Bond market investing strategies for lower interest rates [Video]

Investors may want to start preparing now to earn lower yields on their cash.

With the Federal Reserve signaling it could cut interest rates in September, Pimco’s Jerome Schneider sees a major disadvantage in holding on to cash as money market yields come down.

“You’re finding yourself moving from a 5% risk-free rate to a 3.5% risk-free rate pretty quickly on that cash,” the firm’s head of short-term portfolio management told CNBC’s “ETF Edge” last week. 

The 100 largest money market funds are still offering a competitive return on cash at 5.12%, as of Sunday, per Crane Data. The benchmark 10-year U.S. Treasury yield, meanwhile, edged slightly lower to 3.93% early on Monday.

Schneider suggests it’s not too early for investors to explore other fixed income solutions—particularly exchange-traded funds, which could offer better returns in the long run.

“Move to those ultra-short ETF strategies, low-duration ETF strategies, even the bond and core ETF strategies that have actively managed components,” …