Vanguard Prime Money Market yield over 2.5%

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Almost there
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Re: Vanguard Prime Money Market yield over 2.5%

Post by Almost there » Thu Feb 21, 2019 3:28 pm

Thank you Kevin for the update. I, too, am in the 12% tax bracket.

In the Kiplinger March 2019 issue (pg 42), they posted: "the tax eq yield 24%/35% bracket for Vanguard Municipal MM (VMSXX) at 2.11%/2.46%". And the 30-day yield as of Jan 7 was 1.6%. As of 2/20/2019, it is 1.63%.

How do I find out what my tax eq yield for 12% is would be?

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Re: Vanguard Prime Money Market yield over 2.5%

Post by Kevin M » Thu Feb 21, 2019 4:26 pm

Almost there wrote:
Thu Feb 21, 2019 3:28 pm
Thank you Kevin for the update. I, too, am in the 12% tax bracket.

In the Kiplinger March 2019 issue (pg 42), they posted: "the tax eq yield 24%/35% bracket for Vanguard Municipal MM (VMSXX) at 2.11%/2.46%". And the 30-day yield as of Jan 7 was 1.6%. As of 2/20/2019, it is 1.63%.

How do I find out what my tax eq yield for 12% is would be?
The TEY equations have been discussed in this thread, so you might want to scan through it and look for those posts.

Important to note that it's not your tax brackets, but your marginal tax rates, that matter. My top federal tax bracket is 12%, but my marginal rate will be either 12% or 27%, since my taxable income, including QD/LTCG, is very close to the top of the 0% QD/LTCG rate.

Also, your marginal state tax rate also affects the TEY.

At a marginal fed tax rate of 12%, the muni muni money market funds are of no interest to you. They aren't even attractive at a 27% fed marginal rate. At 12%, VMSXX at 1.63% SEC yield is 1.85% TEY, assuming 0% state tax. You are much better off with Prime MM at 2.46%.

Note that SEC yields for MM funds is 7-day yield, not 30-day yield. For bond funds SEC yield is 30-day yield.

The TEY for a non-state muni MM fund is Y * (1-s) / (1-f-s), where f and s are the federal and marginal tax rates.

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Re: Vanguard Prime Money Market yield over 2.5%

Post by Almost there » Thu Feb 21, 2019 5:01 pm

Thank you Kevin. Appreciate it.

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Re: Vanguard Prime Money Market yield over 2.5%

Post by grayfox » Wed Mar 20, 2019 8:13 am

The next Fed interest rate decision is today, in 4 hours 54 minutes from when I am typing this. It looks like it will hold steady at 2.25-2.50 and same for the rest of the year.

Fed Rate Monitor Tool
CME FedWatch Tool

Vanguard Prime MMF is now at 2.45%. It looks like it hit a brick ceiling and will not go higher. I'm wondering if its time now to switch to something higher rate, like a bond fund or CD.

I'm considering Vanguard GNMA Fund Investor Shares (VFIIX) with SEC Yield 3.12% and/or Vanguard Mortgage-Backed Securities Index Fund Admiral Shares (VMBSX) with SEC Yield 3.38%.

There is also an Admiral version of GNMA with $50,000 minimum: Vanguard GNMA Fund Admiral Shares (VFIJX) with SEC Yield 3.22%

PenFed has 5-Year CD 2.91% 2.95% APY

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Re: Vanguard Prime Money Market yield over 2.5%

Post by zaplunken » Wed Mar 20, 2019 8:20 am

Ally Bank has a 12 CD at 2.75%, I would avoid GNMA due to negative convexity.

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Re: Vanguard Prime Money Market yield over 2.5%

Post by ivk5 » Wed Mar 20, 2019 8:28 am

grayfox wrote:
Wed Mar 20, 2019 8:13 am
I'm considering Vanguard GNMA Fund Investor Shares (VFIIX) with SEC Yield 3.12% and/or Vanguard Mortgage-Backed Securities Index Fund Admiral Shares (VMBSX) with SEC Yield 3.38%.
zaplunken wrote:
Wed Mar 20, 2019 8:20 am
Ally Bank has a 12 CD at 2.75%, I would avoid GNMA due to negative convexity.
+1
If intermediate-term asset-backed securities funds fit your IPS, fine, but those are very different from a money market fund and frankly it is hard to imagine how they could both fit the same need.

Remember the adage- more money has been lost reaching for yield than at the point of a gun...

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Re: Vanguard Prime Money Market yield over 2.5%

Post by jeffyscott » Wed Mar 20, 2019 9:18 am

grayfox wrote:
Wed Mar 20, 2019 8:13 am
Vanguard Prime MMF is now at 2.45%. It looks like it hit a brick ceiling and will not go higher. I'm wondering if its time now to switch to something higher rate, like a bond fund or CD.
But, CDs seem to have hit a rubber ceiling and bounced back down. I'm not willing to transfer IRA assets all over the place chasing CD yields, so I am only looking at brokered CD rates and to get even 2.8% requires going out to about 3 years or more. I am inclined to divert money from maturing CDs and CD interest payments to (mostly corporate) bond funds.
Time is your friend; impulse is your enemy. - John C. Bogle

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Re: Vanguard Prime Money Market yield over 2.5%

Post by grayfox » Wed Mar 20, 2019 9:23 am

Yes, I am seeing 2.95% 5-year CD at Vanguard. 10-Year is 3.15%.
5-years is +50 bsp over Prime MMF.
Treasuries: 5-Year 2.43%, 10-Year 2.60%. 30-Year 3.00%. Forget Treasuries.

This is what I did back in Aug-2000: I sold S&P500, but instead of putting the proceeds into MMMF, I put it in Vanguard GNMA. Although it was paying higher rate than today, about 6.8%. see Yahoo. I thought of it like a money market fund that paid higher rate, but fluctuated around $10, from about $9 to $11. Bob Brinker would always recommend them on his show.

What is the main difference between VMMXX and VFIIX?
VMMXX has a stable price at $1 while VFIIX, the price varies.
VMMXX will have zero Max DD, but the rate still varies. About FFR + epsilon.
What about VFIIX max DD? Look at portviz Jan-1985 to Feb-2019

VFIIX vs. CASHX

Code: Select all

		Initial	Final	CAGR	Stdev	Best	Worst	Max. DD	Sharpe	Sortino	US Mkt Correlation
VFIIX		$10,000	$86,898 6.53% 	3.58%	20.68%	-2.23%	-6.52% 	0.90	1.49	0.07
CASHX		$10,000	$30,525 3.32% 	0.74%	8.38%	0.00%	0.00%	N/A	N/A	0.03
Max DD was -6.52%. So a chance of being 6-7% below peak, for an extra 3.22 - 2.45 = +77 bsp. Is that worth it?

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Re: Vanguard Prime Money Market yield over 2.5%

Post by ReformedSpender » Wed Mar 20, 2019 1:19 pm

FOMC minutes out today claiming no further rate hikes for 2019, possibly on one in 2020 due to downward revision in predicted growth :oops: . Updated projections below

Image
Market history shows that when there's economic blue sky, future returns are low, and when the economy is on the skids, future returns are high. The best fishing is done in the most stormy waters.

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Re: Vanguard Prime Money Market yield over 2.5%

Post by FrankLUSMC » Wed Mar 20, 2019 1:22 pm

ReformedSpender wrote:
Wed Mar 20, 2019 1:19 pm
FOMC minutes out today claiming no further rate hikes for 2019, possibly on one in 2020 due to downward revision in predicted growth :oops: . Updated projections below

Image
BIV likes it up .5% today

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Re: Vanguard Prime Money Market yield over 2.5%

Post by likashing » Wed Mar 20, 2019 1:28 pm

Any MM fund in Fidelity with comparable yield to Vanguard Prime?

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Re: Vanguard Prime Money Market yield over 2.5%

Post by ReformedSpender » Wed Mar 20, 2019 1:29 pm

Additionally, futures traders (yes, I know...) are now pricing a 47% chance of a rate CUT in 2020, up from 23% in 2020 just a few weeks ago

Image
Market history shows that when there's economic blue sky, future returns are low, and when the economy is on the skids, future returns are high. The best fishing is done in the most stormy waters.

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Re: Vanguard Prime Money Market yield over 2.5%

Post by jeffyscott » Wed Mar 20, 2019 3:28 pm

likashing wrote:
Wed Mar 20, 2019 1:28 pm
Any MM fund in Fidelity with comparable yield to Vanguard Prime?
Since ERs are higher, yields are lower, SPRXX is at 2.26% (or with $100K, FZDXX at 2.38%). That's what they have, unless you want to meet a minimum of $1 million or more.

https://www.fidelity.com/fund-screener/ ... ype&tab=mf
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Re: Vanguard Prime Money Market yield over 2.5%

Post by retiringwhen » Wed Mar 20, 2019 4:26 pm

ReformedSpender wrote:
Wed Mar 20, 2019 1:29 pm
Additionally, futures traders (yes, I know...) are now pricing a 47% chance of a rate CUT in 2020, up from 23% in 2020 just a few weeks ago

Image
So this is predicting that the Bond Bulls will win hold the day for at least a little longer........

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Re: Vanguard Prime Money Market yield over 2.5%

Post by corn18 » Wed Mar 20, 2019 4:32 pm

jeffyscott wrote:
Wed Mar 20, 2019 3:28 pm
likashing wrote:
Wed Mar 20, 2019 1:28 pm
Any MM fund in Fidelity with comparable yield to Vanguard Prime?
Since ERs are higher, yields are lower, SPRXX is at 2.26% (or with $100K, FZDXX at 2.38%). That's what they have, unless you want to meet a minimum of $1 million or more.

https://www.fidelity.com/fund-screener/ ... ype&tab=mf
I'm using FZDXX to hold my house buying money. The ER is 0.37% vs. 0.16% for VMMXX. Bummer, but all my money is with FIDO, and I favor simplicity.
Don't do something, just stand there!

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Re: Vanguard Prime Money Market yield over 2.5%

Post by Doc » Wed Mar 20, 2019 4:41 pm

jeffyscott wrote:
Wed Mar 20, 2019 3:28 pm
likashing wrote:
Wed Mar 20, 2019 1:28 pm
Any MM fund in Fidelity with comparable yield to Vanguard Prime?
Since ERs are higher, yields are lower, SPRXX is at 2.26% (or with $100K, FZDXX at 2.38%). That's what they have, unless you want to meet a minimum of $1 million or more.

https://www.fidelity.com/fund-screener/ ... ype&tab=mf
And the 13 week T-Bill is at 2.48 (coupon equivalent).
https://www.treasury.gov/resource-cente ... =billrates

(The VMMXX 7 day yield has dropped to 2.45% as of 3/18/19.)
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Re: Vanguard Prime Money Market yield over 2.5%

Post by jeffyscott » Wed Mar 20, 2019 5:12 pm

Doc wrote:
Wed Mar 20, 2019 4:41 pm
jeffyscott wrote:
Wed Mar 20, 2019 3:28 pm
likashing wrote:
Wed Mar 20, 2019 1:28 pm
Any MM fund in Fidelity with comparable yield to Vanguard Prime?
Since ERs are higher, yields are lower, SPRXX is at 2.26% (or with $100K, FZDXX at 2.38%). That's what they have, unless you want to meet a minimum of $1 million or more.

https://www.fidelity.com/fund-screener/ ... ype&tab=mf
And the 13 week T-Bill is at 2.48 (coupon equivalent).
https://www.treasury.gov/resource-cente ... =billrates

(The VMMXX 7 day yield has dropped to 2.45% as of 3/18/19.)
Vanguard is close enough to t-bills to maybe be worth the ER for convenience, but I try to avoid paying the typical 0.4% or so ERs at Fido and Schwab. I'd rather move to a bond fund with equal or lower ER or buy my own t-bills or CDs.

Even 4 week t-bills have better yield than the money market funds at Schwab and Fidelity.
Time is your friend; impulse is your enemy. - John C. Bogle

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Re: Vanguard Prime Money Market yield over 2.5%

Post by ankonaman » Wed Mar 20, 2019 6:40 pm

I've been holding 40% cash this last year in the Federal Money Market Fund in lieu of bonds watching bond funds dip until recently. Considering moving a chunk of this cash holding over to Vanguard Short-Term Investment-Grade Fund Investor Shares (VFSTX) at this time.

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Re: Vanguard Prime Money Market yield over 2.5%

Post by Kevin M » Wed Mar 20, 2019 8:45 pm

jeffyscott wrote:
Wed Mar 20, 2019 5:12 pm
Doc wrote:
Wed Mar 20, 2019 4:41 pm
jeffyscott wrote:
Wed Mar 20, 2019 3:28 pm
likashing wrote:
Wed Mar 20, 2019 1:28 pm
Any MM fund in Fidelity with comparable yield to Vanguard Prime?
Since ERs are higher, yields are lower, SPRXX is at 2.26% (or with $100K, FZDXX at 2.38%). That's what they have, unless you want to meet a minimum of $1 million or more.
And the 13 week T-Bill is at 2.48 (coupon equivalent).

(The VMMXX 7 day yield has dropped to 2.45% as of 3/18/19.)
Vanguard is close enough to t-bills to maybe be worth the ER for convenience, but I try to avoid paying the typical 0.4% or so ERs at Fido and Schwab. I'd rather move to a bond fund with equal or lower ER or buy my own t-bills or CDs.

Even 4 week t-bills have better yield than the money market funds at Schwab and Fidelity.
I also generally roll 4-week T Bills at Fidelity and Schwab in preference to using their MM funds. This is especially convenient at Fido with the auto-roll feature. A Schwab rep told me they were planning on adding that!

Note that minimum for FZDXX at Fido is $10K in an IRA (compared to $100K in taxable). I try to get $10K in Fido IRAs at least temporarily to get FZDXX open. Once open, it can drop below the initial minimum and remain open. Once I get it open, I can move most of it into T Bills.

I'm planning on switching monthly expense management from Vanguard Advantage account to Fido CMA in June/July, before Vanguard ends the VA accounts on July 31. At some point I'll probably try to get $100K into FZDXX in the CMA just to get it open, and then immediately move most of it elsewhere. FZDXX will then function for me as a high-yield checking account. Until then, SPRXX will function as the high yield checking account.

The Fido MM fund will be topped off monthly mostly from Fido bond interest and proceeds from maturing bonds. I basically have a monthly ladder of munis, Treasuries and CDs, mostly at Fidelity, with maturities out to Feb 2021, and more than enough maturing each month to pay the monthly bills.

Treasuries are more attractive in taxable accounts (than in IRAs) with high state income tax, due to the state tax exemption. Vanguard Treasury MM at 2.36% SEC is TEY of 2.65% for me, which is TE APY of 2.69%. Better than any bank account except for a reward checking account (RCA), but those have balance caps and monthly transaction requirements (I earn 3.33% APY on $25K). The 4-week Treasury at 2.45% is TEY of 2.75% for me, so 10 basis points more of TEY than VG Treasury MM for somewhat reduced liquidity.

Prime MM yield dropped from 2.46% to 2.45% on 3/11/2019. Its high was 2.48% between 1/25/2019 and 2/4/2019.

In contrast to Prime MM, Treasury MM has continued to increases slightly, up from 2.35% to 2.36% today. Last increase was from 2.34% to 2.35% on 02/28/2019. Treasury MM yield basically is the average of the 1-3 month Treasury yields minus the ER of 0.09%, since its holdings are mostly 1-3 month Treasuries. It can't go higher unless 1-3 month Treasuries go higher, and they are unlikely to go much higher unless the federal funds rate (FFR) goes higher, which as we've seen, is extremely unlikely this year.

So it seems that we are indeed at or near a peak for MM yields for awhile.

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Re: Vanguard Prime Money Market yield over 2.5%

Post by jeffyscott » Wed Mar 20, 2019 9:33 pm

Kevin M wrote:
Wed Mar 20, 2019 8:45 pm
Note that minimum for FZDXX at Fido is $10K in an IRA (compared to $100K in taxable).
Thanks, I'll have to check if has that lower minimum in an HSA.
In contrast to Prime MM, Treasury MM has continued to increases slightly, up from 2.35% to 2.36% today.
I'm planning to try to, temporarily, reach the minimum for the treasury money market, mostly with proceeds from selling off I-bonds. I'll wait to see the actual 6 month rates, but my expectation is their composite rates will be too low for me after May. The treasury money fund had recently become likely to be very slightly better than prime or federal at my tax rate, so figured may as well obtain the rights to own the safer option with higher after-tax yield.
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Re: Vanguard Prime Money Market yield over 2.5%

Post by Doc » Thu Mar 21, 2019 10:15 am

RE: Vanguard Prime MM fund and T-Bills

3 month Rolling Return chart.

Image
http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D

T-Bills may be very good depending on the spread you incur when selling if you need the cash. (If you are rolling 4 week T-Bills like Kevin this may not be of much concern.)

Schwab is very good on spreads. I haven't looked at Fido.
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Re: Vanguard Prime Money Market yield over 2.5%

Post by Kevin M » Thu Mar 21, 2019 10:52 am

Doc wrote:
Thu Mar 21, 2019 10:15 am
T-Bills may be very good depending on the spread you incur when selling if you need the cash. (If you are rolling 4 week T-Bills like Kevin this may not be of much concern.)

Schwab is very good on spreads. I haven't looked at Fido.
Schwab usually has the best bid/ask spreads on smaller minimum quantities (e.g., less than 300 = $300K face value); usually their best ask price, and often best or close to best bid price, is for minimum quantity 10 or 1 ($10K or $1K face value). I do recall seeing lower small-quantity spreads recently at Vanguard or Fidelity--maybe they've been losing business to Schwab over this ;-).

I don't just roll 4-week Bills at Schwab. I've bought maturities out to at least one year too, although with the now basically flat yield curve out to one year, that may change as my Treasuries mature. The point was that for fixed income for which I want to have as close to no term risk as possible, and don't plan to use for something else within a few weeks, like paying bills, I'll generally choose rolling 4-week Bills over MM funds at Fidelity or Schwab, especially in IRAs where the money can't be conveniently moved between brokers.

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Re: Vanguard Prime Money Market yield over 2.5%

Post by jeffyscott » Thu Mar 21, 2019 12:02 pm

Kevin M wrote:
Thu Mar 21, 2019 10:52 am
I don't just roll 4-week Bills at Schwab. I've bought maturities out to at least one year too, although with the now basically flat yield curve out to one year, that may change as my Treasuries mature. The point was that for fixed income for which I want to have as close to no term risk as possible, and don't plan to use for something else within a few weeks, like paying bills, I'll generally choose rolling 4-week Bills over MM funds at Fidelity or Schwab, especially in IRAs where the money can't be conveniently moved between brokers.
I'd not even thought of the IRA account issue. I'm still in the process of a post-retirement transition to having essentially all fixed income in IRAs.

One other option at Fidelity would be to use their short term treasury index fund. I'd probably not do it now, due to the yield curve being pretty much flat all the way out to at least 7-10 years. For Schwab, I'd consider their short term bond index as a possible alternative (again not right now, due to yield curve) as they do not offer a short term treasury index fund (except in ETF form). Either of those would have some volatility, of course.

At Schwab and Fidelity there is also one NTF ultra-short bond fund with ER currently discounted to 0.25% (PYLMX). With that you can take some credit risk in lieu of the term risk in the short term bond index funds.
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Re: Vanguard Prime Money Market yield over 2.5%

Post by Doc » Thu Mar 21, 2019 2:37 pm

jeffyscott wrote:
Thu Mar 21, 2019 12:02 pm
One other option at Fidelity would be to use their short term treasury index fund. I'd probably not do it now, due to the yield curve being pretty much flat all the way out to at least 7-10 years. For Schwab, I'd consider their short term bond index as a possible alternative (again not right now, due to yield curve) as they do not offer a short term treasury index fund (except in ETF form). Either of those would have some volatility, of course.
Given the flatness of the yield curve out to about three years any 1-3 Treasury fund/ETF should should perform very similarly to a T-Bill ladder except for the a small price variance if you need/want to sell and not let your ladder just roll off.
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Re: Vanguard Prime Money Market yield over 2.5%

Post by gmaynardkrebs » Thu Mar 21, 2019 3:24 pm

Doc wrote:
Thu Mar 21, 2019 2:37 pm
jeffyscott wrote:
Thu Mar 21, 2019 12:02 pm
One other option at Fidelity would be to use their short term treasury index fund. I'd probably not do it now, due to the yield curve being pretty much flat all the way out to at least 7-10 years. For Schwab, I'd consider their short term bond index as a possible alternative (again not right now, due to yield curve) as they do not offer a short term treasury index fund (except in ETF form). Either of those would have some volatility, of course.
Given the flatness of the yield curve out to about three years any 1-3 Treasury fund/ETF should should perform very similarly to a T-Bill ladder except for the a small price variance if you need/want to sell and not let your ladder just roll off.
If the yield curve is flat, what would be the advantage of going to a 1Y-3Y ETF? That's a question, not a disagreement. :)

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Re: Vanguard Prime Money Market yield over 2.5%

Post by Doc » Thu Mar 21, 2019 5:17 pm

gmaynardkrebs wrote:
Thu Mar 21, 2019 3:24 pm
If the yield curve is flat, what would be the advantage of going to a 1Y-3Y ETF? That's a question, not a disagreement.
Convenience, accessibility, dividend reinvestment, cash flow, tax aspects ...

I was really addressing Jeffyscott's remark:
jeffyscott wrote:
Thu Mar 21, 2019 12:02 pm
For Schwab, I'd consider their short term bond index as a possible alternative (again not right now, due to yield curve) as they do not offer a short term treasury index fund (except in ETF form). Either of those would have some volatility, of course.
For us, 2/3 of our Treasury portfolio is in in 1-3 fund/ETF's and the rest in T-Notes. I don't have any good reason to sell any of that and put it in a T-Bill ladder. I am however adding T-Bills for better short term unexpected cash flow needs as money becomes available.
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Re: Vanguard Prime Money Market yield over 2.5%

Post by grayfox » Fri Mar 22, 2019 3:53 pm

If there is a recession, we can be sure that Fed will lower FFR back to zero, and Prime MMF will follow it.

But what will happen to CD rates, like 3-year or 5-year CD? And what will happen to GNMA fund? I'm starting to think about positioning for some future rate cuts if/when recession hits.

:?: What would be the best thing to be in if recession comes?

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Re: Vanguard Prime Money Market yield over 2.5%

Post by LinusP » Fri Mar 22, 2019 3:58 pm

^Leveraged long-term treasuries? Just be sure your crystal ball will help you call the bottom accurately. :wink:

More along the lines of this thread (and Boglehead philosophy), I think longer-term CDs will be a good place to be if we're actually at the peak for this rate cycle.

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Re: Vanguard Prime Money Market yield over 2.5%

Post by grayfox » Sat Mar 23, 2019 6:11 am

We seem to be back to about where we were in the beginning of 2006 in the interest rate cycle. This shows 10-year (Blue) and 3-Month in (Red)

Image

Does it repeat? One difference is back in 2006, the Fed kept raising another 50 bsp. But they already stopped raising, so maybe they will not cause a recession this time.


How did GNMA do compared to generic MMF, after Feb-2006? GNMA vs CASHX

Code: Select all

	Initial	Final	CAGR	Stdev	Best	Worst	Max. DD	Sharpe	Sortino	US Mkt Correlation
VFIIX	$10,000	$16,506 3.90% 	2.67%	7.69%	-2.23%	-4.00% 	1.04	1.93	-0.11
CASHX	$10,000	$42,573 	11.71% 	44.45%	140.83%	-77.40%	-79.38% 	0.47	0.70	0.36
When they started to cut in Aug-2007, it looks like GNMA did OK. I'm thinking of either CDs or GNMA fund.
Last edited by grayfox on Sat Mar 23, 2019 1:49 pm, edited 1 time in total.

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Re: Vanguard Prime Money Market yield over 2.5%

Post by jeffyscott » Sat Mar 23, 2019 7:56 am

grayfox wrote:
Sat Mar 23, 2019 6:11 am
When they started to cut in Aug-2007, it looks like GNMA did OK. I'm thinking of either CDs or GNMA fund.
Vanguard GNMA fund 30 day SEC yield is 3.07% or 3.17%, depending on share class, and they list average duration of 3.6 years, but average maturity of 6.7 years. For brokered CDs, it looks like you now have to go out to 7 years to get over 3%. With direct CDs you can still get over 3% with a 5 year term.

Vanguard also has a mortgage backed securities index fund, VMBSX with longer duration and higher yield than the GNMA fund. Slightly more credit risk with that as well, I suppose.

I do recall from a book by Bill Gross that I read long ago, that mortgage bonds are good when in a stable interest rate environment, which seems to be what is expected.

I have a few low-cost managed bond funds, in lieu of bond index fund. I checked and found that these each already have 35-45% in mortgages. Meanwhile total bond has 23-24% mortgage bonds. Since my managed bond funds are overweight mortgages (and asset backed) and underweight treasuries, I will probably stick to choosing between CDs, TIPS, and cash/short-term with money coming from CDs, TIPS, and I-bonds.
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Re: Vanguard Prime Money Market yield over 2.5%

Post by MikeG62 » Sat Mar 23, 2019 8:17 am

Kevin M wrote:
Wed Mar 20, 2019 8:45 pm

So it seems that we are indeed at or near a peak for MM yields for awhile.

Kevin
Sadly (from a yield standpoint), I agree with this.
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Re: Vanguard Prime Money Market yield over 2.5%

Post by S_Track » Sun Mar 24, 2019 9:06 pm

OP, thanks for starting this topic, I have learned much from reading through this thread.
Question, If you have funds in the Federal MM , does VG send you documentation at the end of the year indicating the portion that is from US government obligations or do you have to look this up on their site? Will tax software, such as Turbo Tax walk you through this or at least ask about state deduction should it apply or is this something you have to do manually?

Thanks

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Re: Vanguard Prime Money Market yield over 2.5%

Post by sport » Sun Mar 24, 2019 9:11 pm

Vanguard sends a page that shows the federal interest percentage earned by each of its funds that earn such interest. It comes with the 1099 documents.

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Re: Vanguard Prime Money Market yield over 2.5%

Post by ReformedSpender » Mon Mar 25, 2019 7:44 am

Vanguard Treasury money market VUSXX inching ever so higher. Compound yield now at 2.39%

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Re: Vanguard Prime Money Market yield over 2.5%

Post by Kevin M » Mon Mar 25, 2019 12:57 pm

S_Track wrote:
Sun Mar 24, 2019 9:06 pm
OP, thanks for starting this topic, I have learned much from reading through this thread.
Question, If you have funds in the Federal MM , does VG send you documentation at the end of the year indicating the portion that is from US government obligations or do you have to look this up on their site?
sport wrote:
Sun Mar 24, 2019 9:11 pm
Vanguard sends a page that shows the federal interest percentage earned by each of its funds that earn such interest. It comes with the 1099 documents.
Vanguard doesn't send me anything, since I'm set up for online-only access to everything, including tax forms. The % from US government obligations form does not appear with my 1099s, but there is a link to the right of my 1099s titled "Fund-specific tax information". Click on that, then there's a link for "U.S. government obligations information". Click on that to open or download the PDF with the percentages.
S_Track wrote:
Sun Mar 24, 2019 9:06 pm
Will tax software, such as Turbo Tax walk you through this or at least ask about state deduction should it apply or is this something you have to do manually?
I'm now using HR Block tax software, but TT will have something similar. In the 1099-DIV interview, I check a box titled "From U.S. Treasury obligations". After clicking "Next", there's a box to enter "Percentage of dividends from U.S. Treasury Obligations". You must calculate that percentage yourself.

If you have an old-platform mutual fund account, the dividends from the fund will be reported separately on the 1099-DIV, and you would just enter 78 if 78% of the income for the fund was from government obligations.

If you have a brokerage account, you'll need to go to the 1099-DIV details a few pages down, multiply the Fed MM dividend total by the indicated income percentage, then divide by the total dividends (and multiply by 100 to convert to percentage). For example, if you have $100 in Fed MM dividends and 78% was from US government obligations, and you have $1,000 in total dividends, the percentage you'd enter in the tax software would be 78% * 100 / 1000 * 100 = 7.8.

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Re: Vanguard Prime Money Market yield over 2.5%

Post by Kevin M » Mon Mar 25, 2019 1:48 pm

ReformedSpender wrote:
Mon Mar 25, 2019 7:44 am
Vanguard Treasury money market VUSXX inching ever so higher. Compound yield now at 2.39%
This yield increase happened last Wednesday, as posted a bit upthread: viewtopic.php?f=10&t=271396&p=4455603#p4447253.
Kevin M wrote:
Wed Mar 20, 2019 8:45 pm
In contrast to Prime MM, Treasury MM has continued to increases slightly, up from 2.35% to 2.36% today. Last increase was from 2.34% to 2.35% on 02/28/2019. Treasury MM yield basically is the average of the 1-3 month Treasury yields minus the ER of 0.09%, since its holdings are mostly 1-3 month Treasuries. It can't go higher unless 1-3 month Treasuries go higher, and they are unlikely to go much higher unless the federal funds rate (FFR) goes higher, which as we've seen, is extremely unlikely this year.

So it seems that we are indeed at or near a peak for MM yields for awhile.
Looking at a running 5-trading-day average (which usually will include a weekend, so usually 7 calendar days) of the 1m, 2m and 3m Treasury yields from treasury.gov, minus the 0.09% ER of the fund, I see it increasing from 2.364% on 3/18 to 2.366% on 3/19, 2.370% on 3/20, and 2.375% on 3/21, and 2.379% on 3/22. So maybe the fund yield could increase by another basis point or two, but then it could come down a bit after that as well.

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Re: Vanguard Prime Money Market yield over 2.5%

Post by S_Track » Mon Mar 25, 2019 4:36 pm

Kevin M wrote:
Mon Mar 25, 2019 12:57 pm
If you have a brokerage account, you'll need to go to the 1099-DIV details a few pages down, multiply the Fed MM dividend total by the indicated income percentage, then divide by the total dividends (and multiply by 100 to convert to percentage). For example, if you have $100 in Fed MM dividends and 78% was from US government obligations, and you have $1,000 in total dividends, the percentage you'd enter in the tax software would be 78% * 100 / 1000 * 100 = 7.8.

Kevin
Thanks makes sense.

Back a few pages you and Doc were talking about an ultra short fund from Schwab that got into trouble. When I look at VG's ultra short fund they designate it as very low risk, 1 out of 5. Curious, did that Schwab fund have a higher risk rating (not sure what schwab uses) or was it marketed as somethng extremely safe? Was the main problem with that fund hidden junk bonds, I was confused on all the explanation? Thanks

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Re: Vanguard Prime Money Market yield over 2.5%

Post by Doc » Mon Mar 25, 2019 7:07 pm

S_Track wrote:
Mon Mar 25, 2019 4:36 pm
Back a few pages you and Doc were talking about an ultra short fund from Schwab that got into trouble. When I look at VG's ultra short fund they designate it as very low risk, 1 out of 5. Curious, did that Schwab fund have a higher risk rating (not sure what schwab uses) or was it marketed as somethng extremely safe?

It was marketed as safe. A little attention to it made that assessment suspect. I invested heavily in the fund but became suspect before the collapse and got out. Shear luck.

Caveat emptor.

I am now using Vanguard's ultra short fund but only as an accumulater switching to a short Treasury position when the amount becomes enough to warrant the transaction cost. Vanguard's fund does not have the low risk of your typical MM fund.
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Re: Vanguard Prime Money Market yield over 2.5%

Post by S_Track » Mon Mar 25, 2019 9:21 pm

Doc wrote:
Mon Mar 25, 2019 7:07 pm

I am now using Vanguard's ultra short fund but only as an accumulater switching to a short Treasury position when the amount becomes enough to warrant the transaction cost. Vanguard's fund does not have the low risk of your typical MM fund.
Do you have tansaction costs since you are outside of VG? Why do you say VG's Ultra short fund is not low risk, because the ultra invests in corporates? thanks

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Re: Vanguard Prime Money Market yield over 2.5%

Post by Doc » Tue Mar 26, 2019 9:32 am

S_Track wrote:
Mon Mar 25, 2019 9:21 pm
Doc wrote:
Mon Mar 25, 2019 7:07 pm

I am now using Vanguard's ultra short fund but only as an accumulater switching to a short Treasury position when the amount becomes enough to warrant the transaction cost. Vanguard's fund does not have the low risk of your typical MM fund.
Do you have tansaction costs since you are outside of VG? Why do you say VG's Ultra short fund is not low risk, because the ultra invests in corporates? thanks
Transaction costs are higher at Vanguard than Schwab. Vanguard does not have a bond fund with a duration less than 3 years so you need to use an ETF or direct Treasuries. For small trade amount Vanguard's spreads are more than I would like to see.

The ultra short fund is somewhat variable which is a risk for whatever reason. (See 3 month rolling return chart)

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Re: Vanguard Prime Money Market yield over 2.5%

Post by Kevin M » Tue Mar 26, 2019 1:42 pm

Doc wrote:
Tue Mar 26, 2019 9:32 am
Vanguard does not have a bond fund with a duration less than 3 years so you need to use an ETF or direct Treasuries.
Vanguard Short-Term Treasury Index fund has a duration of 1.91 years (from M*, which sometimes lags Vanguard's published duration by a bit, but under two years at any rate). It holds Treasuries in the 1-year to 3-year maturity range.

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Re: Vanguard Prime Money Market yield over 2.5%

Post by jeffyscott » Tue Mar 26, 2019 1:45 pm

Doc wrote:
Tue Mar 26, 2019 9:32 am
Vanguard does not have a bond fund with a duration less than 3 years so you need to use an ETF or direct Treasuries.
:?:

All the short-term funds are less that 3 years duration. After the ultrashort fund (duration 1 year) there is short-term treasury index, which has duration of 1.9 years.
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Re: Vanguard Prime Money Market yield over 2.5%

Post by Doc » Tue Mar 26, 2019 3:05 pm

My bad. I thought the Vanguard Short Treasury used the 1-5 index. I guess I had it confused with the investment Grade funds which is the 1-5.

I actually own the darn thing. I just bought it few weeks ago. And even traded my Ultra Short fund for it. Getting old. :oops:

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Re: Vanguard Prime Money Market yield over 2.5%

Post by jeffyscott » Tue Mar 26, 2019 3:13 pm

Fidelity uses 1-5 for their short term Treasury index fund. AFAIK, it's Schwab that lacks a short term Treasury fund.

It sounds like you meant a fund that doesn't hold anything beyond 3 year maturity, rather than the average duration being less than that?
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Re: Vanguard Prime Money Market yield over 2.5%

Post by Doc » Tue Mar 26, 2019 3:31 pm

jeffyscott wrote:
Tue Mar 26, 2019 3:13 pm
It sounds like you meant a fund that doesn't hold anything beyond 3 year maturity, rather than the average duration being less than that?
That actually is my thinking I just shortcutted my description.
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Re: Vanguard Prime Money Market yield over 2.5%

Post by S_Track » Tue Mar 26, 2019 4:27 pm

Doc wrote:
Tue Mar 26, 2019 9:32 am
Transaction costs are higher at Vanguard than Schwab. Vanguard does not have a bond fund with a duration less than 3 years so you need to use an ETF or direct Treasuries. For small trade amount Vanguard's spreads are more than I would like to see.

The ultra short fund is somewhat variable which is a risk for whatever reason. (See 3 month rolling return chart)

thanks, quick question, if I exchange a VG mutual fund in my VG brokerage account, is there a transaction cost or is this just for outside ETF?

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Re: Vanguard Prime Money Market yield over 2.5%

Post by Doc » Tue Mar 26, 2019 4:45 pm

S_Track wrote:
Tue Mar 26, 2019 4:27 pm
Doc wrote:
Tue Mar 26, 2019 9:32 am
Transaction costs are higher at Vanguard than Schwab. Vanguard does not have a bond fund with a duration less than 3 years so you need to use an ETF or direct Treasuries. For small trade amount Vanguard's spreads are more than I would like to see.

The ultra short fund is somewhat variable which is a risk for whatever reason. (See 3 month rolling return chart)

thanks, quick question, if I exchange a VG mutual fund in my VG brokerage account, is there a transaction cost or is this just for outside ETF?
There is no cost for a mutual fund exchange for VG mutual funds at Vanguard with maybe a few exceptions.

My cost comments were addressed mostly at bid/ask spreads not the transaction fee which does not amount to much unless you are churning a transaction fee fund.
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Re: Vanguard Prime Money Market yield over 2.5%

Post by S_Track » Tue Mar 26, 2019 5:33 pm

Doc wrote:
Tue Mar 26, 2019 4:45 pm
S_Track wrote:
Tue Mar 26, 2019 4:27 pm
Doc wrote:
Tue Mar 26, 2019 9:32 am
Transaction costs are higher at Vanguard than Schwab. Vanguard does not have a bond fund with a duration less than 3 years so you need to use an ETF or direct Treasuries. For small trade amount Vanguard's spreads are more than I would like to see.

The ultra short fund is somewhat variable which is a risk for whatever reason. (See 3 month rolling return chart)

thanks, quick question, if I exchange a VG mutual fund in my VG brokerage account, is there a transaction cost or is this just for outside ETF?
There is no cost for a mutual fund exchange for VG mutual funds at Vanguard with maybe a few exceptions.

My cost comments were addressed mostly at bid/ask spreads not the transaction fee which does not amount to much unless you are churning a transaction fee fund.

got it, thanks!

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Re: Vanguard Prime Money Market yield over 2.5%

Post by kaeltor » Tue Mar 26, 2019 5:56 pm

So should we get out of VMMXX ?

Rather switch to ally if there's any risk at this point... it's only yielding slightly more anyway

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Re: Vanguard Prime Money Market yield over 2.5%

Post by Kevin M » Tue Mar 26, 2019 6:49 pm

kaeltor wrote:
Tue Mar 26, 2019 5:56 pm
So should we get out of VMMXX ?

Rather switch to ally if there's any risk at this point... it's only yielding slightly more anyway
How in the world did you come to the conclusion that we should "get out of VMMXX" based on the posts in this thread?

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