Navigating Short, Medium, and Long-Duration Fixed Income in 2024


January 24, 2024


January 24, 2024


January 24, 2024

By Ambrose O’Callaghan

Fixed income securities are financial instruments that have defined terms between a borrower, or issuer, and a lender, or investor. Bonds are typically issued by a government, corporation, federal agency, or other organization. These financial instruments are released so that the issuing institution can raise capital. The borrower agrees to pay interest on the debt security in exchange for the capital that is raised.

The maturity refers to the date when a bond’s principal is paid with interest to the investor. In the modern era, interest rates tend to fluctuate over long periods of time. Because of this, shorter duration bonds have predictable rates. The longer investors go down the maturity spectrum, the more volatility they will have to contend with in the realm of interest rates.

On January 16, 2024, Harvest ETFs unveiled its full fixed income suite. That means that investors will have access to ETFs on the full maturity spectrum: short, intermediate, and long-duration bonds.

In this piece, I want to explore the qualities, benefits, and potential drawbacks of short-term, medium-term, and long-term bonds. Let’s dive in.

The two types of short-term bonds for investors chasing security

Short-term fixed income tends to refer to maturities that are less than three years. In the realm of short-term fixed income, we should talk about the relationship between money market and short-term bonds.

Money market securities are issued by governments, financial institutions, and large corporations as promises to repay debts, generally, in one year or less. These fixed income vehicles are considered very secure because of their short maturities and extremely secure when issued by trusted issuers, like the US and Canadian. federal governments. They are often targeted during periods of high volatility. Predictably, money market securities offer lower returns when compared to their higher-duration counterparts due to the liquidity of the money market.

Short-term bonds do have a lot in common with money market securities. A bond is issued by a government or corporate entity as a promise to pay back the principal and interest to the investor. When you purchase a bond, you provide the issuer a loan for a set duration. Like money market securities, short-term bonds typically offer predictable, low-risk income.

The Harvest Canadian T-Bill ETF (TBIL:TSX) , a money market fund, was launched on January 16, 2024. This ETF is designed as a low-risk cash vehicle that pays competitive interest income that comes from investing in Treasury Billds (“T-Bills”) issued by the Government of Canada. It provides a simple and straightforward solution for investors who want to hold a percentage of their portfolio in a cash proxy.

Medium-term bonds and their influence on the broader market

When we are talking about intermediate-term bonds, we are typically talking about fixed income vehicles in the 4-10 year maturity range. Indeed, the yield on a 10-year Treasury is often used by analysts as a benchmark that guides other interest rate measures, like mortgage rates. Moreover, as yields increase on intermediate-term bonds so too will the interest rates on longer duration bonds.

Recently, Harvest ETFs portfolio manager, Mike Dragosits, sat down to explore the maturity spectrum and our two new ETFs. You can watch his expert commentary here.

US Treasuries avoided an annual loss in 2023 as bonds rallied in the fourth quarter. These gains were powered by expectations that the US Federal Reserve (the “Fed”) was done with its interest rate tightening cycle. The prevailing wisdom in the investing community is that the Fed will look to pursue at least a handful of rate cuts in 2024.

The Harvest Premium Yield 7-10 Year Treasury ETF (HPYM:TSX) seeks to provide attractive and tax efficient monthly cash distributions to unitholders from its exposure to in mid-duration U.S. Treasuries with average maturities of 7-10 years. These are considered intermediate maturity treasury bonds. US Treasury bonds come with the full faith and credit of the US government, offering strong protection of the principal amount invested and more secured interest payments. On top of providing exposure to US Treasury bonds via US Treasury ETFs, HPYM will have covered call writing on up to 100% of the portfolio. The level of covered call writing, and strike price, may vary based on market volatility and other factors.

How have long-term bonds evolved in the 2020s?

Finally on the far end of the maturity spectrum, we have long-term bonds. These refer to the longest maturity bond offering from the United States Treasury. The longest maturity U.S. Treasuries are 30-year bonds. In 2020, the U.S. Treasury began issuing a 20-year bond for the first time. Those who invest in long-duration Treasuries and corporate bonds with long maturities tend to focus on long-term yield. While investors chase the reward of higher yields, they must also contend with the volatility risks that come with longer durations.

On September 28, 2023, Harvest launched the Harvest Premium Yield Treasury ETF (HPYT:TSX). HPYT is a portfolio of ETFs which hold longer dated US Treasury bonds that are secured by the full faith and credit of the US government. It employs up to 100% covered call writing to generate a higher yield and maximize monthly cash flow.


Canadian investors now have access to a full fixed income suite of short, medium, and long-duration bonds through Harvest ETFs’ offering. Investors who are hungry for a secure, low-risk cash proxy can target TBIL. Meanwhile, investors who are chasing high yields can scoop up HPYM or HPYT.


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