Treasury yields may have come down a little this month, but they are still above the lofty levels they were at the beginning of this year. The 10-year Treasury yield was around 4.3% Wednesday, compared to a year-low of around 3.2% in April. The 2-year Treasury yield was around 4.69%, compared to a year-low of around 3.7% in April. Depending on whether it will be a higher-for-longer rate regime — or if rates start to come down — investors will no doubt be wondering whether they should stay invested in cash (meaning money market funds) or start flocking to bonds. U.K. asset management firm Schroders noted that it’s now possible to earn 5% on cash deposits in the U.S. and U.K., and between 3% to 4% in Europe. That’s quite similar to what investors can get on government bonds, while high-quality corporate bonds yield more nearly 6.5% in the U.S. and U.K., and 4.6% in Europe. “But bond prices can go up and down whereas cash doesn’t. This has led many investors to wonder: is it worth bothering with bonds?” Schroders said. Here’s what the pros say on how to invest within the fixed income space — cash or bonds — in the next two years and beyond. How to invest If investors have a one- to two-year time horizon, it’s best to diversify and invest in both money market funds as well as short-term investment-grade government and corporate bonds, according to Luis D. Alvarado, global fixed income strategist at Wells Fargo Investment Institute. “In our view, the income component will be beneficial for investors in this timeframe and if the Fed manages to cut rates in the second half of 2024 then investors will also enjoy price appreciation from those bonds as short-term bond yields decline,” he told CNBC Pro. For those who have more than two years — with a timeframe of three to five years, Alvarado would recommend a barbell strategy — which strikes a balance between reward and risk by investing in high and low-risk assets. Alvarado says this means having exposure in the short and long-end of the yield curve, with an underweight rating on the intermediate part of the curve. “Our belief is that we are in late cycle territory, and a U.S. economic recession will materialize sometime in the first half of 2024. Hence, we believe investors should focus on high-quality bonds that display better liquidity, are rated-investment grade and those of issuers that have solid balance sheets,” he said. Schroders’ Head of Strategic Research Duncan Lamont also stated his preference for bonds, saying that putting your money in cash means being exposed to interest rate fluctuations. “And short-term interest rates are not expected to stay at current levels for the long term, even if they are unlikely to fall back to the ultra-low levels seen in recent years,” he said, adding that the median expectation of the U.S. Federal Reserve is that its main policy rate will be 2.5% in the long run. In contrast, buying a bond means locking in the rate of interest over the longer term, he said. And those rates are higher than cash — at 6.2% for corporate bonds with an average maturity of three years, and 6.5% on high-quality U.S. corporate bonds with an average tenure of 10 years, noted Lamont. For those with a greater risk appetite, high-yield debt with a tenure of five years offer 9.5%. Goldman Sachs Asset Management added to the chorus, saying that after more than a decade of low rates, the widespread sentiment that there is no alternative (TINA) to equities “finally has turned.” “Fixed income is experiencing greater inflows than equities in the US and the same trend relative to cash in Europe. History suggests this will continue, as bond flows tend to pick up after a hiking cycle ends,” said Ashish Shah, global chief investment officer of public investing at Goldman Sachs Asset Management.