Crane Data Subscribers
Money Market Mutual Fund Investors Say Goodbye to Five Percent Yields. If you look at our "Top 5" rankings tables above, you'll notice that just one fund, Russell Money Market Fund S (RMMXX) and just one bank, Countrywide, pay over 5% yields currently. We expect both to be gone very soon, possibly as early as tonight, as money markets prepare for a possible 50 basis point cut in the Federal funds target rate at the end of this month. This will mark the end of 5% yields, which have been available since the launch of http://www.cranedata.com over a year ago. Note that Crane Data uses 7-day simple yields for money funds (not compound) and rates for banks (not APYs), so some of these effective rates may linger over 5 longer. Retail investors have been living with sub-5% yields for some time now; they may eventually even have to get used to sub-4% returns on cash. Yields broke above 5% following an extended Fed campaign that moved funds rates from a record low of 1% in June 2003-2004 to a peak of 5.25% in June 2006. Savers will miss 5% rates dearly, though it remains to be seen just how low the Fed, and rates, will eventually go. Five percent was indeed a magic number for money funds, causing assets to flood into the sector in pursuit of yields that were attractive on a nominal, on a real, and on a historical basis.
