Investors parking cash in the safest of U.S. assets probably won't see immediate relief from depressed returns when the Federal Reserve starts raising interest rates.

The possibility of as many as two rate increases by year-end has failed to outweigh a mismatch between supply and demand for the shortest and safest of debt, with Treasury bill rates maturing through October locked at about zero percent. Global regulatory changes are boosting the need for high-quality assets from bills to repurchase agreements to bank deposits just as the supply is sliding.

"As the Fed begins tightening, yields on all short-term instruments won't recalibrate higher," said Jerome Schneider, head of short-term strategies and money markets at Newport Beach, California-based Pacific Investment Management Co. "There is a misperception in the market that all asset yields will move higher. We are in a new paradigm and there will be these dislocations."

Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.

  • Critical Treasury & Risk information including in-depth analysis of treasury and finance best practices, case studies with corporate innovators, informative newsletters, educational webcasts and videos, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM websites including and

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.