Now's a Great Time to Build a Bond Ladder
Given the rate-curve inversion, one-year ladders have higher average yields than longer ones


Even after two favorable monthly inflation reports, cash and bond yields remain high and steady. It continues to be a buyer’s market. Still, readers are often uncertain how best to proceed, particularly with new or rollover money. You may be tempted by a basic broad-based bond market index fund. But you can do better.
Your goal should be two guarantees: high yield to maturity and full recovery of principal. Neither is assured using index-based exchange-traded funds. An actively managed, go-anywhere fund from an ace manager such as Baird, Fidelity or Pimco will out-return the indexes over the years, but there is near-term price risk if managers mistime bets or if hostile reports on jobs or inflation or another trading signal rips into bond values.
If your choices are limited within a 401(k) or other retirement plan, choose a short or ultra-short bond fund option, if possible. If not, stay with cash for now. The inverted yield curve, with short-term yields the highest, remains your friend and makes cash profitable and safe.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Looking ahead at bonds
But if you suspect cash yields will drift down and want to lock in the current rates without near-term price risk, my preference would be to infuse some dollars into individual bonds or into target-maturity funds or ETFs, such as Invesco BulletShares or iShares iBonds ETFs. If you have an account with Schwab, Fidelity or E*Trade, it is neither difficult nor costly to research, compare and buy single bonds. Then you, and not a fund manager or the Federal Reserve, control how much and when you get paid and the timing of repayment of the principal.
Normally the best method is to ladder maturities, arranging for parts (rungs) to mature in succeeding quarters or years so you both cement the best yields along the curve and know you will have money to roll over at specific times. You can use Treasuries, high-quality corporate, bank or utility bonds, municipals, high-yield bonds, or a mix of all of them. You can even request a brokerage’s bond platform to set it up for you.
I went to Schwab’s tool to ladder either Treasuries or certificates of deposit. Given the rate-curve inversion, one-year ladders have higher average yields than longer ones. A step stool of T-bills of three, six, nine and 12 months pays an average 5.25% to maturity; use CDs and you get 5.45% (as of May 31). A five-year ladder works out to 4.76% for Treasuries or 4.98% for CDs.
To beat that, of course, you can buy corporate bonds at a spread of one to two percentage points above Treasuries. If you navigate the bond listings, you can ladder one- through five-year BBB-rated bonds for an average 6% yield to maturity; I could recently order a five-step triple-B assembly from Synchrony Bank, Boeing, Ares Capital, Blue Owl and Boston Properties with an average yield to maturity of 5.98%, with none below 5.82%. It’s possible those bonds might flop around in value, but if your plan is to keep them to the end, that doesn’t matter — even if, say, Boeing were to be downgraded to junk status.
Or, you could use a mélange of BulletShares investment-grade, target-maturity corporate ETFs dated 2025 through 2029 for an average 5.3% — less than a BBB ladder due to its A and AA holdings. BulletShares charge just 0.1% and pay monthly, as oppsed to the semiannual interest payments from individual bonds. What matters either way is that you can roll over the principal on your own terms.
Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
Related Content
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Kosnett is the editor of Kiplinger Investing for Income and writes the "Cash in Hand" column for Kiplinger Personal Finance. He is an income-investing expert who covers bonds, real estate investment trusts, oil and gas income deals, dividend stocks and anything else that pays interest and dividends. He joined Kiplinger in 1981 after six years in newspapers, including the Baltimore Sun. He is a 1976 journalism graduate from the Medill School at Northwestern University and completed an executive program at the Carnegie-Mellon University business school in 1978.
-
The Y Rule of Retirement: Why Men Need to Plan Differently
If you have a Y chromosome (because you're a guy), following the 'Y rule of retirement' can help you transition to this new life stage with grace.
-
Retire on This Island for Mediterranean Living on the Cheap
This independent nation has a lower cost of living and more visa options than many of its Mediterranean cousins.
-
5 Popular Investing Strategies You Should Really Rethink
There are plenty of popular sayings that help guide your investing strategies, but which ones work? We turned to the experts and historical data to find out.
-
Do Baby Boomers Spend More on Travel? What You Can Learn from Each Generation
Baby Boomers lead in travel spending, but younger travelers may be getting better value. See how older travelers compare with younger ones — and what each generation can learn about smarter travel.
-
My First $1 Million: General Manager in Construction/Home Services, 46, Indiana
Ever wonder how someone who's made a million dollars or more did it? Kiplinger's My First $1 Million series uncovers the answers.
-
I'm a Financial Professional: It's Time to Stop Planning Your Retirement Like It's 1995
Today's retirement isn't the same as in your parents' day. You need to be prepared for a much longer time frame and make a plan with purpose in mind.
-
An Attorney's Guide to Your Evolving Estate Plan: Set-It-and-Forget-It Won't Work
When did you last review your will? Before kids? Before a big move? An update is essential, but regular reviews are even better. Here's why.
-
Nasdaq Ends the Week at a New High: Stock Market Today
The S&P 500 came within a hair of a new high, while the Dow Jones Industrial Average still has yet to hit a fresh peak in 2025.
-
Google's AI Overview Is Wrong About Life Insurance 57% of the Time, Says Study
You need more than a grain of salt when getting life insurance tips from Google's AI overview.
-
How Apple’s Tariff Strategy Could Affect Your Next iPhone Upgrade
Apple’s $100 billion US expansion could shift iPhone assembly stateside — impacting pricing, availability and your next upgrade decision.