A dramatic shift is underway in the fixed-income market as investors, spooked by bond market volatility and long-term interest rate uncertainty, increasingly favor short-term U.S. Treasuries. Even legendary investor Warren Buffett has joined the trend, with Berkshire Hathaway now owning 5% of the entire short-term T-bill market. This seismic move signals a broader pivot among savvy investors seeking stability amidst economic turbulence.
Short-Term Treasuries Outperforming in 2025
Investors are pouring capital into short-term bond exchange-traded funds (ETFs) in record numbers this year. ETFs like the iShares 0-3 Month Treasury Bond ETF (SGOV) and SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) have collectively attracted over $25 billion in new investor flows. Only Vanguard’s S&P 500 ETF (VOO) has seen greater inflows.
Here’s a snapshot of top-performing fixed-income ETFs in 2025:
| ETF Name | Year-to-Date Inflows | Notable Feature |
|---|---|---|
| SGOV | $15B+ | Focuses on 0-3 month U.S. Treasuries |
| BIL | $10B+ | Tracks 1-3 month Treasury bills |
| Vanguard BSV | $4B+ | Short-term U.S. bond exposure |
“Long duration just doesn’t work right now,” says Todd Sohn, senior ETF strategist at Strategas Securities. Yields on longer-term bonds have fluctuated dramatically, while short-term T-bills are delivering consistent returns.
Current Treasury Yields (May 2025):
| Treasury Type | Yield (Annualized) |
| 3-Month T-Bill | 4.35% |
| 2-Year Note | 3.9% |
| 10-Year Note | 4.4% |
According to Joanna Gallegos, CEO of BondBloxx, “There’s lots of concern and volatility, but on the short and middle end, we’re seeing less volatility and stable yields.”
Warren Buffett’s Big Bet on T-Bills
A recent JPMorgan report revealed that Berkshire Hathaway has doubled its exposure to short-term T-bills and now owns 5% of the entire market. Buffett’s move further legitimizes the strategy of favoring short-term instruments in uncertain times.
“The volatility has been on the long end,” says Gallegos, noting that the 20-year bond yield has flipped between negative and positive five times this year alone.
Why the Bond Market Is So Volatile
Multiple macroeconomic factors are fueling turbulence in the bond market:
- Federal Reserve interest rate cuts (and a subsequent pause)
- Inflation concerns tied to tariffs and fiscal policy
- Anxiety over ballooning government debt and potential tax reform
Long-term bonds, typically a safe haven, have posted negative returns since September 2024—an occurrence last seen during the 2008 Financial Crisis.
“It’s hard to argue against short-term duration bonds right now,” Sohn says. He’s advising clients to avoid anything with a duration longer than seven years.
Investor Behavior: Still Addicted to Equities?
Gallegos cautions that many investors are still overly concentrated in equities, particularly tech-heavy indexes, and are neglecting bonds despite the risks. “My fear is investors are not diversifying their portfolios with bonds today,” she warns.
This overexposure to equities could leave portfolios vulnerable to market corrections—something that already played out earlier in 2025 when the S&P 500 fell 20% between February and April before rebounding.
Time to Look Overseas?
Sohn also recommends global diversification. “International equities are contributing to portfolios like they haven’t done in a decade,” he said. In particular:
| ETF Name | YTD Return (2025) |
| iShares MSCI Eurozone ETF (EZU) | +25% |
| iShares MSCI Japan ETF (EWJ) | +10% |
Conclusion: A Tactical Shift, Not a Trend
Buffett’s T-bill move isn’t a fluke—it’s a reflection of broader investor caution in the face of volatility. The bond market’s recent behavior has sent a clear message: safety lies in short-term instruments, and returns can still be found without taking long-term risks.
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