The latest threat to equities is no longer macro risk – it’s rising 2-year Treasury yields, according to some fund managers and strategists. Short-term, relatively risk-free Treasury bonds and funds are back in the spotlight as the 2-year Treasury yield continues to climb. On Wednesday, it hit 4.1%, the highest level since 2007. On Thursday, during Asian business hours, it rose to 4.124%. “The new headwind for equities is not just inflation, potential recession or even lower earnings estimates, but the ‘competitive threat’ that rising interest rates are making bond yields more attractive” , said John Petrides, portfolio manager at Tocqueville Asset Management. CNBC. “For the first time in a long time, the TINA (There is no alternative to equities) market no longer exists. Short-term bond yields are now attractive,” he said. Michael Yoshikami, founder of Destination Wealth Management, agreed that bonds had become a “relatively compelling alternative” and could prove to be an “inflection point” for equities. While Mike Wilson, Morgan Stanley’s chief US equity strategist, said bonds offer stability in today’s volatile markets. “Although treasury bills run the risk of higher inflation [and the] The Fed is reacting to this, they still offer a safer investment than stocks,” he told CNBC’s “Squawk Box Asia” on Wednesday. “To be honest, I was surprised we didn’t have already seen a greater flight to this security, given the data we have seen. Data from BlackRock, the world’s largest asset manager, shows investors have crowded into short-term bond funds. Flows into short-term bond ETFs stand at $8 billion so far this month Short-term US-listed Treasury ETFs have attracted $7 billion in inflows so far in September, six times the volume of entries last month, BlackRock said. Stocks have struggled, with the S&P 500 down about 4% so far this month. , the traditional 60/40 portfolio is back. This sees investors putting 60% of their portfolio in stocks and 40% in bonds. “With current yields, a portfolio’s fixed-income allocation can contribute to expected rates of return and help those seeking yield from their portfolio to meet cash flow distributions,” he said. -he declares. Here’s a look at how Citi Global Wealth Investments changed its allocations, according to a Sept. 17 report: The bank removed short-term U.S. Treasuries from its largest underweight allocations and increased its allocation to US Treasuries overall. It has also reduced its equity allocation, but remains overweight dividend growth stocks. Citi added that 2-year Treasury bills aren’t the only attractive option in bonds. “The same is true for high-quality, short-duration spread products, such as municipal and corporate bonds, many of which trade at taxable equivalent yields closer to 5%,” Citi said. “Right now, savers are also sending inflows into higher-yielding money market funds, as the yields eclipse the safest bank deposit rates.” Petrides added that investors should move out of private equity or alternative asset investments and shift their allocations into fixed income securities. “Private equity is also illiquid. In a market environment like this, and if the economy could continue on a downward path, clients might want better access to liquidity,” he said. . What about long-term bonds? Morgan Stanley in a Sept. 19 note said global macro hedge funds were betting on another 50 basis point rise in the 10-year Treasury yield. That could send the S&P 500 to a new year-to-date low of 3,600, the investment bank said. The index closed at 3,789.93 on Wednesday. “If these materialize, we believe the downtrend could become more extreme in the near term and the risk of market overreaction will increase. We reiterate to remain defensive in risk positioning and await further signs of surrender,” Morgan Stanley analysts wrote. Rising rates also mean there is a risk that the economy will slow next year, and long-term bonds could benefit, according to Morgan Stanley Investment Management portfolio manager Jim Caron. “Our asset allocation strategy has been a barbell approach,” he said on . “On the one hand, we recommend holding short-duration, floating-rate assets to manage the risk of rising rates. On the other, more traditional fixed income and total return strategies with longer duration. ” Examples of traditional fixed-income securities include high-quality, multi-sector bonds, including corporates, Caron said. BlackRock also said it believes longer rates could rise, given that US Federal Reserve tightening is just “beginning”. But for now, he urged caution on longer-dated bonds. “We urge patience as we believe we will see more attractive levels to enter longer duration positions over the coming months,” BlackRock said.