King Cash

Nowadays, investors have all sorts of options when it comes to parking their cash.

My colleague Randall Forsyth, a longtime chronicler of the bond market for Barron's, has some thoughts on the subject:

"I've found the best deal had been 4-week T-bills, which had been yielding near the low end of the Fed's former target range of 4.5%-4.75%," Randy observes in an email to me. 

On Wednesday, the Federal Open Market Committee boosted short-term rates by another quarter of a percentage point, pushing that target range to 4.75%-5%.

"Now, with the market pricing in Fed cuts and concerns about banks, the latest 4-week bill has sunk below 4%," he continues. "Three months still gets you 4.65%."

Randy posits that another place to park cash is bank certificates of deposit, though investors need to be discerning. "The best deals for safety and liquidity are bank CDs available on the brokerage platforms," he says, having found a 5.05% rate for a three-month CD. 

In an article this week, I wrote that income investors should consider cash as well as bonds for the moment. The latter have been volatile, though their returns have been respectable in 2023. The iShares Core U.S. Aggregate Bond ETF has returned about 3.4% this year through March 22, compared with about 3% for the S&P 500.

“It just so happens that right now, the lowest risk, most liquid part of [fixed income] happens to be the highest yielding -- which is cash,” says Gary Zimmerman, CEO of MaxMyInterest.

The firm allocates customers’ cash into different banks to make sure they don’t exceed the $250,000 insurance limit covered by the Federal Deposit Insurance Corporation. 

Elsewhere, money market funds, which have had big inflows lately, were recently yielding 4.2% on average, though that's expected to increase thanks to the Fed's latest rate increase.