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The yields of all of the securities mentioned in the column, SPAXX (1.49%), SHY (1.16%), MINT (1.75%), FLOT (1.66%), FLRN (1.77%), and BSV (1.75%) are in the same ballpark as various online banks including Synchrony (1.75%) and Marcus by Goldman Sachs (1.80%).
Why squirrel cash away in any of these securities that (except for SPAXX) have fluctuating values, potential trading costs or holding periods, and the risk of losing value in a rising interest rate environment? Not to mention the absence of government guarantees.
If one is willing to give up a small amount of liquidity, there's currently a 1 month zero T-bill auction with an expected yield of 1.82%. If you're in a high tax (say, 10%) state, that's equivalent to over 2% interest.
When investing in bonds/bond funds, I draw a distinction between bond allocations and cash allocations. For cash, I want my holdings to be very stable, never lose money (over, say, any three month period), and at worst return not much less than "true" cash annually.
A few issues with the SeekingAlpha data:
it shows the price of SPAXX as $1.50, up a penny (mouse over the ticker). This is a MMF.
the column, dated 6/22, reports SPAXX's yield at 1.49%. Fidelity (6/25) shows it at 1.39%. MMF yields don't typically fluctuate 10 basis points daily.
the bar graph titled "Annual Returns of Portfolio Assets", above the label 2018 is showing not annual (or annualized) returns for 2018 but YTD figures.
I am sure T is safe, but I recently saw in one of my Fido accounts a deposit of $87 or something, which it turned out upon examination was the final payout of a Lehman $10k bond I had bought maybe 15y (?) ago for my wife --- for safety to balance her riskier equity holdings. Have looked at bonds differently ever since 9/08.
I've found an AT&T (T) make whole note, coupon 6.5%, maturing 3/15/29, with an asking YTW of 4.991%. (Other maturity bonds are also available; longer ones with higher yields and shorter ones with lower yields.) CUSIP 001957AW9.
The purchase made the company the most indebted in the U.S., excluding financial companies. AT&T’s debt load will force it to refinance large amounts of debt every year, "making the company beholden to the health of the capital markets," Moody’s said as it lowered the company’s unsecured debt rating one level to Baa2, two levels above speculative grade.
IMHO it's reasonable to hold a ten year corporate bond like this as part of one's diversified bond portfolio. Good cash flow (especially since it's a premium bond). So it does what a bond is supposed to do. Whether it's a good vehicle in which to hold cash is less clear. I suppose that depends on what one's requirements are for cash.
By the way, Prestige CU in Dallas has a 3% Checking Account IFF... ...Direct Deposit >$400 per month ...15 transactions per month
You can collect 3% on balances upto $15,000. I did this once with another bank that merged away couple of years back. Was getting 2.0%. Seemed too much of a pain. But, if you have the time...
PenFed CU 7-year CD at 3.1%. I've gone 10 years before on a zero-coupon bond, but 3.1% seems like shooting yourself in the foot--- locking in a low rate of return for THAT l-o-n-g. https://www.penfed.org/accounts/certificates-overview
GILDX has a slightly better yield and better 1-year record. VMMXX is less volatile and better YTD. I opt for the yield and slightly greater standard deviation. Just my preference. IMHO, VMMXX is pretty close in performance to MINT, which I own already.
Hi crash... I gave Penfed... Very reason ble credit card and good ratecar/mortgage loans to borrow from fwiw
I received a maturity notice from PenFed yesterday. They emphasized their new early withdrawal penalty:
The penalty in the first year is all the dividends owed. Thereafter, the penalty will equal 30% of what would have been earned if the Certificate had reached maturity, not to exceed total dividends earned."
If I understand this right, the penalty for a 5 yr certificate if I withdraw at the end of year 1, 2, 3, or 4 is 100.00%, 78.47%, 51.53%, or 38.07% of the interest earned thus far.
I’m using the following options for cash. - Money market funds yielding 1.25-1.5% - CD ladder with individual issues maturing about every three months and overall yield about 2% - Stable value fund in 401k currently yielding about 2%
Comments
SPEXX
PIMCO Enhanced Short Maturity Active ETF (MINT)
iShares Floating Rate Bond ETF (FLOT)
SPDR Barclays Capital Investment Grade Floating Rate ETF (FLRN)
Vanguard Short-Term Bond ETF (BSV)
Why squirrel cash away in any of these securities that (except for SPAXX) have fluctuating values, potential trading costs or holding periods, and the risk of losing value in a rising interest rate environment? Not to mention the absence of government guarantees.
If one is willing to give up a small amount of liquidity, there's currently a 1 month zero T-bill auction with an expected yield of 1.82%. If you're in a high tax (say, 10%) state, that's equivalent to over 2% interest.
When investing in bonds/bond funds, I draw a distinction between bond allocations and cash allocations. For cash, I want my holdings to be very stable, never lose money (over, say, any three month period), and at worst return not much less than "true" cash annually.
A few issues with the SeekingAlpha data:
http://bonds1.net/rates/corp-bond/t-att-inc-corporate-bond-yields-rates-new-issues-quotes-news/
Just hold until matures... No fees.. Minimal worries. #1 wireless company in world...
On the page you cited is a link to a Bloomberg article from ten days ago:
AT&T Cut by Moody's as Time Warner Deal Adds Billions of Debt IMHO it's reasonable to hold a ten year corporate bond like this as part of one's diversified bond portfolio. Good cash flow (especially since it's a premium bond). So it does what a bond is supposed to do. Whether it's a good vehicle in which to hold cash is less clear. I suppose that depends on what one's requirements are for cash.
By the way, Prestige CU in Dallas has a 3% Checking Account IFF...
...Direct Deposit >$400 per month
...15 transactions per month
You can collect 3% on balances upto $15,000. I did this once with another bank that merged away couple of years back. Was getting 2.0%. Seemed too much of a pain. But, if you have the time...
http://prestigecu.org
https://www.penfed.org/accounts/certificates-overview
If I understand this right, the penalty for a 5 yr certificate if I withdraw at the end of year 1, 2, 3, or 4 is 100.00%, 78.47%, 51.53%, or 38.07% of the interest earned thus far.
- Money market funds yielding 1.25-1.5%
- CD ladder with individual issues maturing about every three months and overall yield about 2%
- Stable value fund in 401k currently yielding about 2%
SEMPX, SPFPX & IOFIX combo to add yield (along with risk) so as to keep up with inflation.