Last year, we advised members on how to take advantage of rising short-term rates and harvest yield on cash holdings. Now, as this period of rapid and frequent rate hikes may be ending, we offer our guidance on how to navigate a phase of stable and possibly declining interest rates. Specifically, we share views on:
- Adding duration to lock in yield
- Mitigating the duration risk that comes with longer-term rates
We also review the four categories we use to group cash, determined by timing of expected need.
- Reserve funds provide the greatest opportunity to extend duration and lock in yield
We recommend a strategy to take advantage of the current rate environment using Reserve funds – even as we caution that members must have some degree of confidence that those funds will not need to be accessed prior to maturity of the recommended investments.
