Investors are piling into big, short Treasury bets with Warren Buffett

Investors always pay close attention to bonds, and what the latest movement in prices and yields is saying about the economy. Right now, the action is telling investors to stick to the shorter-end of the fixed-income market with their maturities.

“There’s lots of concern and volatility, but on the short and middle end, we’re seeing less volatility and stable yields,” Joanna Gallegos, CEO and founder of bond ETF company BondBloxx, said on CNBC’s “ETF Edge.”

The 3-month T-Bill right now is paying above 4.3%, annualized. The two-year is paying 3.9% while the 10-year is offering about 4.4%. 

ETF flows in 2025 show that it’s the ultrashort opportunity that is attracting the most investors. The iShares 0-3 Month Treasury Bond ETF (SGOV) and SPDR Bloomberg 1-3 T-Bill ETF (BIL) are both among the top 10 ETFs in investor flows this year, taking in over $25 billion in assets. Only Vanguard Group’s S&P 500 ETF (VOO) has taken in more new money from investors this year than SGOV, according to ETFAction.com data. Vanguard’s Short Term Bond ETF (BSV) is not far behind, with over $4 billion in flows this year, placing within the top 20 among all ETFs in year-to-date flows.

“Long duration just doesn’t work right now” said Todd Sohn, senior ETF and technical strategist at Strategas Securities, on “ETF Edge.”

It would seem that Warren Buffett agrees, with Berkshire Hathaway doubling its ownership of T-bills and now owning 5% of all short-term Treasuries, according to a recent JPMorgan report. 

“The volatility has been on the long end,” Gallegos said. “The 20-year has gone from negative to positive five times so far this year,” she added.

The bond volatility comes nine months after the Fed began cutting rates, a campaign it has since paused amid concerns about the potential for resurgent inflation due to tariffs. Broader market concerns about government spending and deficit levels, especially with a major tax cut bill on the horizon, have added to bond market jitters. 

Long-term treasuries and long-term corporate bonds have posted negative performance since September, which is very rare, according to Sohn. “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,” he added. 

Sohn is advising clients to steer clear of anything with a duration of longer than seven years, which has a yield in the 4.1% range right now.

Gallegos says she is concerned that amid the bond market volatility, investors aren’t paying enough attention to fixed income as part of their portfolio mix. “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. 

Volatility in the stock market has been high this year as well. The S&P 500 rose to record levels in February, before falling 20%, hitting a low in April, and then making back all of those losses more recently. While bonds are an important component of long-term investing to shield a portfolio from stock corrections, Sohn said now is also a time for investors to look beyond the United States within their equity positions. 

“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 U.S. large cap growth right now,” he said.

The S&P 500 posted 20 percent-plus returns in both 2023 and 2024.

The iShares MSCI Eurozone ETF (EZU) is up 25% so far this year.  The iShares MSCI Japan ETF (EWJ) posted performance above 25% in the two-year period prior to 2025, and is up over 10% this year.