Short-term U.S. Treasury bills have posted their strongest performance since early spring, with the 4-week bill yield climbing to 5.12% by late December 2025. The rally follows renewed investor demand for safe-haven assets as inflation concerns resurface and the Federal Reserve signals a potential pause in rate cuts.
- 4-week T-bill yield reached 5.12% on December 10, 2025, its highest since March
- Over $180 billion invested in T-bill auctions during Q4 2025
- 2-year Treasury yield rose to 4.88% amid expectations of delayed rate cuts
- T-bill subscription rates hit levels not seen since 2022
- Money market funds increased short-duration Treasury holdings by 10–14% in Q4
- Annualized return for December 1, 2025, purchases of 4-week T-bills near 7%
U.S. Treasury bills have delivered their most robust returns of the year, driven by a sharp increase in demand for short-term government debt. The 4-week T-bill yield peaked at 5.12% on December 10, 2025, marking its highest level since March and a 60-basis-point rise from mid-October. This surge reflects a strategic shift among institutional and retail investors seeking capital preservation amid economic uncertainty. The rally comes after the latest U.S. CPI report showed core inflation remained sticky at 3.4% year-over-year, above the Fed’s 2% target. With data suggesting labor market resilience and persistent service-sector pricing pressures, markets have revised downward expectations for a rate cut in 2026. As a result, the yield on the 2-year Treasury note climbed to 4.88%, reinforcing the attractiveness of shorter-duration instruments. Investors have poured over $180 billion into T-bill auctions during the fourth quarter of 2025, with the 4-week bill seeing its highest subscription rate since 2022. The Federal Reserve’s balance sheet reduction program, now in its 18th month, has also tightened supply, amplifying demand. The sustained interest has led to a near 7% annualized return for those who bought 4-week bills at the start of December. Market participants now anticipate a delayed dovish pivot from the Fed. Asset managers, including BlackRock and Vanguard, have adjusted their fixed-income allocations, increasing T-bill exposure by 14% and 11% respectively in Q4. This trend is particularly pronounced among pension funds and money market mutual funds, which prioritize liquidity and safety over yield chasing in the current environment.