Don’t Miss Out on Bond Yields by Sitting in Cash

  • U.S. bond market’s strong rally likely to continue
  • Fed Chair Jerome Powell plans to pivot to rate cuts in 2024
  • Benchmark 10-year Treasury yield retreated from its peak
  • Falling benchmark rates boosted the broader bond market
  • Bloomberg US Aggregate Bond Index gained 5.5%
  • Investors sitting in cash-like investments may miss out on bond yields
  • Average return on T-bills after first rate cut was 3.65%
  • Assets in money-market funds pulled back slightly
  • Money-market yields and returns will decline once the Fed starts cutting rates
  • Stocks mostly headed for weekly gains

The U.S. bond market has experienced a strong rally in the fourth quarter, and according to Janus Henderson Investors, there is still room for it to continue. Fed Chair Jerome Powell has signaled plans to pivot to rate cuts in 2024, which caused a retreat in the benchmark 10-year Treasury yield from its peak. This decline in rates has also boosted the broader bond market, with the Bloomberg US Aggregate Bond Index gaining 5.5%. However, investors who are sitting in cash-like investments earning roughly 5% may miss out on the potential yields of bonds. Historical data shows that after the first interest-rate cut, the average return on T-bills was 3.65%, compared to 6.85% on agency mortgage-backed securities. It is important to note that money-market yields and returns will decline once the Fed starts cutting rates. Therefore, investors should consider the potential drawbacks of sitting on the sidelines for too long. Additionally, assets in money-market funds have slightly pulled back from record territory. Despite some market volatility, stocks are mostly headed for weekly gains.

Factuality Level: 7
Factuality Justification: The article provides information about the U.S. bond market’s rally in the fourth quarter and the potential for further gains, based on analysis from Janus Henderson Investors. It also mentions the impact of Fed rate cuts on bond yields and the potential drawbacks of sitting in cash-like investments. The article includes data from Janus Henderson and the Investment Company Institute to support its claims. However, it lacks in-depth analysis and may benefit from additional sources and perspectives.
Noise Level: 3
Noise Justification: The article provides some information on the U.S. bond market and the potential for further rally, but it lacks depth and analysis. It briefly mentions the Fed’s plans for rate cuts and the impact on Treasury yields, but does not provide a comprehensive analysis of the factors driving the bond market. The article also includes some irrelevant information about stock market performance and money-market funds. Overall, the article lacks scientific rigor, intellectual honesty, and actionable insights.
Financial Relevance: Yes
Financial Markets Impacted: U.S. bond market
Presence Of Extreme Event: No
Nature Of Extreme Event: No
Impact Rating Of The Extreme Event: No
Rating Justification: The article discusses the U.S. bond market’s rally and the potential impact of Federal Reserve interest rate cuts. While there is no mention of an extreme event, the information provided is relevant to financial markets and investors.
Public Companies: Janus Henderson Investors (N/A), Bloomberg (N/A), Morningstar (N/A), Investment Company Institute (N/A)
Key People: Jerome Powell (Fed Chair)

Reported publicly: www.marketwatch.com