Vanguard Prime Money Market slide

[camfused]

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.

 

[njhowie]

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.

 

[GenXguy]

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.

 

[Scrapr]

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

 

[pb4uski]

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.

 

[ShokWaveRider]

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.

 

[steelyman]

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.

 

[camfused]

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.

 

[kgtest]

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.

 

[Spock]

Look back at the % paid about 3 years ago before rates started to raise.
Thats where I expect it to drop or lower.

 

[gwraigty]

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-funds/profile/performance/vubfx

Disclaimer: I don't own VUBFX and currently use MMFs to the extent they're required to be the settlement fund.

 

[foxfirev5]

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.

 

[steelyman]

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.

 

[audreyh1]

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-funds/profile/performance/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!

 

[Dtail]

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.

 

[COcheesehead]

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.

 

[bmcgonig]

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

 

[Dtail]

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.

 

[audreyh1]

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.

 

[pb4uski]

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.

 

[kgtest]

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.

Nice work. Can you let me know when I want to rotate out of equities

Seriously. I am getting reallly trigger happy here. Overvalued, trade war, Hong Kong, India, Brexit, yield curve inversion and the FOMC monetary policy...

and basically every single person I speak to that knows a lick about finance and econ 101 says they are suggesting a rotation out....

I am up over 25% on average the past 7 years... I know, I know dirty market timing. My only 2 sort of questions are, what if the trade war DOES stabilize, annd what about the upcoming elections, and of course where are the economies headwinds THEN. I know the markets don't like uncertainty as witnissed in the VIX...and I do feel like the boat's about to start rocking...


when, how far it rocks...wish I had that crystal ball!!

EDIT TO ADD SORR is like 13 to 15 years away really, with my FIRE date out so far...but hey, if it smells like a yield curve inversion, and it looks like a yield curve inversion...then it IS a yield curve inversion and everytime they say this one will be different, it isn't and equities tank... RIGHT?

 

[COcheesehead]

Nice work. Can you let me know when I want to rotate out of equities

Seriously. I am getting reallly trigger happy here. Overvalued, trade war, Hong Kong, India, Brexit, yield curve inversion and the FOMC monetary policy...

and basically every single person I speak to that knows a lick about finance and econ 101 says they are suggesting a rotation out....

I am up over 25% on average the past 7 years... I know, I know dirty market timing. My only 2 sort of questions are, what if the trade war DOES stabilize, annd what about the upcoming elections, and of course where are the economies headwinds THEN. I know the markets don't like uncertainty as witnissed in the VIX...and I do feel like the boat's about to start rocking...


when, how far it rocks...wish I had that crystal ball!!

EDIT TO ADD SORR is like 13 to 15 years away really, with my FIRE date out so far...but hey, if it smells like a yield curve inversion, and it looks like a yield curve inversion...then it IS a yield curve inversion and everytime they say this one will be different, it isn't and equities tank... RIGHT?

Posts like this are evidence of "hot" money in the market. If we get a significant downturn, "hot" money blows out causing an even further drop...and that's when you buy. Fear is a powerful thing.

And the VIX isn't high. When its gets near 25 definitely over 30, then its high and its time to buy.

 

[pb4uski]

Nice work. Can you let me know when I want to rotate out of equities ....

See the last tag line in my signature.

 

[kgtest]

Posts like this are evidence of "hot" money in the market. If we get a significant downturn, "hot" money blows out causing an even further drop...and that's when you buy. Fear is a powerful thing.

And the VIX isn't high. When its gets near 25 definitely over 30, then its high and its time to buy.

I buy every week. But I swear in the 5 days between the DCA the market returns to highs. Proof I have no luck at all and really shouldnt market time lol