Finding yield beyond duration - Resilience with less duration risk | Insight Investment

“With yields still elevated and policy uncertainty persisting, the case for moving selectively beyond cash to capture credit premia without materially increasing duration risk is increasingly compelling.”

Elevated policy rates continue to offer a clear opportunity to enhance income without taking on significant duration risk. At the same time, fiscal concerns and renewed inflation pressures have increased volatility in longer-dated government bonds, weakening the case for extending duration.

With markets pricing a prolonged period of restrictive policy across the US, UK and euro area, the additional yield from longer-duration assets looks limited relative to the added rate sensitivity. Shorter-dated and floating-rate exposures provide a more efficient source of returns, driven primarily by income.

Selective exposure to short-dated investment grade credit, floating-rate credit and asset-backed securities can further enhance yield while maintaining resilience. These areas have historically delivered lower volatility and reduced drawdowns.

Overall, investors can move beyond cash and capture elevated yields while maintaining flexibility in an uncertain environment.