Barron's: Say Goodbye to 2% Rates
Barron's writes "Say Goodbye to Those 2% Rates on Savings." The article tells us, "Savers and investors can be forgiven if they are suffering from an extreme case of whiplash. Not long ago, they were counting on higher interest rates after years of near-zero returns on cash. Seemingly overnight, the conventional wisdom reversed. Markets are now betting that interest rates are about to fall for the first time since December 2008.... If the markets are right, rates could fall by three-quarters of a point over the next year, taking federal funds to a range of 1.5% to 1.75% from their current 2.25% to 2.5%. That would have wide-ranging consequences for stocks, bonds, and savings vehicles like money market funds." The piece adds, "Money-market funds holding short-term commercial paper and government securities would quickly yield less if the Fed cuts rates. Yields would also fall for checking and savings accounts. Retail money-market funds yield an average of 2%, according to Crane Data. Online savings accounts tend to pay a bit more. Salem Five Direct recently advertised a 2.51% yield.... BBVA Compass accounts yield 2.4%.... Those yields might edge back down to 1% in a falling-rate climate."
