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VUSXX has virtually the same yield as VMFXX (this has been true for several months), and is mostly state tax exempt.
In a moderate (5%) to high (10%) income tax state, the fund can save 20-40 basis points in taxes (assuming the fund is 80% invested in Treasuries and yields stay above 5%). It may not be worth shopping different institutions to gain a few basis points, but moving from VMFXX to VUSXX can be done overnight and doesn't involve multiple institutions.
As the CDs in my ladders mature, I’ve been reinvesting the proceeds in Treasuries if the yields are comparable. With the recent spike in interest rates, I’ve been able to buy Treasuries with yields equal to or higher than CDs. Treasuries also have tax advantages over CDs and are easier to sell if necessary. Three of my CDs have call dates in May, and it will be interesting to see if they are called in since their yields are marginally higher than current rates.
VUSXX has virtually the same yield as VMFXX (this has been true for several months), and is mostly state tax exempt.
In a moderate (5%) to high (10%) income tax state, the fund can save 20-40 basis points in taxes (assuming the fund is 80% invested in Treasuries and yields stay above 5%). It may not be worth shopping different institutions to gain a few basis points, but moving from VMFXX to VUSXX can be done overnight and doesn't involve multiple institutions.
Of course this only makes sense in a taxable account.
Can VUSXX be used as settlement fund at Vanguard?
Not certain what you are trying to achieve but you can have VUSXX as a fund in your brokerage account and when money comes into your settlement account (VMFXX) you can transfer them to VUSXX. Also, you can name any fund in your brokerage account, including VUSXX, as an "alternative redemption fund". This means that if you are writing checks and do not have sufficient funds in your settlement account, your checks will clear through your alternative redemption fund.
Sold 100k SUTXX MMKT (currently 5.17%) to extend income ladder- 50k treasuries, mature 2/26 @ 4.9698%, and 1/27 @ 4.806%
Note: The Washington Post is reporting that "the U.S. economy grew at 1.6 percent annual rate in first quarter 2024, a sharp slowdown".
Those of us currently building and maintaining income ladders should be alert that high current MMKT returns may drop significantly if the economy slows and the Fed continues finally begins it's rate reductions, and consider moving at least some MMKT cash to long-term securities.
And from the cited WP piece, "That exuberant [consumer] spending — especially on travel, restaurants, concerts and other services — has recently lifted inflation, reigniting fears that the Federal Reserve may have to be even more aggressive in its efforts to slow the economy."
IMHO the markets tend to initially overreact to any news. Still, yields aren't going down in the short term. Nevertheless, grabbing longer term rates over the next few weeks seems like a solid, cautious approach.
@Derf - I suppose that it is a "secondary market"... I just dial up what's available at Schwab and pick what I want. The ones that I mention here were issued some time ago, as the original interest is in the 2 to 3% range.
@msf - OK, let's not get picky here - I'm simply observing that there are apparently contradictory economic indicators at the moment, and it can't hurt to stay alert to a possible tidal change. I still have a significant amount of cash in SUTXX, and it will stay there as long as current rates remain high (or possibly go even higher... who knows?).
Comments
Note: The Washington Post is reporting that "the U.S. economy grew at 1.6 percent annual rate in first quarter 2024, a sharp slowdown".
Those of us currently building and maintaining income ladders should be alert that high current MMKT returns may drop significantly if the economy slows and the Fed
continuesfinally begins it's rate reductions, and consider moving at least some MMKT cash to long-term securities.Continues?
I'm not counting on rates dropping soon. Around 70% of the economy is driven by consumer spending, which "grew at a still-solid 2.5% rate, slowing from the [previous quarter's] 3.3% growth pace".
https://www.fidelity.com/news/article/top-news/202404250006RTRSNEWSCOMBINED_KCN36S06D-OUSBS_1
And from the cited WP piece, "That exuberant [consumer] spending — especially on travel, restaurants, concerts and other services — has recently lifted inflation, reigniting fears that the Federal Reserve may have to be even more aggressive in its efforts to slow the economy."
"Yields remain higher on the day after the latest GDP report showed slower growth and higher inflation than expected." (WSJ)
https://www.wsj.com/livecoverage/stock-market-today-earnings-04-25-2024/card/treasury-yields-stable-after-solid-7-year-auction-yg7fFwF9KaOlkRIwZylf
IMHO the markets tend to initially overreact to any news. Still, yields aren't going down in the short term. Nevertheless, grabbing longer term rates over the next few weeks seems like a solid, cautious approach.
@msf - OK, let's not get picky here - I'm simply observing that there are apparently contradictory economic indicators at the moment, and it can't hurt to stay alert to a possible tidal change. I still have a significant amount of cash in SUTXX, and it will stay there as long as current rates remain high (or possibly go even higher... who knows?).
Typo or Freudian slip there, OJ?
The FED has not reduced rates at all, yet. But your point is well taken.