PayPal money market fund yield remains at 5.03% as of 8/4/2007

[Gentle reminder: I may suspend this weekly post in the near future, but I haven't decided for sure yet.]

Here are some recent money market mutual fund yields as of Saturday, August 4, 2007:

• iMoneyNet average taxable money market fund 7-day yield rose from 4.72% to 4.74%
• GMAC Bank Money Market account rate remains at 5.16% or APY of 5.30% (only $500 minimum)  -- Note: This is an FDIC-insured bank account
• Vanguard Prime Money Market Fund (VMMXX) 7-day yield fell from 5.13% to 5.12%
• Vanguard Federal Money Market Fund (VMFXX) 7-day yield remains at 5.08%
• AARP Money Market Fund 7-day yield rose from 5.07% to 5.08%
• TIAA-CREF Money Market (TIRXX) 7-day yield rose from 5.03% to 5.09%
• PayPal Money Market Fund 7-day yield remains at 5.03% (but actual yield for July was only 4.78%!)
• ShareBuilder money market fund (BDMXX) 7-day yield remains at 4.47%
• Fidelity Money Market Fund (SPRXX) 7-day yield rose from 5.01% to 5.02% ($25,000 minimum)
• Fidelity Cash Reserves money market fund (FDRXX) 7-day yield rose from 4.98% to 4.99%
• Fidelity Prime Reserves money market fund (FPRXX) 7-day yield rose from 4.46% to 4.47%
• Fidelity Municipal Money Market fund (FTEXX) 7-day yield fell from 3.28% to 3.25% or tax equivalent yield of 5.00% (down from 5.05%) for the 35% marginal tax bracket and 4.51% (down from 4.56%) for the 28% marginal tax bracket -- this may be the best rate that most of us can get for "core cash" in a checking-style account
• Fidelity Tax-Free Money Market fund (FMOXX) 7-day yield fell from 3.23% to 3.22% or tax equivalent yield of 4.94% (down from 4.97%) for the 35% marginal tax bracket and 4.46% (down from 4.49%) for the 28% marginal tax bracket
• 4-week (1-month) T-bill investment rate rose from 5.04% to 5.16%
• 13-week (3-month) T-bill investment rate fell from 5.03% to 4.97%
• 26-week (6-month) T-bill investment rate fell from 5.10% to 5.00%
• Treasury I Bond composite earnings rate (semiannual compounded annually) for new I Bonds is 3.74% (down from 4.52%), with a fixed rate of 1.30% (down from 1.40%) and a semiannual inflation rate of 1.21% (down from 1.55%) -- updated May 1, 2007, next semiannual update on November 1, 2007
• (I'm no longer following Schwab since they changed their web site and it is now too confusing to get rates that can be compared to a simple 7-day yield or APY)
• NetBank 6-month CD APY fell from 5.35% to 5.25%
• NetBank 1-year CD APY fell from 5.35% to 5.25%
• Bankrate.com highest 6-month CD APY remains at 5.51%.

Note: APY yield is worth somewhat less than the same 7-day yield. See my discussion and table for Comparing 7-day yield and APY.

I have no idea what is going on with PayPal. I wish I had the time to track down the discrepency in yield. I usually am unable to detect any discrepencies because I frequently add cash to the account, making it very difficult to calculate precisely what rate is being earned on the partial balances.

Update: 4-week T-bills are once again looking like an attractive place to park cash that you won't need for a month, but this rate fluctuates significantly from week to week. The rate is locked in for four weeks once you buy the T-bill at the weekly auction, but you can't predict what rate you will get at the next auction since it is based on supply and demand. Simply letting the T-bills automatically roll every four weeks will average out a lot of this volatility. Frankly, the extreme volatility with frequent low yields has turned me off to T-bills in favor of PayPal and Fidelity Cash Reserves, but we'll see how yields evolve over the coming months. I believe that the higher yield lately is due to turmoil in the bond market, with people dumping 4-week T-bills and shifting into 13-week and 26-week T-bills, possibly on the theory that they believe a Fed rate cut is coming soon and they want to lock in a rate. In any case, my 4-week T-bills rolled this past week, so I'm thrilled to be getting a great rate after getting a mediocre rate for the past couple of months.

I am not an investment adviser, so my opinions and the data presented here should not be considered as advice for where to invest your money. You should examine this and other available data before deciding how to invest your money. And, seriously, past returns should not be construed as a guarantee or even an "indication" of future returns.

-- Jack Krupansky