Vanguard Prime Money Market yield over 2.5%

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kaeltor
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Re: Vanguard Prime Money Market yield over 2.5%

Post by kaeltor » Tue Mar 26, 2019 8:14 pm

Kevin M wrote:
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?

Kevin
Well, you said in one post: "So it seems that we are indeed at or near a peak for MM yields for awhile."

I took that to mean that yields may keep dropping...

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Kevin M
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Re: Vanguard Prime Money Market yield over 2.5%

Post by Kevin M » Wed Mar 27, 2019 6:39 pm

kaeltor wrote:
Tue Mar 26, 2019 8:14 pm
Kevin M wrote:
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?

Kevin
Well, you said in one post: "So it seems that we are indeed at or near a peak for MM yields for awhile."

I took that to mean that yields may keep dropping...
OK, but why would you "get out" when the yield still is higher than other alternatives? I don't care if the yield might fall some more, as long as it's higher now. I would wait to switch until the yield is lower than my best alternative.

For example, you mentioned Ally Bank. Yield on their savings account is 2.20%. The APY-equivalent yield of VMMXX at 2.45% SEC yield is 2.48%, so you're still earning 28 basis points more in VMMXX. Maybe the FDIC insurance is worth 28 basis points to you, in which case I wouldn't fault you for going with the lower yield. I personally am not worried about the safety of Prime MM at this point, and happily use it in IRAs (in taxable Treasury MM provides a higher TEY for me).

Kevin
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UpperNwGuy
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Re: Vanguard Prime Money Market yield over 2.5%

Post by UpperNwGuy » Wed Mar 27, 2019 7:10 pm

kaeltor wrote:
Tue Mar 26, 2019 8:14 pm
Kevin M wrote:
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?

Kevin
Well, you said in one post: "So it seems that we are indeed at or near a peak for MM yields for awhile."

I took that to mean that yields may keep dropping...
Not a very good interpretation of what Kevin said. I think you mis-read his words in the light of your own worries and fears.

kaeltor
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Re: Vanguard Prime Money Market yield over 2.5%

Post by kaeltor » Fri Mar 29, 2019 3:32 pm

Kevin M wrote:
Wed Mar 27, 2019 6:39 pm
kaeltor wrote:
Tue Mar 26, 2019 8:14 pm
Kevin M wrote:
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?

Kevin
Well, you said in one post: "So it seems that we are indeed at or near a peak for MM yields for awhile."

I took that to mean that yields may keep dropping...
OK, but why would you "get out" when the yield still is higher than other alternatives? I don't care if the yield might fall some more, as long as it's higher now. I would wait to switch until the yield is lower than my best alternative.

For example, you mentioned Ally Bank. Yield on their savings account is 2.20%. The APY-equivalent yield of VMMXX at 2.45% SEC yield is 2.48%, so you're still earning 28 basis points more in VMMXX. Maybe the FDIC insurance is worth 28 basis points to you, in which case I wouldn't fault you for going with the lower yield. I personally am not worried about the safety of Prime MM at this point, and happily use it in IRAs (in taxable Treasury MM provides a higher TEY for me).

Kevin
Understood, thanks for expanding on that.

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Kevin M
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Re: Vanguard Prime Money Market yield over 2.5%

Post by Kevin M » Fri Mar 29, 2019 6:17 pm

kaeltor wrote:
Fri Mar 29, 2019 3:32 pm
Kevin M wrote:
Wed Mar 27, 2019 6:39 pm
<snip>
OK, but why would you "get out" when the yield still is higher than other alternatives? I don't care if the yield might fall some more, as long as it's higher now. I would wait to switch until the yield is lower than my best alternative.
<snip>
Understood, thanks for expanding on that.
You're welcome!
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BL
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Re: Vanguard Prime Money Market yield over 2.5%

Post by BL » Sat Mar 30, 2019 9:38 pm

Prime MM is now 2.46% SEC, 2.49 APY, so it went up a tiny bit.

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grayfox
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Re: Vanguard Prime Money Market yield over 2.5%

Post by grayfox » Tue Apr 09, 2019 7:15 am

Currently Roth IRA has a lot in Vanguard Prime Money Market Fund (VMMXX). SEC 2.45%.
The idea is to park money while generating spendable Income.
Rates ain't going no higher. :annoyed I think it might be a good time to lock in something with higher rate, like 3%.

I looked at Treasuries. Current offering:

Code: Select all

		1 year	2 year	3 year	5 year	7 year	10 year	20 year	30 year
Treasuries	2.42%	2.41%	2.35%	2.34%	2.44%	2.52%	2.86%	2.93%
Below 3% even out to 30 years. Too low, too flat.
I looked at new issue Brokerage CDs.

Code: Select all

		1-3 m	6 month	9 month	1 year	18 m	2 year	3 year	4 year	5 year	7 year	10 year
New Issue CDs	2.30%	2.35%	2.35%	2.35%	2.45%	2.45%	2.60%	2.70%	2.80%	3.00%	3.10%
You have to go to 7 years to get 3.00%. A ladder from 1 to 7 years would be too low. And not interested in direct CDs from banks because in Roth IRA.
How about Vanguard Funds?

Vanguard GNMA Fund Admiral Shares (VFIJX) shows SEC = 3.07 (or is it 2.97 ?)
Vanguard Mortgage-Backed Securities Index Fund Admiral Shares (VMBSX) shows SEC = 3.04

Which is better, the old GNMA fund VFIJX or the newer Mortgage-backed Index VMBSX?

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Re: Vanguard Prime Money Market yield over 2.5%

Post by ivk5 » Tue Apr 09, 2019 7:48 am

grayfox wrote:
Tue Apr 09, 2019 7:15 am
Currently Roth IRA has a lot in Vanguard Prime Money Market Fund (VMMXX). SEC 2.45%.
The idea is to park money while generating spendable Income.
[...]
Which is better, the old GNMA fund VFIJX or the newer Mortgage-backed Index VMBSX?
Per my reply to you earlier in this thread - it's not clear to me whether your goals are consistent with the interest rate risk of an intermediate-term bond fund. "Parking money" sounds like you are expecting some measure of principal stability, which would be consistent with the fact that the funds were previously in a MMF.

Also, how much are you comfortable overweighting asset-backed securities relative to total bond market index? (If it were me, I'd say zero.) How much of your fixed income allocation does this Roth IRA represent and how much ABS exposure do you already have in the rest of your FI allocation?

Note that ABS are subject to greater prepayment risk than non-callable bonds when rates fall (it's right in Vanguard's product summary). My understanding - though I profess no special knowledge/experience here - is that this means forward yield may fall without being offset by NAV increase to the extent you'd expect with non-callable bonds of similar duration.

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Re: Vanguard Prime Money Market yield over 2.5%

Post by aristotelian » Tue Apr 09, 2019 8:25 am

grayfox wrote:
Tue Apr 09, 2019 7:15 am
Currently Roth IRA has a lot in Vanguard Prime Money Market Fund (VMMXX). SEC 2.45%.
The idea is to park money while generating spendable Income.
Rates ain't going no higher. :annoyed I think it might be a good time to lock in something with higher rate, like 3%.

I looked at Treasuries. Current offering:

Code: Select all

		1 year	2 year	3 year	5 year	7 year	10 year	20 year	30 year
Treasuries	2.42%	2.41%	2.35%	2.34%	2.44%	2.52%	2.86%	2.93%
Below 3% even out to 30 years. Too low, too flat.
I looked at new issue Brokerage CDs.

Code: Select all

		1-3 m	6 month	9 month	1 year	18 m	2 year	3 year	4 year	5 year	7 year	10 year
New Issue CDs	2.30%	2.35%	2.35%	2.35%	2.45%	2.45%	2.60%	2.70%	2.80%	3.00%	3.10%
You have to go to 7 years to get 3.00%. A ladder from 1 to 7 years would be too low. And not interested in direct CDs from banks because in Roth IRA.
How about Vanguard Funds?

Vanguard GNMA Fund Admiral Shares (VFIJX) shows SEC = 3.07 (or is it 2.97 ?)
Vanguard Mortgage-Backed Securities Index Fund Admiral Shares (VMBSX) shows SEC = 3.04

Which is better, the old GNMA fund VFIJX or the newer Mortgage-backed Index VMBSX?
If you can't get 3% by extending duration, my thinking is just go short and wait until there is a better duration premium, either from short rates dropping or long rates rising. I don't see it worth messing with GNMA or corporates to chase yield. With the Fed having raised rates, the market appears to be distorted at the short end, so why not take the deals there?

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grayfox
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Re: Vanguard Prime Money Market yield over 2.5%

Post by grayfox » Tue Apr 09, 2019 1:32 pm

ivk5 wrote:
Tue Apr 09, 2019 7:48 am
grayfox wrote:
Tue Apr 09, 2019 7:15 am
Currently Roth IRA has a lot in Vanguard Prime Money Market Fund (VMMXX). SEC 2.45%.
The idea is to park money while generating spendable Income.
[...]
Which is better, the old GNMA fund VFIJX or the newer Mortgage-backed Index VMBSX?
Per my reply to you earlier in this thread - it's not clear to me whether your goals are consistent with the interest rate risk of an intermediate-term bond fund. "Parking money" sounds like you are expecting some measure of principal stability, which would be consistent with the fact that the funds were previously in a MMF.
To me, GNMA fund is just another risky asset, but not that risky. From portviz, the max drawdown from 1987 - 2019 was -6.52%. So the risk is a chance of be down about -7%. For that you get about +55 bsp more than VMMXX with 0% Max Drawdown.

Is it worth it?

Right now I'm collecting 2.45% p.a. But how long is that going to last? The next recession, the Fed will bring the rates back down to zero, and the I'll be collecting 0%. By then, the GNMA fund will probably be higher priced and yielding less than now and too late to switch to. You have to lock in before they start cutting.

My first choices would be Treasury and CD ladder, but they are already too low to bother with. So the next step up in risk is short-term bond fund. Short-term Corporate VSCSX would be another possibility. SEC = 3.03%. It has maturity of only 2.9 years. But it has Mostly Baa and A.
VMBSX is 100% U.S. Government There will be no defaults in VMBSX. But has maturity 6.4 years. The price will fluctuate.

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Re: Vanguard Prime Money Market yield over 2.5%

Post by rich126 » Tue Apr 09, 2019 2:20 pm

grayfox wrote:
Tue Apr 09, 2019 1:32 pm
ivk5 wrote:
Tue Apr 09, 2019 7:48 am
grayfox wrote:
Tue Apr 09, 2019 7:15 am
Currently Roth IRA has a lot in Vanguard Prime Money Market Fund (VMMXX). SEC 2.45%.
The idea is to park money while generating spendable Income.
[...]
Which is better, the old GNMA fund VFIJX or the newer Mortgage-backed Index VMBSX?
Per my reply to you earlier in this thread - it's not clear to me whether your goals are consistent with the interest rate risk of an intermediate-term bond fund. "Parking money" sounds like you are expecting some measure of principal stability, which would be consistent with the fact that the funds were previously in a MMF.
To me, GNMA fund is just another risky asset, but not that risky. From portviz, the max drawdown from 1987 - 2019 was -6.52%. So the risk is a chance of be down about -7%. For that you get about +55 bsp more than VMMXX with 0% Max Drawdown.

Is it worth it?

Right now I'm collecting 2.45% p.a. But how long is that going to last? The next recession, the Fed will bring the rates back down to zero, and the I'll be collecting 0%. By then, the GNMA fund will probably be higher priced and yielding less than now and too late to switch to. You have to lock in before they start cutting .

My first choices would be Treasury and CD ladder, but they are already too low to bother with. So the next step up in risk is short-term bond fund. Short-term Corporate VSCSX would be another possibility. SEC = 3.03%. It has maturity of only 2.9 years. But it has Mostly Baa and A.
VMBSX is 100% U.S. Government There will be no defaults in VMBSX. But has maturity 6.4 years. The price will fluctuate.
I'm trying to understand the comments. Maybe I'm wrong but the bolded comment (by me) has me thinking you believe a recession is likely in the near term. If that is the case wouldn't having a longer term treasury fund go up since they will have higher interest rate securities than the rates in a recession? A short term fund would only be if you think rates are going up. Did I miss something?

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grayfox
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Re: Vanguard Prime Money Market yield over 2.5%

Post by grayfox » Tue Apr 09, 2019 2:40 pm

rich126 wrote:
Tue Apr 09, 2019 2:20 pm

I'm trying to understand the comments. Maybe I'm wrong but the bolded comment (by me) has me thinking you believe a recession is likely in the near term. If that is the case wouldn't having a longer term treasury fund go up since they will have higher interest rate securities than the rates in a recession? A short term fund would only be if you think rates are going up. Did I miss something?
Nope. Nobody knows when a recession will come. But when it does come, you can be sure they will cut interest rates. Maybe it comes in 2020 or 2021.

I was only sticking with VMMXX while yield was increasing. I hoped it would have gotten to 3% by now. But they stopped short. So to get 3%, I will have to shift to bond fund like VSCSX. I'm leaning towards that.

Added: Moved 20% of Cash Reserve to VSCSX
Added: I just remembered that they also have equivalent ETF VCSH. I should have looked at VCSH before putting in buy order for VSCSX.

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zaplunken
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Re: Vanguard Prime Money Market yield over 2.5%

Post by zaplunken » Tue Apr 09, 2019 7:17 pm

Ally Bank still has a 12 month CD for 2.75% and it doesn't show any minimum like their other CDs.
https://www.ally.com/bank/cd-rates/

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Re: Vanguard Prime Money Market yield over 2.5%

Post by UpperNwGuy » Tue Apr 09, 2019 7:26 pm

grayfox wrote:
Tue Apr 09, 2019 1:32 pm
ivk5 wrote:
Tue Apr 09, 2019 7:48 am
grayfox wrote:
Tue Apr 09, 2019 7:15 am
Currently Roth IRA has a lot in Vanguard Prime Money Market Fund (VMMXX). SEC 2.45%.
The idea is to park money while generating spendable Income.
[...]
Which is better, the old GNMA fund VFIJX or the newer Mortgage-backed Index VMBSX?
Per my reply to you earlier in this thread - it's not clear to me whether your goals are consistent with the interest rate risk of an intermediate-term bond fund. "Parking money" sounds like you are expecting some measure of principal stability, which would be consistent with the fact that the funds were previously in a MMF.
To me, GNMA fund is just another risky asset, but not that risky. From portviz, the max drawdown from 1987 - 2019 was -6.52%. So the risk is a chance of be down about -7%. For that you get about +55 bsp more than VMMXX with 0% Max Drawdown.

Is it worth it?

Right now I'm collecting 2.45% p.a. But how long is that going to last? The next recession, the Fed will bring the rates back down to zero, and the I'll be collecting 0%. By then, the GNMA fund will probably be higher priced and yielding less than now and too late to switch to. You have to lock in before they start cutting.

My first choices would be Treasury and CD ladder, but they are already too low to bother with. So the next step up in risk is short-term bond fund. Short-term Corporate VSCSX would be another possibility. SEC = 3.03%. It has maturity of only 2.9 years. But it has Mostly Baa and A.
VMBSX is 100% U.S. Government There will be no defaults in VMBSX. But has maturity 6.4 years. The price will fluctuate.
Why are you so desperate to get to 3%? If the market isn't giving 3%, there's no way for you to force it without incurring additional risk. At this point, I think you should be happy with any rate over 2.4%.

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Re: Vanguard Prime Money Market yield over 2.5%

Post by TravelGeek » Tue Apr 09, 2019 7:44 pm

zaplunken wrote:
Tue Apr 09, 2019 7:17 pm
Ally Bank still has a 12 month CD for 2.75% and it doesn't show any minimum like their other CDs.
https://www.ally.com/bank/cd-rates/
And a “special” 15 month CD for 2.80%, last I checked (last week). It only seems to appear as you go through the purchase process on the page where you choose the terms.
Last edited by TravelGeek on Tue Apr 09, 2019 10:51 pm, edited 1 time in total.

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Re: Vanguard Prime Money Market yield over 2.5%

Post by Kevin M » Tue Apr 09, 2019 9:18 pm

zaplunken wrote:
Tue Apr 09, 2019 7:17 pm
Ally Bank still has a 12 month CD for 2.75% and it doesn't show any minimum like their other CDs.
https://www.ally.com/bank/cd-rates/
My TEY for Treasury MM at 2.35% is 2.64%, which is 2.67% on an APY basis; and that's with no term risk.

TEY on a 4-week Treasury at 2.42% is 2.72%, and on a 6-month Treasury at 2.46% TEY is 2.76%. The Ally Bank CD is in the same ballpark on a TEY basis, but why sacrifice the liquidity compared to a Treasury? Granted, for those with lower state income tax rates (mine is 8%), Treasuries aren't as attractive.

Kevin
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Re: Vanguard Prime Money Market yield over 2.5%

Post by grayfox » Wed Apr 10, 2019 5:51 am

UpperNwGuy wrote:
Tue Apr 09, 2019 7:26 pm

Why are you so desperate to get to 3%? If the market isn't giving 3%, there's no way for you to force it without incurring additional risk. At this point, I think you should be happy with any rate over 2.4%.
Prime MMF is stuck at about 2.45%. It will probably be stuck there until the next recession when the Fed's next move will be down. See FYI below.

Inflation target is 2 - 2.5%. So 2.45% is really close to zero after inflation.
If I spend the interest, that is like spending down the principle.
And when they cut the rate back to zero and keep it there for 10 years, that will be negative real return.

During the low years when Prime MMF was yielding about 0, I did not keep anything in MMF.
There are other choices: Treasuries, CDs, bond funds. All have slightly more risk.
I had to take credit and term risk in short and intermediate corporate bonds to barely stay ahead of inflation.


FYI:

Image
https://fred.stlouisfed.org/graph/?g=mqKN

Fed Rate Monitor Tool
CME FedWatch Tool

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Re: Vanguard Prime Money Market yield over 2.5%

Post by jeffyscott » Wed Apr 10, 2019 6:28 am

If inflation is 2-2.5%, a Fed rate cut would not be the response I would expect. Inflation was far below the Fed's target of 2%, when they took short term rate to 0.

TIPS and I-bonds would get you about 0.5% or more above inflation, even at 2.5%.
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 columbia » Wed Apr 10, 2019 6:43 am

It’s yielding more than my short term treasury fund. :annoyed
If you leave your head in the sand for too long, you might get run over by a Jeep.

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Re: Vanguard Prime Money Market yield over 2.5%

Post by grayfox » Wed Apr 10, 2019 6:45 am

jeffyscott wrote:
Wed Apr 10, 2019 6:28 am

TIPS and I-bonds would get you about 0.5% or more above inflation, even at 2.5%.
You have to go out to 2026 to get 0.5%. Treasury Inflation-Protected Securities.
TIPS are only good at one thing: insurance against unexpected inflation.

It looks like CPI inflation averaged 2.4% in 2018. So Prime MMF was about equal to inflation. Just as I guessed.
My 3% VSCSX will have about 0.5% after inflation. Maybe better, if inflation goes back under 2%.

Table of Historical Inflation Rates in Percent (1914-2019)
Consumer Price Index for All Urban Consumers: All Items

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Re: Vanguard Prime Money Market yield over 2.5%

Post by jeffyscott » Wed Apr 10, 2019 7:10 am

grayfox wrote:
Wed Apr 10, 2019 6:45 am
jeffyscott wrote:
Wed Apr 10, 2019 6:28 am

TIPS and I-bonds would get you about 0.5% or more above inflation, even at 2.5%.
You have to go out to 2026 to get 0.5%. Treasury Inflation-Protected Securities.
According to Treasury yield curve, even 5 year is over 0.5%.
https://www.treasury.gov/resource-cente ... =realyield

The WSJ quotes for April 15 maturity in 2020-2022 are near or above 0.5%. I'm guessing April maturities are less subject to seasonal adjustment at this time, since it is April?
TIPS are only good at one thing: insurance against unexpected inflation.
Based on nominal - TIPS spread at the Treasury yield curve site, expected inflation is about 1.8% over the next 5 years. If you agree with that, then money market is expected to provide a real return. But if instead, you expect 2-2.5% inflation, then TIPS would appear to be a good buy.
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 Apr 10, 2019 7:17 am

jeffyscott wrote:
Wed Apr 10, 2019 7:10 am
grayfox wrote:
Wed Apr 10, 2019 6:45 am
jeffyscott wrote:
Wed Apr 10, 2019 6:28 am

TIPS and I-bonds would get you about 0.5% or more above inflation, even at 2.5%.
You have to go out to 2026 to get 0.5%. Treasury Inflation-Protected Securities.
According to Treasury yield curve, even 5 year is over 0.5%.
https://www.treasury.gov/resource-cente ... =realyield

The WSJ quotes for April 15 maturity in 2020-2022 are near or above 0.5%. I'm guessing April maturities are less subject to seasonal adjustment at this time, since it is April?
Holy Cow! I did not notice that!
So the real yield curve is also inverted ?!?
The 2020 April is 0.558 and the 2020 July is 0.088, and then the 2021 Jan is 0.418. :confused
What's up with that.

And the 2019 Apr and Jul are negative. Those TIPS yields don't make any sense to me.

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Re: Vanguard Prime Money Market yield over 2.5%

Post by jeffyscott » Wed Apr 10, 2019 8:19 am

grayfox wrote:
Wed Apr 10, 2019 7:17 am
jeffyscott wrote:
Wed Apr 10, 2019 7:10 am
grayfox wrote:
Wed Apr 10, 2019 6:45 am
jeffyscott wrote:
Wed Apr 10, 2019 6:28 am

TIPS and I-bonds would get you about 0.5% or more above inflation, even at 2.5%.
You have to go out to 2026 to get 0.5%. Treasury Inflation-Protected Securities.
According to Treasury yield curve, even 5 year is over 0.5%.
https://www.treasury.gov/resource-cente ... =realyield

The WSJ quotes for April 15 maturity in 2020-2022 are near or above 0.5%. I'm guessing April maturities are less subject to seasonal adjustment at this time, since it is April?
Holy Cow! I did not notice that!
So the real yield curve is also inverted ?!?
The 2020 April is 0.558 and the 2020 July is 0.088, and then the 2021 Jan is 0.418. :confused
What's up with that.

And the 2019 Apr and Jul are negative. Those TIPS yields don't make any sense to me.
It's because seasonality.

With seasonal adjustment, at the short end it was inverted a few months ago: viewtopic.php?t=267338
I would guess if it still is, it is only slightly so...just a guess based on those quotes for April maturities.
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 Kevin M » Sat Apr 13, 2019 10:43 pm

I'll do another check of the seasonally-adjusted short-term TIPS yield curve soon if I get enough other things off my plate. I kind of lost interest after the short-term TIPS yields came down quite a bit since December last year.

You really can't pay much attention to the raw yields for really short-term TIPS. The shortest term ones are priced to be competitive with nominal Treasuries, since the final nominal values at maturity are already known. For the ones with slightly longer maturities, the seasonal affects are quite pronounced, so you must adjust for seasonality for the quotes to make any sense.

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lepa71
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Re: Vanguard Prime Money Market yield over 2.5%

Post by lepa71 » Tue Jul 02, 2019 4:24 pm

Can somebody help me calculate for Vanguard Treasury MM fund in a taxable account?
My federal is 22% and state MN 7.05%

Thanks

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Re: Vanguard Prime Money Market yield over 2.5%

Post by HomeStretch » Tue Jul 02, 2019 5:21 pm

VUSXX compound yield is 2.31%. Your tax equivalent yield is 2.54% = 2.31% / (1 - (22% + 7.05%)) * (1 - 22%).

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Re: Vanguard Prime Money Market yield over 2.5%

Post by tj » Tue Jul 02, 2019 6:28 pm

grayfox wrote:
Tue Apr 09, 2019 7:15 am
Currently Roth IRA has a lot in Vanguard Prime Money Market Fund (VMMXX). SEC 2.45%.
The idea is to park money while generating spendable Income.
Rates ain't going no higher. :annoyed I think it might be a good time to lock in something with higher rate, like 3%.

I looked at Treasuries. Current offering:

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		1 year	2 year	3 year	5 year	7 year	10 year	20 year	30 year
Treasuries	2.42%	2.41%	2.35%	2.34%	2.44%	2.52%	2.86%	2.93%
Below 3% even out to 30 years. Too low, too flat.
I looked at new issue Brokerage CDs.

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		1-3 m	6 month	9 month	1 year	18 m	2 year	3 year	4 year	5 year	7 year	10 year
New Issue CDs	2.30%	2.35%	2.35%	2.35%	2.45%	2.45%	2.60%	2.70%	2.80%	3.00%	3.10%
You have to go to 7 years to get 3.00%. A ladder from 1 to 7 years would be too low. And not interested in direct CDs from banks because in Roth IRA.
How about Vanguard Funds?

Vanguard GNMA Fund Admiral Shares (VFIJX) shows SEC = 3.07 (or is it 2.97 ?)
Vanguard Mortgage-Backed Securities Index Fund Admiral Shares (VMBSX) shows SEC = 3.04

Which is better, the old GNMA fund VFIJX or the newer Mortgage-backed Index VMBSX?
Why look at brokerage CD's rather than bank/credit union CD's?

Here's a good resource on current rates

https://www.depositaccounts.com/blog/ba ... ts-survey/

lepa71
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Re: Vanguard Prime Money Market yield over 2.5%

Post by lepa71 » Wed Jul 03, 2019 9:21 am

HomeStretch wrote:
Tue Jul 02, 2019 5:21 pm
VUSXX compound yield is 2.31%. Your tax equivalent yield is 2.54% = 2.31% / (1 - (22% + 7.05%)) * (1 - 22%).
How do the IRS and state know not to charge tax on VUSXX at tax time?

jason1
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Re: Vanguard Prime Money Market yield over 2.5%

Post by jason1 » Wed Jul 03, 2019 9:40 am

lepa71 wrote:
Wed Jul 03, 2019 9:21 am
HomeStretch wrote:
Tue Jul 02, 2019 5:21 pm
VUSXX compound yield is 2.31%. Your tax equivalent yield is 2.54% = 2.31% / (1 - (22% + 7.05%)) * (1 - 22%).
How do the IRS and state know not to charge tax on VUSXX at tax time?
You have to report appropriately on your taxes. Note that some states treat partially tax exempt dividends differently.

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petercooperjr
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Re: Vanguard Prime Money Market yield over 2.5%

Post by petercooperjr » Wed Jul 03, 2019 9:42 am

lepa71 wrote:
Wed Jul 03, 2019 9:21 am
How do the IRS and state know not to charge tax on VUSXX at tax time?
The IRS does tax VUSXX. Income comes on a normal 1099-DIV like other mutual fund dividends.

For the state, you go to the Tax information for Vanguard funds and look the fund up in the "U.S. government obligations information", which confirms that for 2018 "Treasury Money Market Fund" got 100% of income from US government obligations.

Then you need to find where on your state forms you subtract out that percentage of that fund's dividend income. (At least for Massachusetts where I live, it shows up with the regular dividends and then you subtract it out on Form 1 Schedule B Line 6.)

SmallSaver
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Re: Vanguard Prime Money Market yield over 2.5%

Post by SmallSaver » Wed Jul 03, 2019 9:52 am

lepa71 wrote:
Wed Jul 03, 2019 9:21 am
HomeStretch wrote:
Tue Jul 02, 2019 5:21 pm
VUSXX compound yield is 2.31%. Your tax equivalent yield is 2.54% = 2.31% / (1 - (22% + 7.05%)) * (1 - 22%).
How do the IRS and state know not to charge tax on VUSXX at tax time?
My understanding is that they do not, you have to figure it our yourself when you file state taxes. One reason I personally don't bother--it's one more thing to keep track of, in exchange for a few bps. Not worth it, for my tax situation.

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William4u
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Re: Vanguard Prime Money Market yield over 2.5%

Post by William4u » Wed Jul 03, 2019 4:30 pm

SmallSaver wrote:
Wed Jul 03, 2019 9:52 am
lepa71 wrote:
Wed Jul 03, 2019 9:21 am
HomeStretch wrote:
Tue Jul 02, 2019 5:21 pm
VUSXX compound yield is 2.31%. Your tax equivalent yield is 2.54% = 2.31% / (1 - (22% + 7.05%)) * (1 - 22%).
How do the IRS and state know not to charge tax on VUSXX at tax time?
My understanding is that they do not, you have to figure it our yourself when you file state taxes. One reason I personally don't bother--it's one more thing to keep track of, in exchange for a few bps. Not worth it, for my tax situation.
In freetaxusa there is a place to put in tax-free interest like this.

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grayfox
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Re: Vanguard Prime Money Market yield over 2.5%

Post by grayfox » Wed Aug 28, 2019 7:11 am

Well this worked out pretty well, so far.

I rode Prime MMF (VMMXX) as it climbed to over 2.5%. :happy
But the last time I posted on 4/10/2019 it was down to 2.45% and the writing was on the wall. Yield would go no higher this cycle.
Now it is down to 2.13% :(

And the FFR is predicated to go to 1.75-2.00 at the next meeting in 3 weeks.
Fed Rate Monitor Tool
CME FedWatch Tool
Short-term rates are not so unpredictable.

What I did at that time was split between VCIT and VSCSX.
4/10/2019 bought VSCSX. Now up over 3% in that. Not counting interest, just price. Current SEC=2.30%
5/3/2019 bought VCIT. Now up over 6% in that, just in price. Current SEC=2.84%

I love it when a plan comes together. --John "Hannibal" Smith

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