Column-Fed starting gun for $6 trillion dash from cash: McGeever By Reuters

By Jamie McGeever

ORLANDO, Florida (Reuters) – If cash has been king, the Fed may be plotting regicide.

As the Federal Reserve’s policy ‘pivot’ draws into view, investors face a $6 trillion question – where to deploy this record amount of cash if the beefy interest rate returns drawing people there evaporate again?

Earning short-term rates not seen for well over a decade, the attraction of 5% cash is considerable and raises a high bar for other assets to perform in such an uncertain economic environment.

But once the first Fed cut comes into view, that money will move rapidly out the maturity curve and into riskier assets. Doubly fast if, as is consensus, those cuts arrive without being forced by recession.

And the scramble to lock into high long-term coupons could quickly become a stampede.

Fed Governor Christopher Waller this week gave the strongest hint yet that the first Fed cut may be closer than many had been anticipating, and rates and bond traders have reacted swiftly.

Rates futures markets are now pricing in more than 100 basis points…