If the Curve Could Speak

Opportunities and Challenges of a Flatter Yield Curve

The sharp rise in short-term rates in 2017 has created attractive valuations on the front end of the investment-grade curve. If the curve could speak, almost certainly the shorter maturities would now be shouting, “Look at me... Look at me!” Not since late 2008 have investors been able to earn 2.0% or more on high-quality, short-term bonds.

In our latest white paper, Senior Portfolio Manager Duane McAllister explains how the recent boost in short-term yields not only allows investors to once again earn a reasonable nominal return on their money without needing to take significant duration risk, it also provides an opportunity to earn a positive real return, since core inflation measures remain below the Fed’s 2.0% target.

The experienced professionals at Baird Funds have decades of experience helping fixed income investors navigate changing markets like those we are experiencing today. We strive to manage risks for our investors while providing shareholders with consistent, incremental returns relative to industry benchmarks across market cycles.

As the table below shows, our approach has helped Baird’s short-term taxable and municipal bond funds achieve strong performance and positive industry ratings through periods of interest rate change.*

Fund NameYTD1-Year3-Year5-Year10-YearSince InceptionInception Date
Short-Term Bond Fund 1.53 1.53 1.55 1.50 2.42 2.76 8/31/04
Bloomberg Barclays 1 - 3 U.S. Government/Credit Bond Index 0.84 0.84 0.93 0.84 1.85 2.35 -
Lipper Ranking Top 48%
(160 of 332 Funds)
Top 31%
(88 of 286 Funds)
Top 18%
(44 of 244 Funds)
Top 33%
(53 of 163 Funds)
Top 29%
(38 of 131 Funds)
Short-Term Municipal Bond Fund 2.84 2.84 1.92 8/31/15
Bloomberg Barclays 1 - 3 U.S. Government/Credit Bond Index 1.61 1.61 0.89 -
Lipper Ranking Top 1%
(1 of 107 Funds)
Top 2%
(2 of 101 Funds)



*Periods of rate change during which the fund beat its benchmark include:

  • Feb. 2005-Jun. 2006 (2.5%-5.25%)
  • Jun. 2006-Dec. 2008 (5.25%-0.25%)
  • Dec. 2015-Dec. 2017 (0.25%-1.5%)


To read the fund's prospectus or to obtain the fund's performance current to the most recent quarter, SEC 30-day yield information and details about this fund's Morningstar rating, please visit the fund's webpage here.

Lipper rank/% is based on total return. Lipper classification for Baird Short-Term Bond Fund is Short Investment Grade Debt Funds.  Lipper classification for Baird Short Term Municipal Bond Fund is Short Municipal Debt Funds. All ratings and rankings are for the institutional class of the funds. Past performance is not a guarantee of future results.