Don’t look now, but US Treasurys are on track for their best year since 2020.

The sarcastic among you will immediately note that’s not saying much. The post-pandemic world’s been rough on government bonds. Indeed, 2022 was one of the worst years ever for Treasurys, which needed a barnstorming late-year rally in 2023 to avoid an unprecedented third consecutive annual decline.

Over the same period, cash (i.e., T-bills and ultra-short govies) delivered some of their best nominal returns in decades as the Fed raised rates to combat the worst bout of inflation in 40 years.

The result was a yawning disparity which, headed into 2025, summed to nearly 18ppt of cumulative cash outperformance.

There’s the chart. You’re reminded that, conceptually speaking, cash is an ATM put. That was helpful in 2022, when equities struggled with the Fed’s hiking campaign.

If you squint, you can see a gradual abatement of the outperformance over the course of 2025. Treasurys are up more than 6% this year (around the same for the broader USD high-grade universe) while cash has returned around 3.7%.

The figure below’s a stark reminder: The post-pandemic Treasury selloff left a mark, so to speak.

Even with this year’s rally, we’re still looking at the worst 10-year rolling annualized returns for long-dated USTs ever.

Plainly, Treasurys’ strong performance in 2025 hasn’t a thing to do with any structural improvement in America’s fiscal trajectory. If anything, fiscal concerns have worsened, at least from the perspective of anyone concerned about the read-across from political dysfunction for bipartisan efforts to address debt and deficits.

Rather, bonds have benefited from the perception that the US economy’s slowing, the resumption of rate cuts, the imminent end to QT and, crucially, Scott Bessent’s (wise) decision to kick the can as far down the road as possible on coupon auction size increases.

In their coverage of bonds’ good year, the Journal quoted a fixed income manager who said, “It’s certainly been more fun to go to client meetings. A few years ago, I wasn’t getting invited to any.”