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I think you should do some back of the envelope calculations based on the interest rate you can get on new CDs and the expected rate of return on the bond fund.

Short term bond funds are best (compared to other bond funds) in times of rising interest rates because the bonds they hold are scheduled to mature soon, so they take the least risk of declining NAV when interest rates rise. The price for this however is lower yield.

So I would compare the value of funds invested after say two years in a new CD to that in the bond fund assuming some loss of NAV due to rising interest rates. A correct choice requires that you guess correctly how much interest rates will increase over the next two years and what fraction of that will be reflected in future payouts of the bond fund and what fraction in reduced NAV.

If the analysis fails to show a clear advantage for the bond fund, I would go with the CDs (or if funds to be invested are large enough investment grade corporate bonds). Two year Treasuries soon should be paying 7.5% interest. At those levels, fixed income investments begin to look attractive.
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