Author Topic: No stupid questions?  (Read 640 times)

Unionville

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No stupid questions?
« on: March 23, 2023, 06:33:31 PM »
Can you tell me about these return rates on Money Markets?  They seem really high compared to a standard money market account and/or Federal bonds.  How am I misreading them, and what percent is the return really?

secondcor521

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Re: No stupid questions?
« Reply #1 on: March 23, 2023, 06:48:15 PM »
This thread on another forum mentions VMFXX and discusses a bit of your question (and other stuff):

https://www.early-retirement.org/forums/f28/vfmxx-and-vbtlx-please-augment-my-understanding-117430.html

VMFXX is invested in US goverment obligations (Treasuries, GSE bonds, and repurchase agreements), and the recent rates of return on those varies between 4.5% and 4.75%.  See first three columns at https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202303

Minus the management fee of 11 basis points and it's about right.

The thing to understand is that US government short term rates bounce around, and what VMFXX actually holds probably gets turned over all the time because they're short term instruments.  I think that's at least part of the explanation why the actual yield of VMFXX can vary from what today's Treasury yields are.

They also have to deal with massive fund inflows and outflows, which may affect returns.

But as the other thread seems to imply, I'm not an expert at this stuff.
« Last Edit: March 23, 2023, 06:56:51 PM by secondcor521 »

dividendman

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Re: No stupid questions?
« Reply #2 on: March 24, 2023, 08:58:28 AM »
I'm also not an expert but it doesn't seem that high compared to T-Bills:

https://www.treasurydirect.gov/auctions/announcements-data-results/

In fact, T-Bills > 8 weeks beat those.

 

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