People focused on saving cash are poised to get another boost from the Federal Reserve on Wednesday as the central bank delivers another interest-rate hike. Even so, rising interest rates have not been lifting all accounts equally. The Fed raised the benchmark rate by 25 basis points to 5.25%-5.50%, the highest rate in 22 years. It marks the 11th rate hike of the Fed’s last 12 meetings.
Many high-yield savings accounts now have annual percentage yields of around 4%, up from an average of approximately 0.5% in March 2022, according to DepositAccounts.com, a platform that compares rates in U.S. savings accounts. However, yields for many money-market mutual funds are now hovering at 5%, up from an average of 0.43% in March 2022, according to Crane Data, which tracks the industry. The seven-day yields for many money-market funds should hit the 5% mark as early as this weekend as the funds start absorbing the rate hike, according to Peter Crane, president and publisher of Crane Data. Money market funds — low-risk mutual funds composed of holdings like high-quality government debt, repurchase agreements and corporate debt — have swelled in size. On Tuesday, total assets in the funds hit a record-breaking $5.9 trillion, up $5.2 trillion at the end of 2022, according to Crane. The assets in funds geared at retail investors hit $1.97 trillion, up more than 20% year to date, Crane said. The mutual funds for institutional investors climbed to $3.81 trillion, up 10% over the same time period. “Re …
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