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Vanguard Prime Money Market slide
Old 08-06-2019, 07:50 PM   #1
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Vanguard Prime Money Market slide

I have been watching VMMXX inch down from about 2.45%, around the beginning of this year, to now around 2.22%. I suspect this is due to the fund having a challenging time finding higher paying bonds and treasuries. Frankly, I am impressed it is still as high as it is.

But, would anyone care to guess how low this slide will go, and when it might bottom out?

I know, it is probably more accurate for a slug to throw a dart, but maybe someone has a semi-intelligent answer.

Thanks.
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Old 08-06-2019, 08:38 PM   #2
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Today Goldman called for two more 0.25% cuts this year. So whatever it pays today, subtract 0.5% and that's roughly where it will be year end.
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Old 08-06-2019, 10:21 PM   #3
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VG Prime MM was 2.51% compounded back on Feb 5 - based on a quick look over my notes.

I'm not impressed with how much it's fallen.
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Old 08-07-2019, 12:54 AM   #4
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VG Prime MM was 2.51% compounded back on Feb 5 - based on a quick look over my notes.

I'm not impressed with how much it's fallen.
just think how much the 1% fund managers are paying in MM's. There is one my MIL uses (cough cough Fast Eddie) and they were about .3 or .4% under Prime MM. When VG was paying 2,5 Fast Eddie was about 2.1 or 2.2%, The FE broker was worried I was going to have MIL pull his money when I asked him what FE MM was paying. He knew I am VG & I dropped that they were paying about 2.4%. He says I can't touch that
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Old 08-07-2019, 09:45 AM   #5
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It seems to me that the slide in VMMXX yields has just parallelled the slide in CD rates over the same period.... I'm guessing that most of VMMXX's underlying investments are in short commercial paper and short CP rates have slid about 30bp or so over the last few months.
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Old 08-07-2019, 09:49 AM   #6
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I am on the look out for something that can beat VMMXX. But there is nothing really. But we only have our 5 years of expenses in there now. I like to keep the cash at hand for a rainy day.
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Vanguard Prime Money Market slide
Old 08-07-2019, 09:54 AM   #7
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Vanguard Prime Money Market slide

I had a fairly large amount earmarked for two different purposes in Vanguard Prime MMF.

A couple of weeks ago I split them by purpose and invested in VFSUX, a Vanguard short term bond fund. That holds money I expect to use in about 2 years.
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Old 08-07-2019, 02:45 PM   #8
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Yeah, I have looked at the SUX too, but there is a difference with a bond fund and a MM fund. The MM fund will not go down in value (just down in the interest it earns). If you are using this as a cash bucket (like me), going down in value is a no-no.
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Old 08-07-2019, 03:01 PM   #9
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The bond market is the ocean, and equities is the dingy getting rocked back and forth. Or so I was told.

Do you wanna be in the boat rockin...or be the waves rockin the boat? Is it time?


That yield curve...I just can't stop thinking about it.
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Old 08-07-2019, 03:46 PM   #10
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Look back at the % paid about 3 years ago before rates started to raise.
Thats where I expect it to drop or lower.
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Old 08-07-2019, 04:04 PM   #11
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Yeah, I have looked at the SUX too, but there is a difference with a bond fund and a MM fund. The MM fund will not go down in value (just down in the interest it earns). If you are using this as a cash bucket (like me), going down in value is a no-no.
You're right about the difference. However, an ultra short bond fund would be closer to a MMF, with extremely little fluctuation in value. VUBFX has fluctuated by pennies, according to the chart:

https://investor.vanguard.com/mutual...formance/vubfx

Disclaimer: I don't own VUBFX and currently use MMFs to the extent they're required to be the settlement fund.
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Old 08-07-2019, 04:34 PM   #12
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IMHO VG Prime M&M is nothing more than a place to park short term cash. Those who bought into the higher yield while waiting for the certain continued interest rate hikes will be feeling the pain. Also those who waited to buy long term CDs have missed the boat.

In other words if a few basis point reduction in a money market account materially makes a difference in your plan, maybe you need to review the plan.
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Old 08-07-2019, 05:20 PM   #13
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Originally Posted by camfused View Post
Yeah, I have looked at the SUX too, but there is a difference with a bond fund and a MM fund. The MM fund will not go down in value (just down in the interest it earns). If you are using this as a cash bucket (like me), going down in value is a no-no.

Yes, the bond fund will fluctuate. The portion that was not transferred is meant as a cash reserve and stayed in the Prime MMF.
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Old 08-07-2019, 05:27 PM   #14
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Originally Posted by gwraigty View Post
You're right about the difference. However, an ultra short bond fund would be closer to a MMF, with extremely little fluctuation in value. VUBFX has fluctuated by pennies, according to the chart:

https://investor.vanguard.com/mutual...formance/vubfx

Disclaimer: I don't own VUBFX and currently use MMFs to the extent they're required to be the settlement fund.
Ultra short bond funds look great until there is a sudden financial shock, then ouch! It's too late!
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Old 08-07-2019, 06:34 PM   #15
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I am on the look out for something that can beat VMMXX. But there is nothing really. But we only have our 5 years of expenses in there now. I like to keep the cash at hand for a rainy day.
Well it is not truly apples to apples, but Ally Bank's no penalty CD yields 2.30%.
Effectively it can be used to park cash just like an MM.
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Old 08-07-2019, 06:40 PM   #16
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I am on the look out for something that can beat VMMXX. But there is nothing really. But we only have our 5 years of expenses in there now. I like to keep the cash at hand for a rainy day.
There are a lot of fixed income instruments that will beat it, you just need to get over the need for the NAV to be $1. In fact during the yield drop of the recent months, if you had a market adjusted NAV, your total return would have been pretty nice. Anything with duration has been doing really well.
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Old 08-08-2019, 04:12 AM   #17
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Well it is not truly apples to apples, but Ally Bank's no penalty CD yields 2.30%.
Effectively it can be used to park cash just like an MM.
Ally just dropped their savings rate from 2.1 to 1.9
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Old 08-08-2019, 04:38 AM   #18
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Ally just dropped their savings rate from 2.1 to 1.9
Yes, but their no penalty CD is still 2.30%. Ally has dropped their MM rate twice in the past few months, but not their CD rate (yet).
By setting up multiple small CD's, it effectively substitutes for the 1.9% rate.
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Old 08-08-2019, 05:52 AM   #19
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Yes, but their no penalty CD is still 2.30%. Ally has dropped their MM rate twice in the past few months, but not their CD rate (yet).
By setting up multiple small CD's, it effectively substitutes for the 1.9% rate.
Glad to know their no penalty CD went back up to 2.3% for higher deposits.
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Old 08-08-2019, 06:10 AM   #20
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IMHO VG Prime M&M is nothing more than a place to park short term cash. Those who bought into the higher yield while waiting for the certain continued interest rate hikes will be feeling the pain. Also those who waited to buy long term CDs have missed the boat. ...
Not necessarily.... I've had a lot of money parked in VMMXX since June 2018... used some of it to buy a 3.5% 5-year Suncoast CU bank CD in April 2019 and the remainder is going out the door to buy another 3.5% 5-year NavyFederal CU bank CD now.... I'm happy with that.
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