Warren Buffett isn't a fan of bonds-and his distaste is paying off for Berkshire Hathaway now as rising interest rates squeeze rivals with large bond portfolios.

Berkshire, where Buffett spent decades as CEO and is now chairman, is the only big provider property and casualty insurance that has virtually no bond portfolio. Its investment portfolio basically consists of Treasury bills and other cash equivalents, which act are substitutes for bonds and stocks.

That means Berkshire will suffer no paper losses on its bond portfolio in the current quarter even though intermediate-term Treasury yields are up about a half-point, cutting the value of the rival insurers' bond portfolios.

Berkshire also will benefit from rising short rates if the Federal Reserve, as expected, lifts its key fed-funds rate by a quarter-point on Wednesday to an upper limit target range of 3.75% to 4%. The anticipation of such a move already has lifted T-bill yields to 4%.

Buffett's view has been that bond yields haven't been sufficiently attractive favor bonds over cash.

P&C insurers take premium income from customers' policies and invest that money until claims are paid. Most insurers, under pressure from regulators, favor bonds for safety, but Berkshire opts for T-bills and stocks. It has more investment leeway than other big insurers because of its massive capital surplus of about $300 billion.

Berkshire ended the second quarter with about $360 billion of cash and equivalents, mostly Treasury bills, at its insurance and some other businesses, according to its 10-Q. It now holds $365 billion of stocks, according to a CNBC tracker, which values the portfolio in real time. Its bond portfolio totaled just $17 billion on June 30, or 2% of its total portfolio. The typical P&C insurer has about 80% of its investments in bonds.

Buffett's bond aversion is one of several pluses for Berkshire now. The company's equity portfolio is having a strong third quarter, paced by gains in its investments in Apple, Coca-Cola, Chevron, and the group of five Japanese trading companies. Barron's estimates the portfolio is up by $20 billion to $25 billion so far this quarter off a base of more than $300 billion.

Several of Berkshire's industrial businesses, notably aircraft parts maker Precision Castparts, are benefiting from strong manufacturing activity and the company's largest wholly owned business, the BNSF railroad, could get a boost as shippers shift to rail from trucks because of record diesel fuel prices.

Investors are showing enthusiasm for Berkshire stock after not showing much interest for much of this year. They may be recognizing that the stock has lagged behind growth in its book value in 2026 and the shares of companies in similar industries like Union Pacific.

Both the class A and B shares are up 3% in the past month and about the same for the year. Still, the S&P 500 has returned about 12% this year.

On Wednesday, A shares were up 0.8% to $779.694 and B shares were 0.5% higher at $519.07.

Barron's estimates that Berkshire's book value should rise more than 3% in the current quarter to about $542,000 for an A share. That means Berkshire's price-to-book ratio stands at an estimated 1.4 times-at the lower end of its range in the past few years.

Berkshire is the largest P&C insurer in the world ranked by capital-at over $300 billion-and its annual premium revenues put it near the top of the industry.

The bulk of Berkshire's bonds are international sovereign debt-probably to meet regulatory requirements of its overseas insurers-and are cash-like with most maturing in one year.

With bond yields rising about a half-point this quarter, P&C insurers are expected to report paper losses on their bond portfolios.

The typical P&C portfolio has a duration-a measure of rate sensitivity of about five years-and an average maturity of close to seven years. For an insurer like Chubb with a fixed-income portfolio of over $100 billion, the paper loss could total $3 billion in the current quarter, based on disclosure in its 2025 10-K report.

When long-term Treasury note and bond yields were at rock-bottom levels of close to 1% in 2020 and 2021, Buffett marveled at the ridiculousness of that and why anyone would buy bonds at those microscopic yields. He stated then that stocks would almost certainly outperform bonds-and he was right.

At Berkshire's 2020 annual meeting, Buffett noted that the 30-year Treasury bond then yielded 1.25%-versus about 5.30% now. "Equities are going to outperform that bond," he said. "They're going to outperform Treasury bills."

It will be interesting to see if Berkshire allocates more to bonds now that the 10-year Treasury yield is close to 5% and near a 15-year high.

Berkshire hasn't only avoided bonds, it has issued debt to take advantage of low interest rates. It has sold $15 billion of yen-denominated debt at an average rate of just 1.4% to help finance the purchase of equity now worth about $45 billion in the Japanese trading companies.

And Berkshire issued dollar-denominated debt at lower yield levels in the past few years, including $2.75 billion of 3.85% 30-year debt in 2022. The market rate for Berkshire's 30-year debt now is over 6% and that 3.85% bond now trades for just 72 cents on the dollar because of the low coupon rate.

By keeping nearly all of Berkshire's fixed-income investments under one year, Buffett has left Berkshire in a great position to capitalize on higher bond yields or equity opportunities.

So far this year, Berkshire hasn't done a lot of investing but that could change in the coming quarters. It's up to Buffett and Berkshire CEO Greg Abel to make that call. Many Berkshire holders would like to see them get more aggressive and invest a chunk of its cash hoard.