Fed nudges savings rates higher

Cash getting a little less trashy

Jun 23, 2017 @ 3:40 pm

By John Waggoner

Cash is starting to get a bit less trashy.

The Federal Reserve nudged short-term interest rates on June 14, and rates on short-term savings vehicles have started to reach levels that are almost compelling.

The Fed raised its target level for fed funds to 1% to 1.25%, a 0.25% increase. Not surprisingly, the prime rate jumped almost immediately to 4.25% from 4%.

Some banks are now offering CDs with yields as high as 2.35%, according to Bankrate.com. Synchrony Bank, for example, now offers a five-year CD yielding 2.35% with a minimum of $25,000. Early withdrawals can result in up to 12 months' interest on the amount withdrawn.

Other banks hitting the 2.35% mark include Ally Bank and Goldman Sachs Bank.

While no one is going to get rich on 2.35%, it's more than inflation, currently 1.9%, and more than investors would earn on a 10-year Treasury note. (To be fair, T-note interest is exempt from state income taxes). Those rates are also higher than the dividend yield on the Standard & Poor's 500 stock index.

Other savings rates have risen as well. Average money market fund yields rose to 0.57% on June 20 from 0.47%, according to iMoneyNet. That's not much. But several large institutional money funds, such as Dreyfus Cash Management Institutional (DICXX) and Western Asset Institutional Cash Reserves (CARXX), now yield 1.12%. The top-yielding institutional money market fund, Morgan Stanley Institutional (MPUXX), yields 1.13%, according to Money Fund Intelligence.

Bank money market accounts remain competitive with money market funds. Goldman Sachs offers a money market account yielding 1.2%, and BankDirect offers one yielding 1.16%.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Featured video

INTV

When can advisers expect an SEC fiduciary rule proposal and other regs this year?

Managing editor Christina Nelson and senior reporter Mark Schoeff Jr. discuss regulations of consequence to financial advisers in 2018, and their likely timing.

Recommended Video

Path to growth

Latest news & opinion

Cutting through the red tape of adviser regulation is tricky

Don't expect a simple rollback of rules under the Trump administration in 2018 — instead, regulators are on pace to bolster financial adviser oversight.

State measures to prevent elder financial abuse gaining steam

A growing number of states are looking to pass rules preventing exploitation of seniors.

Morgan Stanley reports a loss of advisers after exiting the protocol for broker recruiting

The firm said it lost 47 brokers in the fourth quarter, the most in any quarter of 2017.

Morgan Stanley's wealth management fees climb to all-time high

Improvement reflect firm's shift of more clients into fee-based accounts priced on asset levels, which boosts results as markets rise.

Legislation would make it harder for investors to sue mutual funds over high fees

A plaintiff would have to state in their initial complaint why fiduciary duty was breached, and then prove the violation with 'clear and convincing evidence.'

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print