March 25, 1997, May 16, 2000, June 29, 2006, Dec. 19, 2018. Dates used for the first-rate cut are: July 7, 1995, Sept. 29, 1998, Jan. 3, 2001, Sept. 18, 2007, Aug. 1, 2019. Index performance is for illustrative purposes only. Index performance does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results.

Chart description: Bar chart comparing the average annualized returns of bonds and cash over the course of interest rate hike periods between 1990 and 2024. The returns are shown in three time phases: 6 months before the last rate hike, the rate "hold" period, and 6 months after the first cut. Cash outperformed bonds in the 6 months before the last rate hike, but bonds outperformed cash during the rate hold period and in the 6 months after the first cut.


The volatile markets of the past few years may have caused investors to, understandably, move money into a less volatile asset – cash.

While cash has provided income temporarily during the Fed’s recent rate hikes, over the long-term in normal, upward-sloping yield curve environments, longer maturity fixed income investments can provide more income to a portfolio.5

Many investors are still significantly underweight to fixed income, with a 19% average fixed income allocation, based on total U.S. industry assets under management.6 The allocation has fallen far below the “60/40” equity/fixed income portfolio allocation often referenced in balanced portfolio discussions. Although the 60/40 allocation itself may not be right for everyone, we believe investors on average should hold more fixed income than they currently do depending on factors like their goals and their tolerance for risk.


We believe bond ETFs will be a tool of choice for investors looking to capture yields currently available in the bond market. With over 2,300 bond ETFs globally, investors today have more choices and tools than ever.7 The breadth of the fixed income ETF toolkit provides the flexibility to suit almost any investor’s income or return objective and risk profile.

In 2023, global bond ETF inflows rose 25%, hitting a record $333 billion.8 We believe this market will grow to $6 trillion in assets under management by 2030 as more investors view ETFs as a powerful way to access the bond market.