The return of risk-off trading in late-2018 has revived demand for the safe haven of bonds, but only short-term maturities are posting year-to-date gains, based on a set of exchange-traded funds covering US fixed-income markets.

Following a surge of volatility in global markets in recent months, short-term Treasuries are the top performer for a broad set of US bond ETFs. The iShares Short Treasury (SHV) posted a 1.6% total return so far in 2018 through yesterday’s close (Dec. 18), earning the top spot in the US fixed-income horse race this year.

In fact, all the US bond ETFs with positive year-to-date results have short-term mandates. Otherwise, fixed-income funds targeting the US are in the red for 2018.

Year-to-date losses extend to the broad-defined US investment-grade fixed-income benchmark, represented by Vanguard Total Bond Market (BND), which has shed 0.7% so far in 2018 (red line in chart below).

The biggest loser within the US-bond universe this year: long-term corporates of the investment-grade variety. Vanguard Long-Term Corporate Bond (VCLT) is down 6.4%, posting the deepest setback in the fixed-income space at the moment.

The big question for bond investors is whether the Federal Reserve, which is widely expected to raise interest rates today, will continue to squeeze monetary policy in 2019.

“The market’s thinking more and more the Fed may be just about done,” says Michael Schumacher, head of rate strategy at Wells Fargo in New York.

Perhaps, but some analysts note that the rising federal deficit could be a factor that keeps upward pressure on interest rates next year.

“I would not be surprised to see 10-year yields pushing to 3.5% or even higher by end of 2019,” predicts Tony Bedikian, head of global markets for Citizens Bank, based in Providence, RI.

On that basis, the performance edge in short-term bonds appears set to roll on.