A Salute to Warren Buffett and His Fixed Income Playbook
By Paul Rubillo ·
The end of an era may not do it justice when the name Warren Buffett comes into play. The day Berkshire Hathaway investors knew would come has come. Mr. Buffett announced he's stepping down as chairman of Berkshire Hathaway, handing the role to his son Howard after holding it since 1970. It's the final piece of a succession that started with Greg Abel taking the CEO seat at the start of this year. Buffett's reputation was built on stocks, but his bond game was next level. His timing in fixed income almost exclusively came at the extremes, when the market is either terrified or offering nothing at all, and he's spent the years in between saying so out loud.
The clearest early example is RJR Nabisco. After KKR's 1988 leveraged buyout loaded the company with debt, its bonds traded down to distressed levels, and by 1990 Buffett had put $440 million into them at a 14.4% yield. In that year's shareholder letter he was blunt about the rest of the junk market: "Mountains of junk bonds were sold by those who didn't care to those who didn't think."
He ran the same playbook after the dot-com collapse. Through 2002, as telecom credit cratered and junk issuance vastly outran buyer demand, Berkshire took its junk-bond position from roughly $1.3 billion to about $8.3 billion, moving into names it had previously avoided entirely. This included a $100 million slice of a $500 million convertible-note deal for Level 3 Communications, and $98.3 million of Amazon's 10% senior notes bought through Geico, a position that ultimately returned somewhere in the 17%–22% range depending on the redemption.
2008 was the year many will remember as his shining moment during the financial crisis that swallowed up Bear Stearns and Lehman Brothers. Over the course of two weeks, Berkshire put $5 billion into Goldman Sachs perpetual preferred stock at a 10% dividend, callable only at a 10% premium, plus warrants on $5 billion of common stock at $115 a share. He also put $3 billion into General Electric preferred on nearly identical terms. Preferred stock isn't technically a bond, but the cash flow behaves like one: a fixed coupon, senior to common equity. Buffett later joked that the Goldman preferred was paying "$15 per second" while it sat outstanding. Goldman redeemed in 2011 at a premium, and between the redeemed preferred and the warrants, Berkshire's total gain on that single deal ran into the billions; GE redeemed during the same year, handing Berkshire roughly $1.2 billion in dividends and premium on a $3 billion stake. He ran variations of the same structure again with Dow Chemical, Bank of America, and Heinz over the next five years.
Berkshire Hathaway's Treasury bill position, 2023–2026
Berkshire's T-bill position has roughly tripled in two and a half years, hitting an estimated $339 billion by the first quarter of 2026. At its 2025 peak this made Berkshire the largest non-government holder of T-bills on record, at times exceeding the Federal Reserve's own short-term Treasury holdings. Buffett has called T-bills "the safest investment there is" and treated them as the default parking spot whenever nothing else seemed attractive (outside of equities that is).
In 2020, Mr. Buffett wrote in a letter that "fixed-income investors worldwide, whether pension funds, insurance companies or retirees, face a bleak future," adding that reaching for yield in "obligations backed by shaky borrowers" wasn't the answer.” The 10-year Treasury yield closed the year at 0.93%.
With the changing of the guard, it will be interesting to see how Berkshire’s new leadership will run the massive Treasury position from here! Mr. Buffett may no longer be calling the shots but I can tell you the financial markets will still be locked in on how the Berkshire legacy maneuvers through whatever headwinds the global financial markets face.
Cheers to an amazing career! Rest assured, we’ll all be talking about Warren Buffett for a long time to come.