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Lewis Braham: New Ways To Generate Income From Cash
FYI: There was a time when earning 1% from a short-term bond was acceptable. Five years ago, the average one-year Treasury bill yielded less than 0.2% and many money-market funds paid essentially nothing. Ultrashort-term bond funds, which took on a little more risk, but paid a bit more, were one of the few viable options for conservative investors seeking income from their cash. Regards, Ted https://www.barrons.com/articles/higher-rates-produce-more-short-term-bond-alternatives-51554512253?mod=past_editions
Relative to the funds in the article (and the additional funds mentioned here), RPHYX doesn't look so impressive these days. It has an SEC yield of 2.10%. Clearly it's having difficulty meeting its objective of beating the 1 year Treasury (currently 2.4%, as noted by Lewis) by 200 - 400 bps.
Instead of keeping day-to-day money in a low/no interest checking account, one can keep money in Fidelity's SPRXX (2.25% SEC yield) or FZDXX (2.37% SEC yield) and write checks/pay bills directly from that fund. (Fidelity automatically sells the MMF if you have no cash in your core/transaction account.) Every penny helps.
Comments
Currently, Treasuries are essentially flat from 1mo to 7 years. With that sort of curve (actually dipping in the middle), it makes little sense to me to try to eek out yield by going longer than ultrashort. Also, buying a one year CD or Treasury could serve as a hedge against rates dropping in the short term.
https://www.treasury.gov/resource-center/data-chart-center/interest-rates/pages/textview.aspx?data=yield
Instead of keeping day-to-day money in a low/no interest checking account, one can keep money in Fidelity's SPRXX (2.25% SEC yield) or FZDXX (2.37% SEC yield) and write checks/pay bills directly from that fund. (Fidelity automatically sells the MMF if you have no cash in your core/transaction account.) Every penny helps.