For years, cash was trash. Near-zero rates meant savings accounts, T-bills and money funds paid next to nothing, and banks didn’t have to fight for deposits. Then the Fed began raising rates in 2022, cash started earning real money again, and this week, Telis Demos writes in Heard on the Street, markets got a fright about how effortless moving it might become. Interest in Muse, the AI agent from Meta Platforms (META), raised the prospect of customers simply telling software to find the best yield.
Investors didn’t wait for proof. Meta rose more than 11% this week through Thursday (it gave back 3.33% on Friday, by our desk’s close), while the KBW Nasdaq Bank index slid almost 3%. On Tuesday alone, Charles Schwab (SCHW) fell more than 6%, LPL Financial (LPLA) more than 7%, and Bank of America (BAC), JPMorgan Chase (JPM) and Wells Fargo (WFC) more than 3% each, all firms that make money on the cash customers leave with them. The competition was already crowding in, from neobanks to stablecoins to tokenized T-bills, and in the lobbying battle over the Clarity Act, banks argued that stablecoin rewards would compete with deposit yields.
Demos sees reasons the pressure could build. The personal saving rate fell to 2.6% in April, the lowest since 2022, and JPMorgan economists estimate pricier energy may have shaved about half a point off it between February and September. As more households stop building retirement savings and start spending them down, deposits could get costlier for banks to keep. Simon-Kucher & Partners found 12% of U.S. bank customers have no single primary account, a share it projects could reach 20% by 2029, and the upshot, says the firm’s Abdul Bhatti, is that “customers in general become more rate sensitive.” Robinhood Markets (HOOD) already pays 3.6% on uninvested cash to subscribers of its Gold service.
Our read
The selloff is the market pricing a future in which cash moves with a tap. The present looks different. Bankrate’s average money-market account yield in Friday’s paper was 0.44%, while a three-month Treasury bill yielded 4.24% at Friday’s close, by our desk’s figures. On $50,000, that gap’s about $1,900 a year before taxes. In cash-flow terms (M5), inertia is a fee nobody sends you a bill for, and it can be steepest for retirees living off savings, the very shift the column flags.
Just know what you’re moving into. FDIC insurance covers bank deposits, including money-market deposit accounts, up to $250,000 per depositor, per bank, per ownership category; it doesn’t cover money-market funds, T-bill ETFs or stablecoins, and a stablecoin reward isn’t deposit interest. A Treasury bill is backed by the U.S. government itself, but a fund that holds bills is a security, not a deposit. We keep our own safe money in funds that hold Treasury bills and floating-rate Treasurys, the iShares 0-3 Month Treasury Bond ETF (SGOV) and WisdomTree Floating Rate Treasury Fund (USFR), and this week’s numbers support holding them; we didn’t buy anything new. Look up the rate on your cash this weekend. If you don’t know it, that’s your answer.