Expected returns from 1-2 year bonds Expected returns from 1-2 year bonds Expected returns from 1-2 year bonds

Expected returns from 1-2 year bonds

John Hardy

Head of FX Strategy

The indications below for the yields available from shorter term bonds will fluctuate with market conditions and do not include transactions costs, which will depend on the size of the transaction and the liquidity of the bond in question (minimal costs for the most liquid instruments). By the way, in the month of February 2023, the US 2-year treasury yield rose approximately 0.60% and the German 2-year yield rose about 0.45%, to get a sense of how rapidly yields are moving during the recent time frame.

Note: all yields below are snapshots made near March 1 of 2023 and subject to change as the market fluctuates.

1-2 year yields for USD-based investors

  • US Treasuries: 4.8+% for a 2-year US Treasury
  • Investment Grade US corporate bonds: approximately 5.25-5.50%
  • High yield bonds:  6% and higher, depending on risk tolerance.
  • Floating rate bonds: currently (as of March 2023) yield slightly less than 1-2 year bonds, but if central banks continue to hike as expected, the yield will move higher.

1-2 year yields for EUR-based investors

  • “Risk-free” core EU bonds (Germany, France, etc..):  3.1% for 2-yr bonds
  • Italian government bonds, or BTPs: 3.5% for 2-yr bonds
  • Investment Grade EU corporate bonds: approximately 3.5%.
  • High-yield EU debt: 4% and up, depending on risk tolerance.
  • Floating rate bonds: currently (as of March 2023) yield slightly less than 1-2 year bonds, but if central banks continue to hike as expected, the yield will move higher from current levels.

1-2 year yields for DKK-based investors

  • Danish government bonds:  near 3.2% for 1-2 year bonds
  • Danish mortgage bonds: about 3.5%

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