RCM Managed Asset Portfolio: Where to Put My Fixed Income If Rates Fall

RCM Managed Asset Portfolio

By Christopher Chiu, CFA

January 2026

Where to Put My Fixed Income If Rates Fall

With interest rates falling, there is a risk that investors will not continue to get the same yield that has benefited them the last three years. Money invested in CDs, money markets, or the 3-month T-Bill has been yielding less than it did a year ago as the 3-month Treasury yield has fallen from its high at 5.25% in January 2024 to 3.6% in Jan 2026.  And this yield will likely be less a year from now. The question then arises: Where should investors put their money to get the equivalent yield in the future? 

Advantages of Investing in Longer-Term Bonds Right Now

If you are a short-term fixed income investor, it is not possible to stay in the same investment and continue to get the same yield in a falling interest rate environment. This is because a short-term Treasury, such as a T-Bill, matures every three months. And when it matures, any new T-Bill must yield at the new, lower interest rate.

There are only two places you can still get the same yield in a falling interest rate environment. One place is in a riskier investment.  (To compensate investors, riskier investments need to offer a higher interest rate.) I would not recommend this. After all, as a fixed income investor, why would you suddenly want to get into a riskier investment? Just to get a little more yield?

The other place where one gets the same yield as before in a falling interest rate environment is in a longer maturity bond. But this isn’t without risk. One risk is that interest rates will change while the investor is invested at a fixed rate. For example, if interest rates go higher and there are bonds of the same length available at a higher interest rate, then bonds offered at the older, fixed interest rate will be less desirable and therefore less valuable.

But this scenario is unlikely in a falling interest rate environment. And this gets to the other advantage right now of shifting your money into longer-term bond instruments of equivalent risk. In addition to the higher yield, the investment also has a chance to go up in value as rates fall. Just as fixed interest rate bonds will decrease in value when interest rates rise, they will also gain in value as interest rates fall. And that is the situation we now find ourselves in. As rates fall not only for short-term debt but across all maturity lengths, existing fixed income generally gains in value.

The Importance of Good Credit in Long-Term Bond Investments

When investing in longer-term bonds, investors also should consider the credit risk of the investment. And with the chance the economy might weaken, the overall demand for all investments might decrease. To our mind, investors investing in longer-term bonds should do so with debt that will be good credits. This is what we have done in our fixed income program at RCM Wealth Advisors. Traditionally, the good credits among long-term bond investments have been 1) the long-term U.S Treasury bonds, which have the explicit backing of the Federal government and 2) home mortgages, which have the implicit backing of the Federal government.  It becomes a matter of finding the correct balance between these two if you are expert enough to know which will do better or to find an expert who does.