The latest threat to stocks now isn’t any macro risk — it’s rising 2-year Treasury yields, according to some fund managers and strategists. Short-term, relatively risk-free Treasury bonds and funds are back in the spotlight as the yield on the 2-year Treasury continues to rise. On Wednesday, it reached 4.1%—the highest level since 2007. As of Thursday during Asia hours, it pushed higher to 4.124%. “The new headwind for stocks is not just about inflation, potential recession, or even declining earnings estimates, but from the ‘competitive threat’ that rising interest rates makes bond yields more attractive,” John Petrides, portfolio manager at Tocqueville Asset Management, told CNBC. “For the first time in a long time, the TINA market (There Is No Alternative to stocks) is no longer. Yields on short duration bonds are now compelling,” he said. Michael Yoshikami, founder of Destination Wealth Management, agreed that bonds had become a “relatively compelling alternative” and could prove to be an “inflection point” for stocks. While Mike Wilson, Morgan Stanley’s chief US equity strategist, said that bonds offer stability in today’s volatile markets. “While Treasury bonds do run the risk of higher inflation [and the] Fed reacting to that, they do offer still a safer investment than stocks for sure,” he told CNBC’s “Squawk Box Asia” Wednesday. “To be honest, I’ve been surprised we haven’t seen a greater flight to that safety already , given the data that we’ve seen.” Data from BlackRock, the world’s largest asset manager, shows that investors have been piling into short-term bond funds. Flows into short-end bond ETFs are at $8 billion so far this month — the largest short-end bond inflows since May, BlackRock said Tuesday. Meanwhile, US-listed short-term Treasury ETFs have attracted $7 billion of inflows so far in September — six times the volume of inflows last month, BlackRock said. It comes as stocks have struggled, with S & P 500 down around 4% so far this month. How to allocate So should investors be fleeing equities and piling into bonds? Here’s what analysts say about how to allocate your portfolio right now. For Tocqueville Asset Management’s Petrides , the traditional 60/40 portfolio is back. This sees investors put 60% of their portfolio in stocks, and 40% in bonds. “At current yields, the fixed income allocation of a portfolio can help contribute to expected rates of returns and help those looking to get yield from their portfolio to meet cash flow distributions a possibility,” he said. Here’s a look at how Citi Global Wealth Investments has shifted its allocations, according to a Sept. 17 report: The bank removed short-term US Treasurys from its largest underweight allocations, and increased its allocation to US Treasurys overall. It also reduced its allocation to equities, but remains overweight on dividend growth stocks. Citi added that 2-year Treasurys aren’t the only attractive option in bonds. “The same goes for high-quality, short duration spread products, such as municipal bonds and corporates, with many trading at taxable equivalent yields closer to 5%,” Citi said. “Right now, savers are also sending inflows into higher yielding money funds as yields eclipse the safest bank deposit rates.” Petrides added that investors should get out of private equity or alternative asset investments, and shift their allocations to fixed income. “Private equity is also illiquid. In a market environment like this, and if the economy could continue down a recessionary path, clients may want more access to liquidity,” he said. What about long-dated bonds? Morgan Stanley in Sept. 19 notes said that global macro hedge funds were betting on another 50 basis point rise in the 10-year Treasury yield. This could send the S & P 500 to a new year-to-date low of 3,600, the investment bank said. The index closed at 3,789.93 on Wednesday. “If these materialize, we believe bearishness might become more extreme near term, and the risk of a market overreaction will rise. We reiterate staying defensive in risk positioning and wait for more signs of capitulation,” Morgan Stanley analysts wrote. Rising rates also means there’s a risk the economy will slow next year, and long-duration bonds could benefit from this, according to Morgan Stanley Investment Management’s Portfolio Manager Jim Caron. “Our asset allocation strategy has been a barbell approach,” he said. “On one side we recommend owning short duration and floating rate assets to manage the risk of rising rates. On the other, more traditional core fixed income and total return strategies with longer duration.” Examples of traditional fixed income include multi-sector investment-grade bonds, including corporates, Caron said. BlackRock also said it believes longer rates could rise, given that the US Federal Reserve’s tightening is just “getting started.” But for now, it urged caution on longer-dated bonds. “We urge patience as we believe we will see more attractive levels to enter longer-duration positions in the next few months,” BlackRock said.