In 2026, the Federal Reserve's rate cut actions will become a key lever for triggering the global financial markets. The market has already largely locked in expectations—America will cut interest rates twice within the year, and this policy shift is quietly changing the profit logic of various assets.

Currently, money market funds offering a 3.0% annualized yield seem quite stable and have become the preferred parking spot for many idle funds. But what about those high-quality US bonds? The 4.35% coupon yield, as expectations of rate cuts heat up, is revealing a more attractive allocation appeal. By the end of the year, this advantage could become even more apparent.

The issue lies in the fundamental differences between these two asset classes. The returns of money market funds are inherently tied to policy interest rates; the 3.0% figure essentially mirrors short-term market rates. Once the Federal Reserve actually begins to cut rates, the yields of money market funds will quickly follow downward. Looking at historical records—during the 2019 rate cut cycle, the average yield of US money market funds dropped from 2.4% to 1.5%, a decline of nearly 40%. Even more frustrating is that money market funds cannot lock in returns; investors can only passively endure the shrinking yields caused by falling rates, and with a single source of income—interest payments—there's no room for capital appreciation.

The situation with bonds is entirely different. High-quality bonds such as investment-grade credit bonds and medium-term (2-5 years) government bonds, based on a 4.35% coupon rate, actually gain additional opportunities in a rate-cut environment. These bonds have fixed coupons; once purchased, even if market interest rates decline, your fixed income remains unchanged. At the same time, you can profit from bond price increases—this is the dual profit logic of "coupon + capital gains." During a rate-cut cycle, older bonds with higher coupons become more sought after, pushing their prices higher. For holders, this translates into tangible appreciation.