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FYI: (Click On Article Title At Top Of Google Search) Investors tired of earning next to nothing on their savings are finally getting some relief.
Even as short-term Treasury rates stay excruciatingly low, interest earned on many kinds of short-term securities has been rising in recent months. Yields on ultrashort bond funds, which buy debt maturing in less than a year, have increased about 30% in the past 12 months. The average yield in the category is 0.5%, according to Morningstar, but many of them are yielding more than 1%. Regards, Ted https://www.google.com/#q=Ultrashort+Bond+Funds:+Better+Yields,+Lower+Risk+Barron's
IMHO they're getting closer, but still not worth the risk as a cash substitute. The heuristic I'm using is to take the SEC yield, subtract 1/2 * duration (assuming a 1/2% rate increase over the period of a year), and compare it with a 1% bank account.
If the fund has other risk factors, I ding it qualitatively (i.e. seat of the pants): - junk bonds (credit risk), - adjustable rate/mortgage bonds (these somewhat artificially lower the duration, or if you prefer have higher interest risk than is represented in their duration) - other "esoterics" (notably PSHDX, though if you want to assume risk on your cash, this has definitely done well so far)
FWIW, the lead fund mentioned in the story, MAFRX, is available NTF at TDAmeritrade.
Comments
http://news.morningstar.com/fund-category-returns/ultrashort-bond/$FOCA$UB.aspx
IMHO they're getting closer, but still not worth the risk as a cash substitute. The heuristic I'm using is to take the SEC yield, subtract 1/2 * duration (assuming a 1/2% rate increase over the period of a year), and compare it with a 1% bank account.
If the fund has other risk factors, I ding it qualitatively (i.e. seat of the pants):
- junk bonds (credit risk),
- adjustable rate/mortgage bonds (these somewhat artificially lower the duration, or if you prefer have higher interest risk than is represented in their duration)
- other "esoterics" (notably PSHDX, though if you want to assume risk on your cash, this has definitely done well so far)
FWIW, the lead fund mentioned in the story, MAFRX, is available NTF at TDAmeritrade.