Behind the Yield

Behind the Yield: January 22, 2026

Cash feels safe until it stops paying you.

By Charles Urquhart, CFA · January 22, 2026

THE THEME

Cash feels safe until it stops paying you.

Right now, money markets are yielding something meaningful. Clients are comfortable. Advisors are not getting pushback. Everyone is happy.

That comfort is the risk.

Cash does not lock in anything. Cash reprices. And when it reprices lower, it does so quickly and without warning.

THE WEEKLY SNAPSHOT

As of Jan 21, 2026 close

2Y Treasury: 4.60% 5Y Treasury: 4.42% 10Y Treasury: 4.63% 30Y Treasury: 4.91% IG Corporate OAS: 78 bps

THE POINT

Reinvestment risk is the risk nobody talks about until it is too late.

Duration risk gets all the attention. Rates go up, prices go down, clients call. That risk is visible. It shows up on statements. It generates headlines.

Reinvestment risk is quieter. It does not show up as a loss. It shows up as a smaller number on the next statement. And then the next one. And then the client asks why their income dropped.

Cash is the asset most exposed to reinvestment risk. When the Fed cuts, cash yields reset immediately. There is no buffer. There is no lock. There is just a new, lower number.

Bonds let you extend the runway. Cash makes you renegotiate the runway every 30 days.

WHY THIS MATTERS FOR ADVISORS

The clients sitting in cash right now are not stupid. They are responding to incentives.

For the past two years, cash paid well and bonds were volatile. Staying in cash was not laziness. It was a rational response to a weird environment.

The problem is that rational responses to past environments become irrational anchors in new ones.

When short rates fall, and they will eventually fall, the client earning 5% will be earning 4%. Then 3.5%. Then they will call and ask what happened.

The conversation you want to have now: "Let's build a plan to lock in some of this income."

The conversation you do not want to have later: "Why didn't we do something when rates were higher?"

One of those conversations is proactive. The other is defensive. You know which one is easier.

REINVESTMENT RISK IN PLAIN ENGLISH

Reinvestment risk is the risk that when your cash flow comes back to you—whether from a maturing bond, a called bond, or a money market dividend—you have to reinvest it at a lower rate.

It is the opposite of duration risk.

Duration risk hurts you when rates rise. Reinvestment risk hurts you when rates fall.

The client hiding in cash to avoid duration risk is maximally exposed to reinvestment risk. They have traded one risk for another. They just do not feel it yet.

The job is to help them see both sides of the equation before the Fed makes the decision for them.

THE CONVERSATION YOU WILL HAVE THIS QUARTER

A client will say something like this:

"I'm getting 5% in my money market. Why would I move it?"

Here is what they are really asking: Why take any risk when risk-free pays this well?

The answer is not "because rates might fall." That sounds like a guess. Clients do not act on guesses.

The answer is a question back:

"How long do you want to earn this rate? Because cash only guarantees it for the next 30 days. If you want it for longer, we need to lock it in."

That reframe moves the conversation from prediction to intention. You are not asking them to bet on rates. You are asking them how long they want to get paid.

Nobody has ever been mad about a plan. People get mad about surprises.

THE TRAP

The trap is treating all cash the same.

Some cash has a job. Emergency reserves. Near-term spending. Liquidity for opportunities. That cash should stay cash.

Some cash is just default. It landed there because the client did not know what else to do. Or because the advisor did not have a better answer. Or because everyone was waiting for "a better time" that never came.

Default cash is the problem.

Default cash is a decision to let the Fed decide your client's income. That is not a plan. That is an abdication dressed up as caution.

The job is to separate liquidity cash from default cash. Then build a glidepath to move the default cash into something with a longer runway.

THE PLAYBOOK FOR ADVISORS THIS WEEK

Audit cash across your book. Pull a report. Sort by cash percentage. Identify the households where cash has quietly become a larger allocation than anyone intended. Those are the conversations to have first.

Segment the cash. For each high-cash household, answer two questions: How much is liquidity? How much is avoidance? If you cannot answer that clearly, the client definitely cannot.

Build one simple glidepath. Do not try to move all the cash at once. That feels like a trade. Instead, propose a 3-month or 6-month deployment schedule. "We will move $X per month into a short ladder." Schedules feel like plans. Plans feel safe.

Prepare the "why now" answer. The client will ask. Have a calm, non-defensive response: "Cash rates are attractive today, but they reset every month. Locking in a portion now means you are not dependent on what the Fed does next. This is not a prediction. It is a plan."

CLIENT READY WORDING (Use this)

"Cash pays you for today. Bonds pay you for time. Right now, both are paying well. The question is how much of your income do you want to lock in, and for how long."

If you want a second line:

"You are earning 5% in your money market. That is great. But that 5% comes with a 30-day lease. If you want to own the income instead of renting it, we need to extend the term."

WHAT I AM WATCHING NEXT

Fed language. Not just rate decisions—the tone around future cuts. When "patience" becomes "prepared to act," the window to lock in income gets smaller.

Money market fund flows. When cash starts moving out, it tends to move quickly. The time to act is before the herd figures it out.

Client conversations about cash. When they shift from "I'm happy earning 5%" to "what happens when this goes away?"—that is the opening.

The spread between money market yields and short bond yields. When the gap widens, the case for extending gets easier to make.

ONE QUESTION

What percentage of your book is sitting in cash that does not have a clear purpose?