Yields on US Treasury bills are climbing as a once-reliable source of demand cools. According to a Reuters report, the flow of investor cash into money-market funds has slowed sharply this year. That has lifted bill yields and could leave markets more exposed to short-term funding strains.

Key Numbers

  • Fund inflows: $158 billion in the first three quarters of 2026, versus $823 billion for all of 2025 and $840 billion in 2024.
  • Bill holdings: money funds' Treasury bill holdings rose about 4% by the end of August, compared with an 18% increase over 2025.
  • Yield spread: 3-month bill yields rose nearly 10 basis points above 3-month overnight index swaps (OIS) on Monday. The spread hit its widest since September 2024 last week.
  • Fund maturities: the weighted average maturity of money funds fell to 36 days last month from a May peak of 42 days. That is still well above the 2022 low of 15 days.

Why Demand Is Softer

Vanguard's Nafis Smith says the strength of the US stock market this year has reduced investors' urge to hold cash. Money funds remain net buyers of bills, but at a slower pace. Investors now demand a bigger premium to hold them.

Supply Is Rising

Barclays estimates the Treasury will issue about $225 billion of bills in October and another $160 billion in November. With less new cash to absorb that supply, analysts expect yields to be pushed higher.

The Fed Factor

Rate futures price in one 25-basis-point Fed hike this year and two more in 2027, according to LSEG estimates. Money-fund managers tend to shorten maturities when they expect higher rates, so they can reinvest at better yields. Vanguard's Smith says that uncertainty gives funds a reason to stay short.

Is This a Sign of Stress?

Not yet. Analysts say the move does not look like stress in underlying funding markets, and Treasury officials point to steady demand from money funds and stablecoins. Money-fund inflows also typically pick up in the fourth quarter as investors build cash for year-end needs.

The risk is that funds shift cash from overnight repo into higher-yielding bills while issuance ramps up. That could tighten funding conditions, raise repo rates and lift financing costs for dealers.

What to Watch

  • Weekly money-fund flow data.
  • Treasury bill issuance and auction results.
  • Repo rates and the Fed's October 27-28 meeting.