Money market mutual funds had seen their yields drop steadily for most of 2008.  To start the New Year, several money market mutual funds are yielding very desirable interest rates.  When 2008 came to an end, the best bank CD rates were far eclipsing the best rates found on money market funds.  As the credit market has thawed slightly, fed funds rate went to near zero and the rates paid on the best CDs finally began to fall.  At the same time the rates earned on money market funds has remained mostly stable.

The economic instability of the financial markets had driven money market funds rates to extremely low levels as both the supply of commercial paper dwindled and the rates on Treasury securities were pushed ever lower.  Treasuries and commercial paper make up the two largest components of money market fund assets.  Money market funds had to steer clear of the riskier commercial paper while the supply of marketable paper was drying up.  The flood of money into the safety of U.S Treasuries brought the T-bill rates down to historic lows. 

Competition with bank CDs was a losing situation as the spread between money market fund rates and CD rates were widening.  Now that the CD rates have dropped and money market fund yields have stabilized do to the moderate revival of commercial paper, Treasuries bouncing mildly of their lows and Federal agency paper providing a suitable investment substitute, the top money market funds are yielding competitive rates once again.  In this case, competitive yield is a very relative term.  The best bank CD rates are still measurable higher than money market fund rates.

The current top five money market funds have 7 day yields that are within two percent of the top national bank CD rates.  The number one money market fund is Vanguard Prime Money Market Fund that has a 7 day yield of 2.14%.  Right behind this fund is the Touchstone Money Market Fund that earns a 7 day yield of 2.04%.  In third place is Federated Prime Money market Fund with an interest rate on the 7 day yield of 1.91%.  Nest comes the Fidelity Money Market Retirement Trust that has a 7 day yield of 1.84%.  And to finish the top 5 money market funds is another Fidelity fund, the Fidelity Select Money Market Portfolio Fund that earns a rate of 1.81% on the 7 day yield.

Interest rates on money market mutual funds are subject to change.

Tags: ,

No user commented in " Top 5 Money Market Fund Rates "

Follow-up comment rss or Leave a Trackback

Leave A Reply

 Username (*required)

 Email Address (*private)

 Website (*optional)