It’s Time to Say Goodbye to ‘T-Bill and Chill’

Investors who wait too long to get off the sidelines may find they’ve missed out.

Bonds could see a big boost as central banks pivot toward rate cuts in 2024. Yet nearly $6 trillion is still sitting in money-market funds, a relic of the “T-bill and chill” strategy made popular in 2022, when central banks were aggressively hiking interest rates.

If you’re among the many investors sitting on the sidelines, now’s the time to get in on the action. Here’s why.

Don’t Miss Out: Get Ahead of the Rush

Rolling Treasury bills seemed like a sensible idea in 2022. Cash rates were high, and bond prices were falling as central banks hiked aggressively, trying to get a grip on runaway inflation. With so many investors agreeing that cash was king, money market funds reached a record US$5.8 trillion in assets by the end of 2023.

But since October 2022, when the Federal Reserve’s overnight fed funds rate hit 4%, cash returns have failed to keep up with the bond market. From October 2022 through December 2023, cumulative returns for the US Treasury Bill 1–3 Month Index were 6.1%, compared with 7.5% for the Bloomberg US Aggregate Bond Index. The Bloomberg US Corporate High Yield Index fared even better, posting 18.2% over the period.

Now that the Fed appears poised to ease, many sidelined investors are looking to time their entry back into the bond market. Historically, as the Fed eased, cash flooded out of money markets and back into longer-term debt (Display).

Assets Tend to Flow Out of Money Market Funds During Easing Cycles