Recent data indicates there’s more than $7 trillion sitting in money markets and related instruments. That’s a staggering sum, to be sure. It’s one that may imply investors holding cash stockpiles could find themselves between a rock and a hard place.
The Federal Reserve has lowered interest rates twice over the prior two months. So yields on cash instruments are poised to decline. However, recent price action among risk assets suggest some skittish market participants may want to keep some dry powder at hand. Smart investors can split the difference with income-generating ETFs such as the NEOS Enhanced Income Aggregate Bond ETF (BNDI ).
BNDI, one of the flagship funds in the NEOS stable, sports an enticing distribution rate of 5.78%. That is well in excess of what investors find with traditional aggregate bond ETFs. The NEOS ETF’s impressive-by-comparison income stream could be all the more alluring at a time when some market participants are looking to deploy cash without taking on significant risk.
Time Is Right to Bet on BNDI
Perhaps adding to the near-term case for BNDI is the fact that money market yields have trending lower for an extended period of time, whittling away at the “risk-free” income delivered to investors.
“However, money market yields began to decline somewhat after the Fed responded to cooling inflation with a full percentage point of rate cuts in late 2024. The U.S. central bank’s latest quarter-point reduction, delivered in late October 2025, lowers the policy rate to a target range of 3.75% to 4.00%. More cuts appear likely, with the Fed’s latest “dot plot” projections from September showing the fed funds rate declining to about 3.625% by the end of 2025 and to 3.375% in 2026,” observed Morgan Stanley.
As its name implies, BNDI juices the income proposition associated with pure beta aggregate bond strategies. The NEOS ETF isn’t a fixed income fund in the traditional sense. But its bond market ties are pertinent today, particularly when discussing the aforementioned declining cash yields.
“Keep in mind, Fed rate cuts have typically weighed less on longer-duration fixed income yields than on cash rates. Our team’s analysis shows that U.S. investment-grade bonds historically have averaged higher returns than cash equivalents during the periods between the end of Fed rate hikes and the end of Fed rate cuts—where we are currently in the cycle,” added Morgan Stanley.
Home to nearly $117 million in assets under management, the actively managed BNDI charges 0.58% per year.
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