Wow. This seems unusual...


Moderator Emeritus
Oct 12, 2005
North Oregon Coast
I have a couple of brokerage accounts with USAA. One is an asset management account (AMA) which I currently only use as a high-interest checking account with about half of our emergency fund in it (my primary brokerage accounts are with Schwab). I also have a small Roth IRA there.

In the Roth IRA I have the cash swept into the regular USAA money market fund. The AMA is swept to an FDIC-insured money market fund.

I just recorded the interest for February into Quicken. The yield for the ordinary MMF came to an average of 3.106%. The yield on the FDIC-insured money market fund was...get this... 3.550%.

The insured fund paid out 0.45% higher last month! That seems particularly odd these days, given the huge premiums people are paying for security and preservation of capital.
Just wait til next month - my guess is it will drop faster than [-]Paris Hilton's panties[/-] a falling brick.
Oh, I have no doubt that yields will keep plummeting (thanks, Ben).

But it still seems odd in any event that an FDIC-insured money market fund would yield almost a half point MORE than the uninsured option from the same company.

The "flight to safety" in terms of insured deposits and Treasuries began long before February.
Just noticed that the average FDIC insured money market yield for March was still higher than the uninsured MMF -- 3.08% overall for the insured MMF compared to 2.93% for the uninsured version.

I'm not sure how this is possible, especially in this hyper-cautious environment.
Simple explanations:

1) the uninsured MMF probably has a fair chunk of t bills in it. Yields on T bills have hit the floor and were under 1% not long ago.

2) FDIC insured MMFs are subject to competition among banks for deposits. With all the stress in the funding markets, it has been more attractive to pay up for deposits and be sure you have the funding, especially since you can just whack MM rates later when things calm down.
Good point about the T-bills. An insured MMF probably doesn't need to buy them -- that would be like buying munis in an IRA. I'll bet that's a big chunk of it right there.
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