State Street Global Advisors' latest "Monthly Cash Review – November 2023 (​USD)," which is subtitled, "Time to Chase Duration," explains, "We believe the US Federal Reserve (​Fed) can cut rates by 100–​150 bps in 2024, beginning as early as March, but more likely in June or July. With this timeline in mind, the chase for duration has begun as investors try to lock in longer-​term yields before their eventual decline.... Money market funds began their extension in the early summer months of 2023, shortly after the Debt Ceiling debacle was resolved. The shift was aided by the US Treasury'​s aggressive issuance pattern, where T-​Bill debt increased by almost $​500 billion from May to June. In fact, as of October month-​end, T-​Bill debt has increased by almost $​1.​5 trillion since May. The outsized issuance has resulted in a cheapening of T-​Bills vs. repo, making the extension out of repo (​mostly overnight) into longer-​term T-​Bills a no-​brainer." The piece continues, "For fund managers, extending duration is just one part of the equation. The bigger challenge is keeping duration extended. Each day, a fund'​s duration shrinks, so a manager must constantly search for the optimal point to position money further out the curve. As curves begin to flatten and ultimately invert, the job becomes more difficult, and could force a fund to buy yields that are lower than their shortest maturity investments (​with the hope that the Fed eases its policy rate). Already we are seeing an inverted and flatter T-​Bill curve, though the credit curve has yet to reach a similar point of inversion. There is still time for extension in a positive sloping curve, although by the time you read this circumstances may have changed." They conclude, "Finding the conviction to extend duration and add risk to one'​s portfolio is always a challenge in an uncertain market. Trying to time the move is even more difficult. Identifying economic leading indicators and market signals in your investment framework can help relieve pressure on the guessing game. At this point (​December 2023), it seems obvious that the Fed will begin down the path of easing policy rates. Back in June, it was less obvious, and the rate moves in the month of September and October could have broken even the strongest of convictions. How fast the Fed eases is the million-​dollar question, and next month, we will discuss what these economic outcomes could mean for fixed income returns."

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