BlackRock, AXA and Other Institutions Shift to Short-Duration Bonds to Avoid Long-End Risk
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BlackRock, Aviva Investors, Aegon and Allspring are concentrating holdings in short-duration bonds, fleeing long-dated government debt whose yields have hit multi-decade highs — a move one fund manager calls the market's "most consensus trade."
What is the "short-duration trade," and why is everyone doing it?
Duration — a measure of how sensitive a bond's price is to interest-rate moves; the longer the duration, the harder a bond falls when rates rise — is the key concept behind this shift.
BlackRock's London fixed-income team, led by James Turner, has rotated into short-duration and inflation-linked bonds since the Middle East war broke out in February.
Aviva Investors, Aegon Asset Management and Allspring Global Investments prefer short-duration corporate credit, including asset-backed securities and private debt.
This means → the biggest managers agree: rates will stay elevated, and long bonds carry far more downside than upside.
How far have long-dated bonds actually fallen?
The 30-year US Treasury yield has breached 5%, the highest since the financial crisis; the UK 30-year gilt yield hit 5.83%, near its 1990s peak.
Germany's 30-year Bund yield rose to 3.77%, the highest since 2011; Japan's 30-year yield broke 4%, an all-time record.
In plain terms = ultra-long government bonds across every major economy have fallen to prices unseen in a generation.
By contrast, the Bloomberg index tracking 1-to-3-year bonds is up roughly 1% this year, while bonds of 10 years and above are down about 4% — a gap of more than 5 percentage points.
What is pushing long-end yields so high?
Aegon's Colin Dryburgh lists five forces driving inflation higher: war, tariffs, onshoring, net-zero transition and massive AI infrastructure spending.
Aviva's Sunil Krishnan notes that traditional cautious multi-asset portfolios allocate up to 80% to fixed income — "unless held at very short duration, that means taking on a lot of rate and inflation sensitivity."
This reflects multiple structural forces acting at once, not a single shock — making the timeline for long-end rates to retreat deeply uncertain.
How deep is the scar from 2022?
DWS European CIO Vera Fehling invokes the 2022 lesson: the inflation shock from the Russia-Ukraine war, combined with rapid rate hikes, dealt bond portfolios double-digit losses.
Her conclusion is blunt: "The short end of the government-bond yield curve is probably the safest place when I don't want to worry."
This means → the pain of 2022 is actively shaping today's positioning — managers would rather earn less than repeat that drawdown.
Credit risk versus rate risk — which is scarier right now?
Shackleton CIO Charlie Lloyd says his fund is underweight government bonds and has bought floating-rate asset-backed securities instead — "zero duration exposure."
His logic: corporates are cash-rich and growth is steady, so credit risk is easier to bear than rate risk.
In plain terms = lending to companies short-term is actually safer than lending to governments long-term right now — because companies have cash, while long-dated sovereign bond prices keep falling.
When does this "consensus trade" break down?
Lloyd himself concedes: if the economy suffers a growth shock or recession, the logic flips fast — corporate credit spreads would widen, and government bonds would outperform.
Markets currently price the Fed to hike roughly 25 basis points this year. This means → pressure on long-dated bonds is unlikely to ease soon.
This reflects a deeper truth: the short-duration strategy's shelf life depends entirely on how inflation and growth evolve — if the economy turns cold suddenly, today's "safest trade" could become tomorrow's wrong bet.
Content is for reference only, not financial advice.