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Cash Retakes Its Crown as the Fed Wrestles With Inflation

Investors are piling into products that shield them from losses in a rising rate environment.

Photo Illustration: Zak Tebbal for Bloomberg Businessweek; Photos: Getty Images (4)

For most of modern investing history, cash has carried a connotation of indecision: Any allocation to money-market funds or Treasury bills—considered cash equivalents—was merely a way station en route to more definitive investment decisions. But with the US Federal Reserve cranking interest rates ever higher, cash has become a bona fide asset class for the first time in decades.

Rates on three-month Treasury bills are hovering near 3.3%, the highest since 2008, while six-month bills yield 3.9%. The latter is above the 10-year Treasury note’s yield but with negligible duration risk—a measure of sensitivity to interest rate changes, which can be particularly destructive in extreme market environments. “Guaranteed 3-plus percent on T-bills? You have no duration, you have no credit risk—you have no risk,” says Jason Bloom, Invesco’s head of fixed income, alternatives, and ETF strategies. “That looks amazing right now.”