Investors Shift Cash to Treasuries as Money-Market Yields Fall

Investors are shifting cash and stock allocations into U.S. Treasuries as money-market yields decline and equities posted strong gains in the first half of 2026. Two-year Treasuries yield about 4.21% and the 10-year about 4.47%.

Money-market fund yields peaked in 2023 and have fallen to just below 3.5%, creating reinvestment pressure for holders of cash equivalents. The St. Louis Federal Reserve reported more than $8.2 trillion in money market funds at the end of the first quarter.

RiverFront noted the front end of the yield curve has become more attractive for conservative investors. The firm reported that short-term Treasuries with maturities of 1 to 5 years are yielding roughly 4% to 4.3%.

RiverFront reported that corporate bonds currently offer about 50 basis points of additional yield for investors willing to take credit risk. The firm is avoiding longer maturities because of inflationary pressure tied to higher oil prices from the Middle East conflict.

The S&P 500 returned just over 10% in the first half of 2026. RiverFront had forecast a 10-year Treasury yield near 4.2% for the year; the 10-year averaged about 4.47% through the same period.

RiverFront identified fair value on the 10-year Treasury near 4.3% and flagged yields above 4.75% as a potential buying opportunity. The firm noted that real yields, nominal yields adjusted for inflation, remain above 2%, compared with a roughly 1% average over the past 23 years.

RiverFront described the rise in short-term yields since the start of the Iran war as tightening financial conditions across maturities from two to 30 years.

On monetary policy, RiverFront noted the Federal Reserve has maintained a hawkish public tone but does not expect further policy rate hikes in 2026.

RiverFront reported being underweight fixed income overall while seeking opportunities to add bond exposure in shorter-horizon portfolios to enhance income generation.

The firm reiterated standard investment warnings that all securities carry the risk of loss, rising interest rates generally put downward pressure on fixed-income prices, and diversification does not guarantee a profit or protect against loss.