Cash is anything but trash these days for many yield-challenged bond funds.

That’s what some Thornburg Investment Management executives said at a meeting in Manhattan on Wednesday.

Their stay-liquid argument is that municipal-bond yields are low and some parts of the muni market are very bad today.

“We still live in an extremely low-rent world and that creates a lot of difficulties,” said Lon Erickson, a Thornburg portfolio manager and managing director. He added this was particule problem for many foreign bonds.

Some $8 trillion of sovereign debt, Erickson said, is trading at negative yields. He added negative yields aren’t occurring in the U.S. bond markets yet, but outside of the United States it is “commonplace.”

This puts bond managers under increasing pressure to seek new kinds of fixed-income investments. They must ensure that clients depending on bond income for retirement income can obtain it. “And that is a scary proposition,” Erickson said.

This hunger for yield creates “fear,” he said. Thornburg officials said the pressure on bond investors to find reasonable investments is turning some from long-term investors into speculators.

So it is often a smart strategy to keep lots of fund assets in cash, Thornburg officials said. That’s even though some investors will wonder why their fund has 8 percent or more in cash.

One should also, they say, generally keep away from long durations until the environment is clearer. “We prefer to stay shorter because we don’t see a lot of value in going up the yield curve,” Erickson said. “The risk reward just isn’t there with the 10-year bond at 1.75 percent.” He conceded that the cash, stay-short approach potentially costs the fund investor some income opportunities.

Erickson said Thornburg is looking into some credit-spread products because “we don’t see a recession in the next 12 months.”

It is also a smart strategy, Thornburg officials warned, to avoid certain bond categories that could be lethal for a portfolio.

“I hate the high-yield municipal bond market. Puerto Rico and tobacco settlement groups are garbage. Puerto Rico is done,” said Nicholos Venditti, another Thornburg portfolio manager.

Other continuing problems in the bond markets are the energy sector, which Thornburg managers believe won’t be a good place for a while. They don’t expect oil will go back to $50 a barrel in the near term. Cheap oil will bankrupt some companies, although some diversified pipeline companies might be good investments, they said.

Cities with problems? Detroit and Atlantic City, they say. Although Chicago continues to have problem, it, unlike Detroit and Atlantic City, has the resources, but not yet the plan, to overcome its bond problems.

Commercial real estate, Thornburg officials said, is also a big problem because underwriting standards have been slipping.