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Money Market Rates - interesting again?

I track FZDXX and it's 7 day yield just popped to 1.18% at Fido. Money Market rates are finally bumping up after last week's 75 bp hike.

With continued Fed hikes, should we expect to see 2% MMKT rates this summer?

And then could we expect to see close to 3% in 3Q 2022 after the Sept 21-22 Fed meeting....or are such expectations too high?


  • I own FNSXX in my Wellstrade acct. Current 7 day yield- 1.34%. As noted by others it still will not even begin to cover the current inflation fiasco.
  • edited June 2022
    @JD, I'd forgotten FZDXX existed until you posted about it earlier. I have a pretty good pile of it now and really like those upticks in yield.

    Also plan to add more short duration Treasuries (through Treasury Direct) during next week's auction of 13-week and 26-week bills. The announcements come out tomorrow.
  • I'm just using short-laddered T-bills purchased at Fidelity.

    As I type this, T-bill rates for 3M/6M/1-yr are: 1.5% / 2.4% / 2.8%.

    I fired the middle-man (MM funds) and just went straight to the source.
  • AndyJ said:

    Also plan to add more short duration Treasuries (through Treasury Direct) during next week's auction of 13-week and 26-week bills. The announcements come out tomorrow.

    @AndyJ Probably going to get closer to 2% to 2.4% annualized on those short-term Treasuries, right? That's probably a decent move.

    Hopefully, after the next few Fed meetings, we will be talking about ~4% returns on short-term Treasuries (6 mos).

  • edited June 2022
    @JD Last auction reported was 1.7% for 13wk and 2.2 for 26wk, and I'd think in the auction Monday, those would pop at least to the range you mentioned.

    I may go pretty small on this auction and save some $ for the next ones, probably with higher yields like you say.
  • Which would you pick, CDs and treasury of the same duration?
  • edited June 2022
    @Sven, I haven't done anything like an exhaustive search of CD-land, but from what I have seen, similar duration Treasuries tend to have slightly higher yields. But there's no guarantee if you sign up for an auction you'll get what you expect. On balance, though, I'll take the T's.
  • msf
    edited June 2022
    I would take a Treasury bill over a CD of the same maturity, all else being equal. They are state income tax exempt, so their post-tax return is higher than equal rate CDs if the income is taxed.

    Duration is slightly different. T-bills pay interest only at maturity - they are effectively zeros. The duration of a zero equals its maturity, while the duration of a vehicle paying (or accruing) interest periodically is shorter.

    Since I plan on holding to maturity, this minor difference doesn't matter to me.

    In a rising rate environment, those interest payments are theoretically a plus because one could reinvest the interest as it is received at progressively higher market rates. Reality is that it's hard to reinvest nickels and dimes at market rate.

    In a rapidly rising rate environment, I would not be looking at longer terms, so I'm not bothering to compare T-notes and T-bonds to CDs.

    Current rates (CDs, Treasuries, and more) at Vanguard
  • edited June 2022
    Thank you for all your feedback. No longer maturity fixed income vehicles for sure. I am looking at the shorter-end of treasury or CD ladder - a bit more yield than money market. Since they will be for our tax-deferred accounts, tax-exempt advantage doesn’t apply.

    Given the rising interest rate environment, I will be buying some 5-yr TIPS at auction tomorrow. Also considering some treasury at auction on next Monday.

    After Powell testimony today, several more rounds of rate hikes are anticipated.
  • VG MM up to 1.38 and will go up after next hike.
  • I just looked at take home after taxes ( Mass tax is 5%)

    At Schwab Short term treasuries look the best with 3 mo 1.47 vs Schwab MM 1.11
    Their muni MM at my tax rate is 0.64% pretty pathetic!

    I guess the spread at 3mos implies that rates will be much higher by then, or is it just Schwab's fee etc?
  • M-mkt ERs are quite different:

    Vanguard VMFXX 0.11% (core/settlement)

    Schwab SNVXX 0.35% (no core/settlement m-mkt funds at Schwab)

    Fidelity SPAXX 0.42% (core/settlement) (Fido also has policy of sequentially tapping other better Fido m-mkt funds)

    Keep an eye on 3-mo Treasury rates, $IRX (scale is 10x),$IRX&p=D&yr=1&mn=0&dy=0&id=p99540670730
  • @YBB. I am logged on to my Schwab account right now. SWVXX value advantage money fund is reported to have a 7 day yield of 1.19% under the research tab. However I own this fund and my position reports a yield of .6%. I have asked Schwab to explain this to me and tell me what’s going on and for days they claim “technical problems “. SNVXX showing 1.07%. But who knows?
  • edited June 2022
    @larryB, sloppy updates. I just checked in my account,
    SNVXX 7-day yield 0.45% as of 4/7/22,
    SWVXX 7-day yield 0.60% as of 6/27/22.
    These data are either stale or wrong.

    Schwab website is showing 1.07% and 1.19%, respectively.
  • I saw the same data.

    One of my smaller accounts received $1.61 on 6/15 on a SWVXX balance of $3217

    Annualizing it and not accounting for compounding that is $19.32 a year

    19.32/3217 is 0.6%

    Will email them.

  • While I a not sure I believe them, Schwab chat claims with fed reserve raising rates, next months payout will be close to 1.19%. The "waivers' apply to individual investors also he says. The $1.61 was on6/15 same day fed hiked rates
  • edited June 2022
    I hope Schwab is in fact giving us the rates shown at The rates at the link already represent an opportunity cost (about 20 bps for minimums below $1M) relative to MMF rates at Vanguard, which requires rock bottom minimums. If the actual rate credited by Schwab to our accounts is much lower, that would be very annoying.

    It seems non-Schwab MM funds are not available on the Schwab platform. Same with TD Ameritrade. Is that correct?
  • I spoke to multiple reps at Schwab this afternoon and got multiple answers. I was told I am getting 1.19% and to ignore the .6% as it was a known technical issue. Later I spoke to a “Pinnacle” rep,,,, supposed to be their brightest and best. He said without hesitation that the rate is .6%. When I told him what I had been told ten minutes earlier he transferred me to a tech support person who knew nothing about the known issue. He then transferred me to a broker who said 1.19%. I used to be a fan of Schwab.
  • I have been a Schwab customers for many years. Yesterday, for the first time I learned in my taxable account that I can not place a sell order for SWVXX and immediately place a buy order for a mutual fund from another fund family. (Strangely, about a month ago I transferred cash from my bank to Schwab and parked the cash in SWVXX to later buy a mutual fund. Evidently, the $200K I have in SWVXX gives me a margin buying power of $30K to buy another mutual fund before SWVXX sale is settled - very strange.) I called the Schwab rep and he said Schwab changed their policy a year ago and now you have to wait for the mutual fund sold to settle before you can place a buy order (SWVXX is treated as a mutual fund). When I showed him that recently I had no problem switching mutual funds on the same day in my IRA, like I always did, he said the new rule applies only to taxable account. W/r/t my taxable account, I asked him to clarify and after two days he still has not gotten back to me with answers to (1) why I am not allowed to use immediately 90% of the potential sale proceeds of SWVXX (or any mutual fund) to buy another fund? and (2) why I am not allowed to use the exchange feature to sell and buy funds from the same non-Schwab fund family? I no longer own any mutual funds in my taxable account to test if (2) is correct, except that is what the rep said.

    It is already punitive that Schwab does not provide a MM fund as a sweep account like Vanguard and Fidelity do. Schwab wants to discourage using their MM funds and force liquid funds into zero interest cash account if immediate liquidity is desired. Schwab has gotten so used to paying no interest on cash in its bank and brokerage accounts that it does not want to pay any yield now, even when FF rate continues to go up.

    I am surprised it is legal for Schwab not to give its customers access to any non-Schwab money market funds. I could not find this access on their website and the Schwab Rep said that is the case.

    More likely I will be moving the cash from Schwab to (Fidelity or Vanguard) where I can get a better yield in the sweep account than in SWVXX.
  • Think of the YIELD PLUS fiasco and the latest settlement concerning cash in robo accounts. Cash is Schwab’s tragic flaw. Customer of Schwab for decades.
  • msf
    edited June 2022
    sma3 said:

    While I a not sure I believe them, Schwab chat claims with fed reserve raising rates, next months payout will be close to 1.19%. The "waivers' apply to individual investors also he says.

    That sounds more or less correct. As with MMFs generally, SWVXX declares dividends daily and distributes monthly. So the distribution on June 15th (this fund makes distributions in mid-month) includes the interest declared on May 16th, May 17th, May 18th, ..., June 14th.

    The 0.000501157 per dollar invested that was paid on June 15th, which as @sma3 calculated comes to about 0.6%/year, is really the average of rates on each of these days. (see distributions)

    Rates have been increasing nonlinearly over the past three months. One expects that to continue for some time. The SEC rate quoted is the average of the interest declared over the past seven calendar days, annualized. That means interest declared June 21, June 22, ..., June 27th.

    The midpoint of the days used to calculate the SEC yield of 1.19% is June 24th. The midpoint of the days for which interest was just paid (0.6% annualized) was May 31st. That's a difference of 3.5 weeks!

    Both rates are correct. One just needs to be precise as to what "rate" means. The 0.6% rate is the rate of interest earned between May 16th and June 14th. The 1.19% is the rate of interest earned between June 21 and June 27.

    If one extrapolates, the next payment, about July 15th, should be higher than 1.19%. That's because it will include interest earned June 15 - June 20 (6 days paying less than 1.19%), interest earned June 21-27 (7 days paying 1.19% average), and interest earned for about 17 days after that (paying more than 1.19%).

    17 days at rates higher than 1.19%, 7 days at 1.19% (average), and 6 days at lower rates. That should wind up averaging more than 1.19%.

    There is a 0.01% waiver in effect. So the annual yield without waiver would be about one basis point lower.
  • @ msf Thanks for that explanation. I spoke to quite a few Schwab reps and was given several explanations,,,, often contradictory. Many claimed a technical glitch. None showed any understanding of how the rate was calculated. But they all asked if there was anything else they could help me with. That must be part of CSR training. That’s better than the kiss off “good luck” when you are looking for a part for your 40 year old boat that doesn’t exist anymore.
  • edited June 2022
    What @larryB, @sma3 and I are seeing from SWVXX click within Schwab a/c is the following screenshot. It clearly says 0.60% as 7-day yield and that is WRONG, it is the distribution yield as seen in the following table of monthly distributions annualized using the main website data (that also shows CORRECT 7-day yield as 1.19%). So, it is BAD/WRONG presentation, NOT that Schwab is stiffing us for pennies. @msf makes a good point about rapid nonlinear rise in m-mkt rates.

    2/15/22 0.0278%
    3/15/22 0.0278%
    4/15/22 0.0712%
    5/15/22 0.2646%
    6/15/22 0.6014%

  • From - Money market funds close and settles on the same day as the trade date. No excuse for Schwab not to allow customers to use funds in a money market fund for a trade on the same day - but that is how they do business.
  • edited June 2022
    I see T+1 settlement for m-mkt funds at Fido & Vanguard, just as at Schwab.

    Fido SPAXX (core/settlement fund) prospectus: "Shares will be sold at the NAV next calculated after an order is received in proper form. Normally, redemptions will be processed by the next business day, but it may take up to seven days to pay the redemption proceeds if making immediate payment would adversely affect a fund."

    VG VMFXX (core/settlement fund) prospectus: "If your redemption request is received in good order, we typically expect that redemption proceeds will be paid by a Fund within one business day of the trade date; however, in certain circumstances, investors may experience a longer settlement period at the time of the transaction."

    If some brokers offer T+0 m-mkt fund settlement, that would be good to know.

    Edit/Add: I also know that Fido and Schwab update their websites by 8:30-9:00 pm Central on most days but that doesn't affect their official settlements.

  • One can't always believe what one reads. Especially from tertiary sources.

    Investopedia writes:
    Not every security will have the same settlement periods. All stocks are T+2, and mutual funds differ but are T+1 and T+2, depending on the fund. However, bonds and some money market funds will vary between T+1, T+2, and T+3.
    Correction—May 5, 2022: This article previously contained an error regarding the settlement date timeline for mutual funds.
    Fidelity also has apparent inconsistencies. Contrast the MMF prospectus excerpt Yogi provided with this writing in Fidelity's help section (bold in original): "How long does it take for a mutual fund trade to settle? ... Sells and buys of money market funds settle the same day"

    Investopedia is right on one point - settlement times of MMFs vary. Some MMFs settle T+1 and some settle T+0. Read their SEC filings. Examples of T+0 funds are the institutional shares of Blackrock MMFs.

    In their prospectus, the purchase and sale section of each fund reads in part: "To purchase or sell shares of the Fund, purchase orders and redemption orders must be transmitted to the Fund’s office ... You have until the close of the federal funds wire (normally 6:45 p.m. Eastern time) to get your purchase money in to the Fund."

    They really do settle same day. I've owned at least one of them. You can trade them through Merrill.

    One can infer from the prospectus that it's not up to the brokerage whether to settle the same day or not. If the brokerage carries the fund it must settle the same day.
  • edited June 2022
    No interest in debating.

    Information in this post is in continuation of my previous posts in this thread. Forum members are free to use or discard the information I provide or entertain themselves. As always, if a correction in the information I provide is needed, I will gladly provide the necessary corrections in a separate later post.

    I put in an order to sell entire SWVXX at Schwab yesterday. I had to wake up today at 6 AM PST to pick a family member at the airport. So, I checked my Schwab account pre-market and the SWVXX sale cash was already in the account. On the way back from the airport, stopped by a Fidelity branch and deposited a check drawn on the Schwab account into FZDXX. FZDXX at Fidelity, unlike SWVXX at Schwab, is counted towards my cash buying power, and Fidelity will automatically liquidate FZDXX as necessary to satisfy any buy trade. Additional interest income FZDXX earns is just a bonus.
  • msf
    edited July 2022
    I put in an order to sell entire SWVXX at Schwab yesterday [Wed June 29]. I had to wake up today at 6 AM PST to pick a family member at the airport. So, I checked my Schwab account pre-market and the SWVXX sale cash was already in the account.

    Cash actually in the account? Or is Schwab just making it look that way without being very precise?

    Financial institutions have a propensity to offer ersatz services - carefully hiding details letting customers' imaginations fill in the gaps. NOW accounts are a good example. Savings banks offered these accounts that looked like checking accounts, felt like checking accounts, but were not the same as demand deposit accounts.

    Schwab may have posted a pending credit prior to market open, making it look and feel like a cash deposit, knowing that any withdrawal would not be reconciled until end of day, i.e. T+1.

    I transferred money from one Fidelity account to another this weekend. The money shows as available for withdrawal in the target account. But my MMF position in the "from" account is unchanged. And the number of shares in the target core MMF hasn't increased. The cash has not moved. Yet.

    On the "Positions" page, Fidelity says that what's in the target account is a "Cash Credit from Unsettled Activity."

    FZDXX at Fidelity, unlike SWVXX at Schwab, is counted towards my cash buying power, and Fidelity will automatically liquidate FZDXX as necessary to satisfy any buy trade.

    True, and a nice feature, though it isn't a sweep account and Fidelity hasn't quite figured out all the mechanics. I know because I asked a fairly long time ago.

    FZDXX is subject to liquidity gates (at least until the regs are changed; see SEC proposal thread here). There is at least a theoretical possibility that Fidelity would impose a hold on FZDXX redemptions if the fund came under stress. What would happen with cash withdrawals made "immediately" on the assumption that cash could get pulled out of FZDXX? The honest answer I got from Fidelity was that they didn't know.

    (FWIW, it does not seem that Fidelity MMF needed bailouts in 2008; Chuck's did.)
  • edited July 2022
    In addition to what I had written in my previous post, on my way to the airport, I called Schwab to wire the money to Fidelity, to which Schwab said they are happy to send the money immediately but all wires are subject to a wire fees. I did not want to pay a wire fees and so ended up writing a check to Fidelity. (I do not pay any wire transfer fees at other brokerages.) I expect members to call Schwab -1-800-435-4000 or make a test transaction before relying on my experience.

    "FZDXX is subject to liquidity gates."

    I think you meant redemption gates, as specified in the current SEC regulations. Not relevant for me but SWVXX is also subject to redemption gates.
  • msf
    edited July 2022
    From Fidelity: " government money market funds: Transact at $1.00 and are not subject to SEC liquidity 'gates and fees'".

    Same difference. All prime funds are subject to liquidity gates. At their discretion, government MMFs may impose liquidity gates. AFAIK, none has.

    Aside from Fidelity, most brokerages charge for outgoing wires.

    all wires are subject to a wire fees
    Some brokerages may waive the fee if your account is large enough. Schwab waives its fee for the first three wires per quarter if you have $100K with them.

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