Saturday, September 08, 2007

PayPal money market fund yield leaps to 5.23% as of 9/8/2007

Despite the chatter about the so-called "credit crunch" and "subprime crisis" and the potential risk of even money market funds, money market funds are still an extremely safe place to park cash.

The good news is that a number of money market fund yields are higher as their existing short-term commercial paper matures and rolls over into new commercial paper that is getting a higher yield since supposedly nobodya wants any of this commercial paper, or so the story goes.

Here are some recent money market mutual fund yields as of Saturday, September 8, 2007:

  • iMoneyNet average taxable money market fund 7-day yield rose from 4.52% to 4.71%
  • GMAC Bank Money Market account rate remains at 5.16% or APY of 5.30% (only $500 minimum for that rate)  -- Note: This is an FDIC-insured bank deposit account, not a money market fund 
  • Vanguard Prime Money Market Fund (VMMXX) 7-day yield fell from 5.11% to 5.09%
  • Vanguard Federal Money Market Fund (VMFXX) 7-day yield fell from 5.03% to 5.02%
  • AARP Money Market Fund 7-day yield rose from 5.08% to 5.11%
  • TIAA-CREF Money Market (TIRXX) 7-day yield rose from 5.04% to 5.08%
  • PayPal Money Market Fund 7-day yield leaped from 5.04% to 5.23% -- Making it the #1 top yield on the iMoneyNet Prime Retail Money Market Fund list
  • ShareBuilder money market fund (BDMXX) 7-day yield fell from 4.83% to 4.57%
  • Fidelity Money Market Fund (SPRXX) 7-day yield rose from 5.12% to 5.15% ($25,000 minimum)
  • Fidelity Cash Reserves money market fund (FDRXX) 7-day yield rose from 5.08% to 5.11%
  • Fidelity Prime Reserves money market fund (FPRXX) 7-day yield rose from 4.55% to 4.60%
  • Fidelity Municipal Money Market fund (FTEXX) 7-day yield remains at 3.56% or tax equivalent yield of 5.48% for the 35% marginal tax bracket and 4.94% for the 28% marginal tax bracket -- this is a very decent yield for "core cash" in a checking-style account
  • Fidelity Tax-Free Money Market fund (FMOXX) 7-day yield remains at 3.52% or tax equivalent yield of 5.42% for the 35% marginal tax bracket and 4.89% for the 28% marginal tax bracket
  • 4-week (1-month) T-bill investment rate fell from 4.70% to 4.37%
  • 13-week (3-month) T-bill investment rate fell from 4.73% to 4.47%
  • 26-week (6-month) T-bill investment rate fell from 4.78% to 4.55%
  • 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
  • NetBank 6-month CD APY remains at 5.40%
  • NetBank 1-year CD APY fell from 5.40% to 5.35%
  • highest 6-month CD APY remains at 5.70% (IndyMac Bank, $5,000 minimum, with Countrywide Bank #2 at 5.55%, $10,000 minimum)
  • highest 12-month CD APY remains at 5.65% (Countrywide Bank, $10,000 minimum)

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.

Update: Still no confirmation on the apparent shortfall of the PayPal dividend for July. The dividend for August is even more whacky: 5.59% annualized simple return. Even if I average the July and August dividends, I get 5.20%. Hey, I can't complain about those kind of rates, but I have no idea why the final dividend is so out of line with the 7-day yields reported every week over the past month.

Right now, Fidelity Cash Reserves (FDRXX) is my preferred parking place for the bulk of my cash. I do appreciate the higher yield I have been getting these past few weeks, which is probably due to higher yields on commercial paper. I know that I can get a better yield elsewhere, but the convenience, decent yield, and relative safety of Fidelity make this a very attracive parking place.

DISCLAIMER: 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


At 11:10 AM EDT , Anonymous Certificate of Deposit Rates said...

Money Market funds are great for cash, but just realize that if/when the FOMC lowers rates, those yields will drop quickly.

If you don't need the funds for 90Days to 180Days look to a CD.

If you don't need the funds for even longer, consider laddering or locking in some longer-term rates.

Jumbo CD Investments, Inc.


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