Goldman says it’s not too late to move out of cash to nab yield. Here’s what it likes
It is not too late to start thinking about moving out of short-term cash instruments and into longer-duration bonds, according to Goldman Sachs Asset Management. Investors have been enjoying solid yields on their cash , although those payouts are down from recent highs. The Crane 100 Money Fund Index , which is based on the largest taxable money funds, currently has an annualized seven-day yield of 4.18%. However, there is better income to be found in bonds these days, said Lindsay Rosner, head of multisector investing at Goldman Sachs Asset Management. Some 99% of investment-grade bonds are now out-yielding cash, compared with just 24% a year ago, she said. For instance, the Goldman Sachs Access U.S. Aggregate Bond ETF , which tracks investment-grade bond market, has a 30-day SEC yield of 4.50%. Bond yields move inversely to prices. GCOR 1Y mountain Goldman Sachs Access U.S. Aggregate Bond ETF “[I’m] not saying you’ve missed the opportunity,” she said during a webinar outlining the firm’s fixed-income strategies for 2025. “The opportunity is here, alive and well, but now really is the time to start thinking about moving out on the curve.” In fact, term premium is back, Rosner said. Term premium essentially means that investors are getting more compensation for holding a longer-term bond. “All the money sitting in cash or money market funds — it can start to move out the curve and be compensated with more yield and more spread,” she said. “That’s actually a good thing.” Moving out the curve not only locks in income, it also allows you to diversify your fixed-income portfolio, she said. For instance, there are more opportunities available in assets like structured products, as well as additional high-yield issuers, she added. “There’s just a multitude of things that you can invest in as you move out the curve,” Rosner said. “The key to really repeatable and stable returns is diversification.” She sees plenty of opportunities, despite the fact that many credit spreads are at their tightest percentiles. Spreads measure the difference in yield between Treasurys and other fixed income assets of the same maturity. However, investors really need to do their homework, Rosner said. Therefore, active management is crucial right now, especially at a time when passive funds have a heavy tilt towards government securities, she said. “There’s going to be a lot to navigate with tight spreads and making sure … that you do that credit work — and find out what are the credits that are going to be able to pay you back and not default and can live in a high-interest-rate environment, and which ones do you want to stay away from,” she explained. For instance, Rosner likes high-yield bonds that are rated BB and B — but is very name specific. There are even places to buy within investment-grade credit, even though spreads are at really tight levels, she said. “We think financials are really interesting. We’re underweight autos, for example, on concerns about tariffs,” Rosner said. Among the top corporate issuers in the actively managed Goldman Sachs Bond Fund are Bank of America , T-Mobile , Boeing , Morgan Stanley and UBS , as of Dec. 31. Within structured products, she prefers collateralized loan obligations and commercial mortgage-backed securities . The firm is finding interesting opportunities for those assets in the primary market, she said. “So there’s places to pick and opportunities in a lot of areas due to relative value,” Rosner said.
