NY Times on 2 Percent Yields
An article in Sunday's New York Times, entitled "Income Investors Finally Have a Chance to Cash In," tells us, "Multiple Federal Reserve rate increases are finally making it possible to earn a decent yield. For the first time since the financial crisis, playing it safe is paying off for income investors. After a decade when conservative money market funds and similar short-term investments yielded close to zero, it is now possible to earn about 2 percent and even a bit more. Vanguard Prime Money Market fund yields more than 2 percent. A six-month Treasury bill yields 2.4 percent, up from 0.6 percent at the beginning of 2017. Ally Bank pays a 3 percent annual yield on a five-year certificate of deposit, with an early withdrawal fee equal to five months of interest." The piece continues, "Money invested in savings and C.D. bank accounts is guaranteed to hold its value. Money market mutual funds lack an outright guarantee but are designed to deliver the same steady ride. In both instances, you've got no downside risk and your upside is the interest you earn." It quotes, Kathy Jones, chief fixed-income strategist at the Schwab Center for Financial Research, "When I go out and talk to clients, all of a sudden everybody is sitting in T Bills or cash equivalents." The Times adds, "And if you have money parked in a brokerage sweep account, you might want to reconsider how much is sitting there. According to Crane Data, such accounts yield just 0.22 percent, on average, as firms are moving the accounts from higher-yielding money market mutual funds -- with an average yield of 1.8 percent -- into bank accounts that pay a lot less to investors but generate nice fees for the brokerages." In related news, Barron's wrote this weekend, "What This Mess Means for Your Money," and discussed, "What to do with your cash." They tell us, "One upside to rising rates is that money-market funds and other cash proxies pay a bit more -- although not enough to generate a 'real' inflation-adjusted return. Taxable money-market funds aimed at individuals yield an average 1.53%, up from 0.75% a year ago, according to Crane Data. Vanguard Prime Money Market (VMMXX) yields 2.2%. Mysavingsdirect, an online bank, offers a 2.25% annual percentage yield on savings of up to $2 million in deposits. Accounts held at American Express National Bank, Ally Bank, and Barclays Online Savings yield 1.9%."
