With interest rate volatility and global uncertainty keeping markets on edge, fixed-income investors are increasingly looking for safer avenues that can deliver better returns than traditional bank fixed deposits.Market experts believe that high-quality short-term corporate bonds and accrual-focused debt strategies could offer retail investors yields in the 7.5–9% range without taking excessive risk.Why experts are avoiding long-duration bond betsAccording to Ankit Gupta, Co-founder & Director at BondsIndia.com, investors should focus on quality and avoid aggressive duration bets in the current environment.Want safer returns than FDs? How retail investors can earn 7.5-9% via bonds without taking riskAmidst interest rate volatility and global uncertainty, fixed-income investors are exploring safer alternatives to bank deposits. Experts suggest short-term, high-quality corporate bonds and accrual-focused debt strategies can yield 7.5-9% without excessive risk. Investors are advised to focus on quality, avoid long-duration bets, and consider laddered portfolios for liquidity and reinvestment opportunities.“In the current environment, we are advising clients to stay selective, focus on quality, and avoid taking excessive duration risk. With the RBI maintaining a neutral and data-dependent stance, interest rate volatility is likely to continue,” Gupta said.Short-term AAA bonds offering attractive yieldsGupta said the short-to-medium end of the curve currently offers attractive opportunities for investors seeking stable accrual income with lower volatility.“Today, 1–3 year AAA and AA+ corporate bonds are offering yields in the 7.5%–9% range, which we believe provides a healthy balance between accrual and risk management without the higher price sensitivity associated with longer-tenor papers,” Gupta noted.He also advised investors to stick to high-credit-quality instruments such as AAA and AA+ bonds as well as State Development Loans (SDLs), instead of chasing marginally higher yields in lower-rated papers.Laddered portfolios can help manage uncertaintyAccording to Gupta, a laddered portfolio strategy — where investments are spread across different maturities — can help investors maintain liquidity and benefit from reinvestment opportunities if rates move higher.He added that disciplined allocation and flexibility work better than trying to aggressively time interest rate movements during uncertain rate cycles.Geopolitical risks keeping bond managers cautiousExperts say the current macro environment, marked by geopolitical tensions and elevated crude oil prices, is making fund managers cautious on longer-duration debt instruments.Puneet Pal, Head-Fixed Income at PGIM India Mutual Fund, said investors should currently stay at the very short end of the yield curve.“In light of the continuing geopolitical uncertainty and higher for longer crude oil prices, which seem quite plausible currently, we are recommending the very short end of the yield curve for investment to investors, basically funds whose duration is maximum 1 year,” Pal said.Why short-duration debt funds are being preferredPal pointed out that the short end of the yield curve is already pricing in possible rate hikes over the next year, thereby offering a margin of safety to investors.“The longer segment of the yield curve faces headwinds from adverse demand supply situation owing to fiscal pressures and elevated rising global bond yields,” he added.Accrual income strategies may work better nowMeanwhile, Devang Shah, Head of Fixed Income at Axis Mutual Fund, said returns in the current market are likely to come more from accrual income rather than duration-led gains.“In the current environment, discipline matters more than directional rate calls. With bond yields range-bound, returns are being driven more by accrual than duration-led gains, making accrual-oriented strategies better suited,” Shah said.He added that the fund house continues to favour short- to medium-duration funds with selective exposure to gilts, while focusing on steady income generation and managing mark-to-market volatility.What retail investors should do nowFor retail investors seeking alternatives to fixed deposits, experts suggest that short-duration high-quality bonds, debt mutual funds with lower duration risk, and disciplined portfolio allocation may help generate relatively stable returns even amid market uncertainty.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)