According to CNBC, traders are increasingly pricing in a higher-for-longer interest-rate backdrop, and that has lifted interest in short-term fixed income after the Federal Reserve kept its target rate in a range of 3.5% to 3.75% on Wednesday. The 10-year Treasury yield touched its highest level since January 2025 on Friday, while the 30-year bond yield rose to its highest since July 2007. Fed funds futures trading points to a 65% chance of a rate hike at the central bank's September meeting, according to the CME Group's FedWatch tool.

Rebecca Venter, senior fixed income client portfolio manager at Vanguard, said long-term investors should look at the two-year to seven-year part of the curve as the best risk-reward opportunity. Brian Rehling, co-head of global fixed income and digital asset strategy at Wells Fargo Investment Institute, said cash alternatives and short-term bonds continue to offer attractive yields and can help investors limit exposure to price swings if rate expectations change. The Crane 100 Money Fund Index has an annualized seven-day current yield of 3.49%.

Among the products cited, the Janus Henderson AAA CLO ETF (JAAA) has a 30-day SEC yield of 4.77%, while the iShares AAA CLO Active ETF (CLOA) has a 30-day SEC yield of 4.80%; both have expense ratios of 0.2%. The Vanguard Short Duration Bond ETF (VSDB) has an expense ratio of 0.15% and an SEC yield of 3.49%, while Baird's Short-Term Bond Fund (BSBIX) has an expense ratio of 0.3% and an SEC yield of 4.26%.