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Old 03-22-2020, 07:00 AM   #1
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Safe Harbor for cash

Just had a sizable CD mature and roll over into my FIDO MM (FDRXX) sweep account. Any suggestions ? Although my 50/50 AA looks more like 40/60 I'm not quite ready to dive back into equities until the covid-19 event shakes out. Don't need the money for living expenses and not really comfortable leaving it in the sweep account for the short term. Appreciate any and all advice in advance.
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Old 03-22-2020, 07:07 AM   #2
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Treasury only money market fund, go find a CD special at a bank or CU, folding money?
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Old 03-22-2020, 07:12 AM   #3
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Quote:
Originally Posted by frayne View Post
Just had a sizable CD mature and roll over into my FIDO MM sweep account. Any suggestions ? Although my 50/50 AA looks more like 40/60 I'm not quite ready to dive back into equities until the covid-19 event shakes out. Don't need the money for living expenses and not really comfortable leaving it in the sweep account for the short term. Appreciate any and all advice in advance.
For Fidelity - FUAMX. Intermediate Treasuries. No fee. About the only instrument up YTD besides a CD.

IMHO - I think states will have a hard time covering CDs or that early cash out will be a big haircut if there is a wave of bankruptcies or liquidity lockup.
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Old 03-22-2020, 07:15 AM   #4
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Originally Posted by frayne View Post
Just had a sizable CD mature and roll over into my FIDO MM sweep account. Any suggestions ? Although my 50/50 AA looks more like 40/60 I'm not quite ready to dive back into equities until the covid-19 event shakes out. Don't need the money for living expenses and not really comfortable leaving it in the sweep account for the short term. Appreciate any and all advice in advance.
I use Ally Bank no penalty CDs for holding short term cash. Transfers to and from brokerage are easy and quick once you have a link set up.
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Old 03-22-2020, 07:15 AM   #5
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From a 10,000 foot level, if the safety of this money is paramount then I see two options.

#1) US Treasury securities if liquidity is needed

#2) CD (bank or brokered) if liquidity is not needed.

Everything else is an implementation detail and left as an exercise for others.

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Old 03-22-2020, 07:18 AM   #6
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For Fidelity - FUAMX. Intermediate Treasuries. No fee. About the only instrument up YTD besides a CD.

IMHO - I think states will have a hard time covering CDs or that early cash out will be a big haircut if there is a wave of bankruptcies or liquidity lockup.
FUAMX is a bond fund, not a MM/cash fund.

States are not responsible for covering CDs. FDIC is Federal. Just respect the limits per institution.
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Old 03-22-2020, 07:23 AM   #7
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Old 03-22-2020, 07:37 AM   #8
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Agree with Brewer. Treasuries-only MM fund or CD's/high yield savings with a reputable bank. Any Treasury MM fund that is not Treasuries-only is trying to goose the yield with repo agreements and the like. Musical chairs in this environment. I like VUSXX.
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Old 03-22-2020, 07:42 AM   #9
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FUAMX is a bond fund, not a MM/cash fund.

States are not responsible for covering CDs. FDIC is Federal. Just respect the limits per institution.
Related to Brewer's comment about Treasury only MM, do you feel that the Fidelity MM FZDXX is not totally safe and can break the buck?
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Old 03-22-2020, 08:10 AM   #10
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Related to Brewer's comment about Treasury only MM, do you feel that the Fidelity MM FZDXX is not totally safe and can break the buck?
I'll add the same question about FIDO's MM, FDRXX safety ?
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Old 03-22-2020, 09:20 AM   #11
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Related to Brewer's comment about Treasury only MM, do you feel that the Fidelity MM FZDXX is not totally safe and can break the buck?
That is a prime money market fund, so it doesnít have as many protections as a govt MM fund, and is subject to more restrictions during times of stress.

As to breaking the buck- they have done major reform on retail MM funds and it does actually float at the 4th decimal place. I canít speak to risks - above my paygrade.
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Old 03-22-2020, 09:22 AM   #12
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I'll add the same question about FIDO's MM, FDRXX safety ?
This one is govt cash reserves - govt only short term funds. So safer than FZDXX and has less trading restrictions in times of stress. But beyond that I can’t say because it’s above my pay grade.
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Old 03-22-2020, 09:36 AM   #13
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Why not cut out the middle man and just buy govvies direct? Bills, notes, and bonds are easy to buy through most brokerages and, bought on the auction, fees are negligible.

Agencies are probably also easy but I have never done anything with them and don't know how frequently auctions are held. I think they typically yield a few extra bps; your favorite bond desk can educate you.
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Old 03-22-2020, 09:40 AM   #14
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FDIC insured yield savings accounts are still yielding way more than treasury bills at the moment, and are very liquid. You still have to deal with waiting for bills/notes to mature before accessing those funds, or deal with selling on the secondary market.
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Old 03-22-2020, 09:42 AM   #15
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States are not responsible for covering CDs. FDIC is Federal. Just respect the limits per institution.
You are correct - thank you.
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Old 03-22-2020, 09:47 AM   #16
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Why not cut out the middle man and just buy govvies direct? Bills, notes, and bonds are easy to buy through most brokerages and, bought on the auction, fees are negligible.

Agencies are probably also easy but I have never done anything with them and don't know how frequently auctions are held. I think they typically yield a few extra bps; your favorite bond desk can educate you.
I have bought bills and bonds in the weekly treasury auctions before, but at the moment I just want a temporary holding pen for dollars before they are deployed elsewhere. A money market makes this convenient. Since it isn't likely I will earn more than a nominal yield either way, I will go for ease of use.
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Old 03-22-2020, 09:50 AM   #17
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FDIC insured yield savings accounts are still yielding way more than treasury bills at the moment, and are very liquid. You still have to deal with waiting for bills/notes to mature before accessing those funds, or deal with selling on the secondary market.
Agreed. I went the old fashion route of just opening up new savings accounts online with (5) different banks and will stay under joint account FDIC limits. I'll leave some in VUSXX as well.

This is a very safe and very liquid scenario for me to wait this out. I am not worried about a return right now, just want to keep my powder dry and have (5) years of cash I can live off of.
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Old 03-22-2020, 10:28 AM   #18
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FDIC insured yield savings accounts are still yielding way more than treasury bills at the moment, and are very liquid. You still have to deal with waiting for bills/notes to mature before accessing those funds, or deal with selling on the secondary market.
I don't think there is any security more liquid than a govvie. Selling is as easy as entering the order and you will take a much smaller haircut than when selling a CD.

But the answer is to plan cash flows so you don't have to sell and to keep a little cash if necessary as insurance against selling.
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Old 03-22-2020, 10:49 AM   #19
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That is a prime money market fund, so it doesnít have as many protections as a govt MM fund, and is subject to more restrictions during times of stress.

As to breaking the buck- they have done major reform on retail MM funds and it does actually float at the 4th decimal place. I canít speak to risks - above my paygrade.
Thanks.
It looks like the MM Treasury fund at Fidelity which would qualify is FDLXX, but not sure of the current yield, as they only post the 7 day yield from 02/29 which is now way outdated.
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Old 03-22-2020, 11:34 AM   #20
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I use SPAXX treasury MM by fidelity
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