Fed Cuts Rates? Investors Chase High Yields Anyway

When the Fed eases up, the old playbook says to relax. Not this time. The hunt for yield is back with a vengeance—and it's bypassing traditional finance entirely.

The New Yield Frontier

Forget measly savings accounts. A generation of investors, burned by inflation and underwhelmed by conventional returns, is pushing capital into riskier, higher-yielding corners of the market. It's a global scramble for assets that actually pay.

Decentralized Finance Steps In

This isn't just about junk bonds or emerging markets. The real action is happening on-chain. Decentralized protocols are offering yields that make traditional finance blush, attracting capital that's tired of asking permission for a decent return. The promise? To be your own bank—with better interest.

A Cynical Twist on Capital

It's the ultimate finance irony: central banks cut rates to stimulate the economy, only to push savers into the arms of the very speculative assets they often warn against. Desperation for yield, it seems, is the most powerful investment thesis of all.

Investors keep chasing high yields as Fed cuts rates

The Federal Reserve already cut its benchmark rate by a quarter-point in both September and October, pulling it down into the 3.75% to 4% range. Despite that, cash continues to flood into money‑market funds.

Gennadiy Goldberg, head of US interest rate strategy at TD Securities, said the trend’s not shocking.“Money market funds continue to draw inflows as yields remain highly attractive amid gradual Fed rate cuts,” he said.

Gennadiy doesn’t expect the inflows to stop completely but thinks they’ll likely cool a bit if the Fed keeps cutting. Still, even yields above 2% tend to keep the momentum going.

Traders are already betting on another rate cut at the Fed’s December meeting. That speculation jumped last week after John Williams, the New York Fed President, hinted he’d be on board with one.

That matters because John is seen as closely aligned with Fed Chair Jerome Powell. Before his remarks, several other policymakers had pushed back against cutting again so soon.

A major reason money‑market funds are seeing such strong flows is how they handle falling rates. Banks typically pass lower rates on to customers almost immediately.

Money‑market funds MOVE more slowly, which makes them more appealing when rates are falling. That delay gives investors more time to squeeze value out of their cash.

So far in 2025, over $848 billion has flowed into the money‑market fund space, based on Crane’s industry-wide tracking. A separate figure from the Investment Company Institute, which doesn’t include firms’ internal funds, reported total assets at $7.57 trillion for the week ending November 25.

SEC pushes new rules to help small companies go public

At the same time this fund explosion is happening, the Securities and Exchange Commission is trying to make it easier for smaller companies to go public.

Paul Atkins, the SEC Chair, said during a Tuesday event at the New York Stock Exchange that the agency is working on changes to cut disclosure requirements and reduce red tape.

The goal is to give smaller firms a longer on-ramp, at least two years, to fully meet IPO rules, instead of the current one-year period.

Paul also said the agency is revisiting the definition of a small company. That label hasn’t been seriously updated in twenty years. He pointed out that the number of publicly traded firms is now half what it was three decades ago, and he tied that decline to compliance costs that often hurt smaller players more than the big ones.

“Our regulatory framework should provide companies in all stages of their growth and from all industries with the opportunity for an IPO,” Paul said. He warned that current compliance costs might be shutting out smaller firms from public markets.

Beyond IPOs, the SEC is also going after changes to executive compensation rules. That issue came up earlier this year during a listening session with investors, pension funds, and public companies.

Paul confirmed the agency is still working on this. He also asked SEC staff to come up with ideas for “de-politicizing shareholder meetings” so they stay focused on electing directors instead of becoming battlegrounds.

Get up to $30,050 in trading rewards when you join Bybit today