With all the concerns voiced by investors in the past year about a narrowing US equity market, dominated by a few AI-related technology players, investors may be overlooking a growing concentration in US fixed income, according to new insights based on the Morningstar US Core Bond Index.
In his recent article ― What a Treasury-Heavy Bond Market Means for Your Investment Portfolio ― Morningstar Indexes Strategist Dan Lefkovitz points out the growing share of Treasuries in the Morningstar US Core Bond Index and examines the potential implications for fixed income investors.
Notably, the share of US Treasuries in the index, which measures the performance of fixed-rate, investment-grade US dollar-denominated securities with maturities greater than one year, now sits at almost 47% of the index as compared to 36% a decade ago.
So, should fixed income investors be looking for ways to diversify away from Treasuries? Not necessarily, according to Lefkovitz, who cites rising yields for the Morningstar US Core Bond Index as a benefit that helps offset interest rate risk driven, in part, by a larger allocation to US Treasuries and corporate bonds. Other benefits to Treasuries right now include the potential for capital appreciation (the index has risen more than 7% in 2025) and diversification relative to US stocks.
Dan Lefkovitz, Strategist, Morningstar Indexes, said:
“A Treasury-heavy market is causing unease among many investors. Just as the rising share of technology and AI-related stocks has raised concerns of concentration risk in the stock market, fixed income investors worry about the impact of debt, deficits, and inflation. It may therefore seem like a no-brainer to get tactical and active with bonds. But it’s not that straightforward. While investors may be tempted to avoid Treasuries or stay in cash, this strategy includes opportunity costs.”
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