Thornburg's Limited Term U.S. Government Fund, which invests 80 percent of its assets in U.S. government issued or guaranteed securities, had 9.5 percent in cash as of June 30, about double the typical 5 percent, Brady said. The $340.3 million fund's 3.28 percent return in the last 12 months beat 90 percent of its peers, according to Bloomberg data.

Pacific Investment Management Co., the manager of the world's biggest bond fund, isn't likely to be swapping idle cash for longer-maturity Treasuries. Bill Gross, Pimco's co-chief investment officer and manager of the $242.8 billion Total Return Fund, has said Treasuries are unattractive because yields are too low relative to the risk of faster inflation.

'Liability Burden'

The Total Return Fund had approximately 29 percent of its assets invested in cash and equivalents as of June 30, equivalent to about $70 billion. While Gross boosted the fund's investment in U.S. government securities to 8 percent of assets in June from 5 percent in May, he told CNBC on July 13 that their Treasury investment is in two-year and three-year notes.

"The U.S. basically has a $60 trillion net present value liability burden, and that constitutes Medicare, Medicaid and Social Security in combination," Gross said July 15 on Bloomberg Television's "Surveillance Midday" with Tom Keene. "It certainly exceeds those liabilities in Greece or Portugal or Spain. Ultimately the U.S. has a big, big problem."

Treasury 10-year yields, which serve as a benchmark for everything from mortgages to company bonds, will likely rise to 3.55 percent by year-end, according to the weighted average estimate of 62 economists and strategists surveyed by Bloomberg.

The yield, which has ranged from 2.04 percent to 4.27 percent since the start of 2008, slid back below 3 percent last week as traders sought the safest assets on concern Europe's dent crisis was spreading.

Europe Crisis

Moody's cut Ireland to below investment grade on July 12, while Italy's 10-year bond yield rose to 6.02 percent on July 12, the highest since the euro was created in 1999. The 17- nation common currency touched $1.3837 on July 12, its weakest level since March.

"It's a period now where you need to be cautious," Terry Belton, the global head of fixed-income and foreign-exchange research at JPMorgan Chase & Co., said in a July 7 "Bloomberg Surveillance" radio interview. "So earning zero or close to zero for a short period of time is not the worst thing in the world in the very near term."

Belton's fixed-income research group was No. 1 last year in Institutional Investor magazine's poll of U.S. money managers.

BlackRock 'Defensive'