Saturday, October 28, 2006

PayPal money market fund yield rises to 5.03%

Here are some recent money market mutual fund yields:

  • iMoneyNet average taxable money market fund 7-day yield remains at 4.72%
  • PayPal money market fund 7-day yield rose from 5.02 to 5.03%
  • ShareBuilder money market fund (BDMXX) 7-day yield fell from 4.45% to 4.44%
  • Fidelity Money Market Fund (SPRXX) 7-day yield remains at 5.01% ($25,000 minimum, or $50,000 minimum to waive the $2 checkwriting fee)
  • Fidelity Cash Reserves money market fund (FDRXX) 7-day yield fell from 4.97 to 4.96%
  • Fidelity Prime Reserves money market fund (FPRXX) 7-day yield remains at 4.45%
  • Fidelity Municipal Money Market fund (FTEXX) 7-day yield rose from 3.18% to 3.23% or tax equivalent yield of 4.97% (up from 4.89%) for the 35% marginal tax bracket and 4.49% (up from 4.42%) for the 28% marginal tax bracket
  • Fidelity Tax-Free Money Market fund (FMOXX) 7-day yield rose from 3.12% to 3.17% or tax equivalent yield of 4.88% (up from 4.80%) for the 35% marginal tax bracket and 4.40% (up from 4.33%) for the 28% marginal tax bracket
  • 28-day (1-month) T-bill investment rate rose from 5.04% to 5.15%
  • 91-day (3-month) T-bill investment rate fell from 5.07% to 5.12%
  • 182-day (6-month) T-bill investment rate rose from 5.13% to 5.17%
  • Charles Schwab 3-month CD APY remains at 5.19%
  • Charles Schwab 6-month CD APY remains at 5.21%
  • Charles Schwab 1-year CD APY fell from 5.15% to 5.05%

T-bill yields are continuing to rise, suggesting that much of the mass exodus from commodities is over and that people are starting to redeploy their "cash" out of T-bills.

PayPal continues to be a fairly interesting place to store cash for both relatively quick access and a well above average yield. There is no minimum for a PayPal account, no fee for a basic account, and it can be linked to your bank checking account for easy access. Right now I am using PayPal as a savings account, putting a little more money in whenever I get a chance and feel that my budget has some "spare change."

28-day T-bills once again are a rather attractive for cash that you won't need for a month, since new issues are now yielding more than PayPal and Fidelity Cash Reserves. But, these rate fluctuate significantly from week to week.

Please note the disclaimer on Fidelity's web site:

Past performance is no guarantee of future results. Yield will vary.

As always, please note that cash placed in money market mutual funds is subject to the disclaimer that:

An investment in the Fund is not insured or guaranteed by the Federal Insurance Deposit Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.

In practice, that is not a problem at all, but it does incline me to spread my money around a bit.

T-bills and the cash in your bank checking and savings accounts or bank CDs are of course "protected", either by "the full faith and credit of the U.S. Treasury" or the FDIC. Please realize that you may not get your full principle back if you attempt to cash out early for Treasury securities since you'll get the price on the open market, which is not guaranteed by the U.S. Treasury. You are only assured of getting your full principle if your Treasury security is held until maturity.

-- Jack Krupansky


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