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Bet on the Barbell While Managing Duration

BY | ETF Database
8:49 am ET 10/30/26 | 26 VIEWS
With 10-year Treasury yields recently having traversed two-decade highs, fixed income investors face some trying circumstances, making bond barbell strategies as relevant as ever.Put simply, bond barbell strategies entail mixing short- and ultra-short duration bonds with longer-dated fare. That’s a task easily accomplished with ETFs. For example, advisors and investor can barbell ETFs emphasizing bonds with durations of 10 years or more with funds such as the WisdomTree Interest Rate Hedged U.S. Aggregate Bond Fund (AGZD C) or the WisdomTree Interest Rate Hedged High Yield Bond Fund (HYZD C). Those both are designed to thrive when yields climb. No one has a crystal ball, making it difficult to forecast what’s next for Treasury yields. However, it is clear that the Federal Reserve wants to thwart inflation. It’s also clear that higher starting yields bode well for fixed income investors’ long-term success. That indicates that the barbell methodology has merit today. “To assess where the U.S. Treasury (UST) 10-year yield may be headed, it is useful to remember how longer-dated UST yields reached their current levels,” noted Kevin Flanagan, head of investment and fixed income strategy at WisdomTree. “A confluence of factors, including good growth, sticky inflation, Fed policy uncertainty related to Warsh and supply considerations tied to Treasury issuance and AI, has led the bond market to reprice yields to reflect these changing dynamics.”To the Barbell for BallastPairing ETFs such as AGZD and HYZD with traditional counterparts with longer duration makes sense today. Not only from an income perspective, but also because rates are unlikely to materially trend lower over the near-term. “The forces that pushed the UST 10-year yield to a more than 20-year high are unlikely to fade soon. For now, however, the back end of the yield curve may have found support near these multi-decade highs,” added Flanagan. “Yields could rise further, but the UST 10-year may now trade in a range of roughly 4.50% to 5.25% in the near term, skewed toward the upper end.” HYZD, which turns 13 years old in December, is appealing on a standalone basis or as part of a bond barbell. After all, the Fed wouldn’t be comfortable raising rates if the economy was on fragile ground. If that was the case, default rates would likely rise, denting the case for junk bonds. Fortunately, that’s not the case. In fact, some fixed income experts believe it’s an ideal time for long-term fixed income investors to evaluate corporate debt. For more news, information, and analysis, visit the Modern Alpha Content Hub.DisclosuresThis article was prepared as part of WisdomTree’s general paid sponsorship of VettaFi | ETF Trends. This specific content within and any opinions expressed therein belong solely to VettaFi and do not reflect the opinion or analysis of WisdomTree, its employees, or its affiliates. Content published on VettaFi | ETF Trends is provided for educational purposes only and should not be considered investment or tax advice. For investment or tax advice, please consult a financial professional. WisdomTree is an independent company, unaffiliated with VettaFi | ETF Trends. WisdomTree has not been involved with the preparation of the content supplied by VettaFi | ETF Trends. It does not guarantee, or assume any responsibility for its content.

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