RIA CIOs lean on short-duration bonds as Treasury yields reach two-decade highs

With both ends of the Treasury curve at their highest levels in two decades, the chief investment officers who run fixed income for wealth firms have stopped waiting for a better entry point, and the arithmetic they describe is straightforward: when yields are high enough to outpace inflation, an investor can generate income without reaching down the credit stack or out along the duration curve.

Treasury rates from the 10-year out to the 30-year sit at two-decade highs, with similar spikes across other sovereign debt, and the Federal Reserve added 25 basis points at its last meeting while markets price one more increase by the end of 2026, plus potentially a few more in 2027. Borrowers feel the weight, and homebuyers face average rates near 7.5% on 30-year mortgages, even as those same rates hand fixed income allocators their income.

A higher starting yield does two things at once: it supplies income that clears inflation and cushions price volatility in a way the low-rate years before the global inflation spike never could. The CIOs see that opening across Treasuries, municipal bonds, high-yield corporate debt, private credit and TIPS, and many are leaning on active management inside their fixed income sleeves to add alpha on top of the coupon.

The menu is broad, and the sleeves carry different jobs: munis pay tax-exempt income, TIPS protect the real value of the coupon against inflation that has stayed elevated, and private credit trades spread for illiquidity. Vehicles vary by firm, which means the same rate view reaches client accounts in quite different forms.

Active management is the quieter half of the positioning: when the starting yield is this high, an index sleeve captures the coupon but not the selection, and many CIOs expect their managers to earn something on top. It is a bet that dispersion across sectors and issuers now rewards a manager more than it did during the low-rate years, when every additional basis point of yield came attached to credit risk.

Jeff Neumeyer, principal partner and chief investment officer at Open Arc Corporate Advisory, a former Merrill Lynch breakaway managing more than $10.5 billion in assets, has tilted client portfolios toward quality, trimmed exposure "where spreads don't justify the risk," and kept dry powder to add "if the setup improves."

Matthew Liebman, founding partner and CEO of Amplius Wealth Advisors, a Blue Bell, Pa., RIA with $1.7 billion in assets, has taken the other direction at a different pace. After running most client portfolios underweight duration for several years, he is moving gradually toward a neutral stance while assessing where rates settle: a measured shift rather than a dramatic repositioning, he said, because the asymmetric case for staying as short as it has been no longer looks the same.

The two positions bracket the duration decision inside fixed income right now: staying short keeps flexibility if yields keep climbing, while moving toward neutral locks in today's coupon if they do not. Liebman's word for his own shift, gradual, is a fair read on where the debate sits—short duration is no longer the only defensible place to be, and the open question is how quickly to leave it.

The three firms quoted span a wide band of scale, from a $1.7 billion Pennsylvania RIA to an $8 billion Charlotte advisory business to a $10.5 billion breakaway, which suggests the same trade is being run under several different liquidity tolerances and that agreement on direction outruns agreement on implementation.

Implementation varies more than the outlook: a minority of wealth firms buy debt directly; most use a mix of ETFs and mutual funds, frequently inside separately managed accounts for individual clients; and some add structured notes and private credit for clients who can tolerate illiquid positions. Chris Osmond, chief investment officer for Fifth Third Wealth Advisors, a Charlotte, N.C., RIA with about $8 billion in assets, said his firm primarily uses individual bond issues while incorporating actively managed mutual funds and ETFs.

How much of that yield reaches the client turns on the mix. A fund sleeve inside an SMA collects the coupon and pays a manager's fee out of it, while individual bonds pay the coupon without a fund expense and leave reinvestment and credit decisions to be made client by client; structured notes and private credit sit at the far end of the spectrum, where the extra yield only pays for itself with money a client will not need to touch.

The move has precedent: this publication reported on September 28 that the 10-year topped 5% and that Rieder saw bond opportunity in the level, and the CIOs quoted now are a step past that call. The question they are answering is not whether to own fixed income but where on the curve and inside which wrapper, with shorter maturities drawing attention because they now pay without demanding much risk in return.

For advisors whose clients have moved from saving to spending, the arithmetic is unusually kind: a two-decade-high yield is the cheapest an income floor has been in years, and the coupon does work that used to require a product to manufacture. The variable to watch is pace. Liebman's gradual move toward neutral, the only duration shift described as underway, gets its first test at the next policy meeting with the market pricing one more Fed increase by the end of 2026.