Fidelity Says Get More Yield on Cash
Fidelity Investments published, "Get More Yield on Your Cash," subtitled, "CDs and short-duration bonds may offer higher yields but more risk than savings accounts." The article explains, "In early February, average rates on savings accounts nationally were around 0.11%. That's not nothing, but it sure is close. The bad news for savers is that there isn't a lot of yield to be found, at least not from investments that are safe enough to be considered as a home for your cash. But even if you can't earn a lot on your cash, that doesn't mean you can't do significantly better. "There are a range of income options that can offer a meaningful increase in income; you could potentially increase the yield on your savings by a significant amount," says Richard Carter, a vice president of fixed-income products and services at Fidelity. "The key is to understand what you need the money for, and then find an option that makes sense for your situation."" The piece reviews high-yield savings accounts, CDs, money markets, and short-duration bond funds. On money market funds, it says, "The good news: Money market funds offer easy access to your investment and very little risk. Held in your brokerage account, they come with check-writing and ATM card access similar to a savings account, and making these investments a good option for funds you may need in a hurry. And, if interest rates rise, those higher rates will pass through to money market funds quickly. Some prime and government money market funds have seen yields tick up with the Fed's year-end move, with yields on some prime funds at 0.20%-0.30%, and the average prime fund offering about 0.12%. The bad news: The yields offered by the types of securities in which money market funds invest have been stubbornly low in recent years.... So you may find security and easy access to your funds, but you won’t find much yield unless the interest-rate environment continues to change. You should also note some regulatory changes taking place for prime and municipal money market funds. In a time of market stress, these non-government types of funds could be subject to a fee or temporary halt on withdrawals. So they may no longer be as liquid as U.S. Treasury or government money market funds." In other news, "The Federal Reserve released the Minutes from its January 26-27 FOMC meeting. On the Reverse Repo Program they said, "The Committee then resumed its consideration of matters related to the System's reverse repurchase agreement (RRP) facilities, focusing in particular on the appropriate aggregate capacity of the ON RRP facility going forward.... [P]articipants reiterated that the Committee expects to phase out the facility when it is no longer needed to help control the federal funds rate, and they unanimously expressed the view that it would be appropriate to reintroduce an aggregate cap on ON RRP operations at some point."
