Best CD & MM Rates Thread 2018 Archive

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American Express Savings raised their high yield savings rate from 1.8% to 1.9% a day after the Fed raised the Fed Funds Rate. I would expect Synchrony and Ally who are currently at 1.85% to be close behind or even leapfrog.

However, there appear to be several banks now offering high yield savings rate at 2.05% and a bit higher.
 
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dvalley said:
Seems like 3% is becoming easier to find now. The question in my mind is how much higher will the rates go in 24 months and would it be wise to lock up the cash for 2yrs? I supposed a CD ladder approach could help. For now I'm keeping my cash in VMMXX and see what happens after the next rate hike in Dec :popcorn:
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I’ll be evaluating that question in Dec through March when I have several CDs maturing. A lot depends on the early withdrawal penalties for specific 2yr CDs as well as the shape of the yield curve then.
 
The 3% 2 year CD's are now equivalent to 2 yr Treasuries, at 2.865%, once I factor in the relatively high State Taxes we would pay at the highest marginal rate.
 
ShokWaveRider said:
Why are Vanguard MM funds (7 day Yield) so much more than Fidelity ~0.25%
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Expense ratios. Compare like funds and you will see a huge difference. Fidelity is not losing enough customers yet to reduce the expenses on their money market funds.
 
I'm in the same dilemma, now deciding if I want to commit for 2 years at 2.65%. LOL

I could do better, I know, but would like to keep this money at a local small town bank. Decisions/decisions I don't like to make them anymore. LOL
 
ShokWaveRider said:
Why are Vanguard MM funds (7 day Yield) so much more than Fidelity ~0.25%
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That's about the difference in expense ratio.

At Fidelity, Prime Money Market has expense ratio of 0.42%, the $100K Prime Money Market Premium class with $100K initial investment requirement has an expense ratio of 0.37%, so .05% lower.

Vanguard Prime MM Admiral shares has an ER of 0.10%. So right there you have a difference of 0.27% to 0.32%.
 
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Per Fidelity, estimated rates for Monday's auction are 2.20 percent for 13 weeks and 2.36 percent for 26 weeks. The 4 week rates for Tuesday's auction will be announced Monday.
 
Purepoint just upped their savings account rate (10K min) to 2.15%
 
I see little value in locking up money for 2 years right now. I think 9 months is the sweet spot for treasuries.

If you van pick off the CD specials like NASA FCU 3.25% for 15 months, I think that makes sense.

With some CDs maturing today I invested in Riverpark ST high yield (RPHIX), which has returned north of 3% this year and 3.11% last 90 days. Duration 120 days. I like having access to the funds.
 
Montecfo said:
I see little value in locking up money for 2 years right now. I think 9 months is the sweet spot for treasuries.
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Depends what your view is, what your investment objective is, and if you subscribe to timing the (interest rate) market.

With some CDs maturing today I invested in Riverpark ST high yield (RPHIX), which has returned north of 3% this year and 3.11% last 90 days. Duration 120 days. I like having access to the funds.
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As of 9/27 Morningstar rates this fund with 1 star, indicates YTD it has returned 2.29%, and 0.29% for the past 1-month. Expenses for the fund is 0.87%. The credit quality of the holdings is quite low at BB (below investment grade). This all indicates the fund is high risk. The only factor mitigating the risk is that the holdings are short-term. Understand that this is not comparable to US short-term cash-like funds. This is a short-term corporate bond fund.

Looking on the fund's webpage at their entire list of holdings as of 8/31, the average maturity of holdings looks to be in the 2-3 year range...the top holding at almost 7% of the portfolio is a 5-year bond, and the top 10 holdings have over 15% of the fund at 4 to 5 year maturities.

http://riverparkfunds.com/short-term-high-yield-fund
 
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Montecfo said:
With some CDs maturing today I invested in Riverpark ST high yield (RPHIX), which has returned north of 3% this year and 3.11% last 90 days. Duration 120 days. I like having access to the funds.
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This thread is focused on cash or cash equivalents with no credit risk. Prime MM funds do cross that line just barely as they are not FDIC insured nor 100% govt backed like Treasuries. But they are still super low credit risk.

But a short term high yield bond fund definitely crosses that line!:LOL:

RPHIX total return has been 2.3% this year according to Morningstar. Over the past 90 days/3 months around 1%. Trailing 12-month yield and SEC yield are both around 2.5%. Average credit quality is BB a.k.a. “junk”. https://www.morningstar.com/funds/xnas/rphix/quote.html
 
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njhowie said:
Depends what your view is, what your investment objective is, and if you subscribe to timing the (interest rate) market.
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Of course. And to clarify, my objective for my cash is income balanced with safety, and I do subscribe to timing the interest rate market here with real rates at zero, a .25% rate hike in December a virtual certainty, and additional hikes expected. So I stay focused on effective duration. I am taking very little interest rate risk with this holding, but, granted, it is not zero.

As of 9/27 Morningstar rates this fund with 1 star, indicates YTD it has returned 2.29%, and 0.29% for the past 1-month.
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You have to look further than Morningstar's star rating. They are rating this compared to conventional high yield bond funds, to which it is not comparable. The 2.29% YTD return is for less than 9 months. It is over 3% annualized, as I said.

<i>Expenses for the fund is 0.87%. </i>

The expenses do not matter, since there is no truly comparable fund. It is a smaller fund and the fund's objective depends on heavily researching potential investments.

<i>The credit quality of the holdings is quite low at BB (below investment grade). This all indicates the fund is high risk. The only factor mitigating the risk is that the holdings are short-term. Understand that this is not comparable to US short-term cash-like funds. This is a short-term corporate bond fund.</i>

I understand what the fund is, yes. It is a specialized short-term bond fund with a very short effective duration.

<i>Looking on the fund's webpage at their entire list of holdings as of 8/31, the average maturity of holdings looks to be in the 2-3 year range...the top holding at almost 7% of the portfolio is a 5-year bond, and the top 10 holdings have over 15% of the fund at 4 to 5 year maturities.</i>

The effective duration is 120 days. The fund invests in securities expected to be called or subject to other corporate events which reduce the duration. If you notice, it is not volatile. The effective duration mitigates credit quality.

It is not for everyone. I am using it because i can get 2.0-3.25% return, with little rate risk, and keeping funds available. It is outperforming my cash alternatives and also outperforming my highly rated conventional short to intermediate bond funds.
 
Montecfo said:
The 2.29% YTD return is for less than 9 months. It is over 3% annualized, as I said.
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What your prior post says is:
...which has returned north of 3% this year...
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I took that to mean YTD as it did not say annualized.

In the end, again, it's what you're looking for. If you're happy with the fund's objectives and what you're getting, that's all that matters.
 
This thread is focused on cash or cash equivalents with no credit risk. Prime MM funds do cross that line just barely as they are not FDIC insured nor 100% govt backed like Treasuries. But they are still super low credit risk.

But a short term high yield bond fund definitely crosses that line!
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This is what I did with some maturing CD money. I am not trying to convince you of anything. But it is all balancing. RPHIX has credit risk, but it is mitigated by the short effective duration of about 120 days and the fund's process. A CD has "no interest rate risk" unless you need the funds, in which case it does. A CD is not similar to a MM fund for that matter. They they may or may not have a similarity of being government insured. And as I said above, RPHIX is not similar to your typical 1-3 year maturity ST bond fund, or even an Ultrashort bond fund which might have an effective duration of one year.

RPHIX total return has been 2.3% this year according to Morningstar. Over the past 90 days/3 months around 1%. Trailing 12-month yield and SEC yield are both around 2.5%. Average credit quality is BB a.k.a. “junk”. https://www.morningstar.com/funds/xnas/rphix/quote.html
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The total return YTD is over 3.07% on an annualized basis, using the figure you quote. The 1% you quoted for the last 90 days is 4% annualized. With rates increasing, the total return has been increasing.

My cash and near cash investments reflect a narrow spectrum of risk and fund availability. This investment is the riskiest near cash type investment for me. I could also view it as the safest of my short term bond funds, all of which is has outperformed.

I appreciate the discussion.
 
I think if one anticipates needing money before the duration of an investment one should NOT invest in that vehicle. We have invested in CDs for 30 years and NEVER have we had to take an early withdrawal. So IMHO arguments about Early withdrawal penalties are moot and would be a result poor planning.
 
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njhowie-

Yes, I referred to annualized rates of return in all cases for comparability.
 
ShokWaveRider said:
I think if one anticipates needing money before the duration of an investment one should NOT invest in that vehicle. We have invested in CDs for 30 years and NEVER have we had to take an early withdrawal. So IMHO arguments about Early withdrawal penalties are moot and a result poor planning.
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Early withdrawal penalties are a characteristic of a CD. That a CD has different characteristics than a MM fund was my point.
 
ShokWaveRider said:
I think if one anticipates needing money before the duration of an investment one should NOT invest in that vehicle. We have invested in CDs for 30 years and NEVER have we had to take an early withdrawal. So IMHO arguments about Early withdrawal penalties are moot and would be a result poor planning.
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+1
 
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