Liquidity Management in Fixed Income Portfolios

In managing a fixed income portfolio, a fund manager is assessing the liquidity of various bond holdings in light of a recent influx of investor redemptions. The portfolio contains a mix of government bonds, corporate bonds, and a few illiquid high-yield bonds. The fund manager expects that navigating potential liquidity constraints is crucial in maintaining the portfolio's performance while ensuring sufficient liquidity to meet redemption requests.

The fund manager is particularly concerned about how the impending interest rate changes might exacerbate liquidity issues. In this context, the manager must decide on the best strategy for managing liquidity across the portfolios. After thorough analysis, the manager identifies three potential strategies to enhance liquidity: 1) increasing exposure to short-term government securities, 2) reducing allocations to lower-rated corporate bonds, and 3) extending the duration of the portfolio in search of yield enhancement.

Which of the following strategies would be the best choice for improving liquidity in this situation?