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In reaction the uncertainty in the stock and bonds markets, interest in bank money market accounts has been rising. As of June 2006, the Federal Reserve's recent tightening of monetary policy in the U.S. has caused a board sell-off across all stock markets and turmoil in securities markets worldwide. Bank money market accounts have remained a haven for cash positions throughout this turmoil, and bank money market rates have benefited by the Fed's actions with yields approaching an important 5% psychological barrier.
While the difference between the low 5% and high 4% accounts may not be very much to the average investor in terms of real returns, yields in the 5% range has been a threshold for which institutional investors have frequently shifted massive investment positions into cash as a hedge against failing equity markets. This potential investment opportunity is particularly intriguing to investors because of the minimal risk involved in the bank money market accounts from a short or long-term view.
For those who have a good amount of money to invest and are a little edgy about the placement of their money a bank money market account could be just the right answer due to the ever-climbing rates. According to BankRate.com, the highest money market accounts in April of 2004 had a yield of around 2.4%, whereas the same accounts in April of 2006 are yielding about 4.8%. Even the highest non-taxable money market funds are up from almost 1.2% in 2004 to around 3.3% in 2006.
The Near Future for Bank Money Market Rates - Bank money market accounts are generally a great place to turn for investors because of the reduced risk and attractive yields that are available in times of economic uncertainty - and these times are certainly uncertain. Price inflation for ordinary goods and services is reducing the purchasing power of American households, eroding savings and diminishing and reducing the value of long-term investments. Excessively slow economic growth is reducing employment opportunities, discouraging business expansion, and forcing corporations to cut dividends. Neither bond nor stock investing in such an environment is a safe venture, and the inaccessibility of certificates of deposit makes bank money market rates very attractive. As long as the Fed is being vigilant about inflation (and they are almost to a fault), bank money market rates are likely to slowly and steadily climb throughout 2006.
Disclaimer - The information on this site is believed to be accurate, but no warranty is made regarding rates, terms or features of any financial product. Carefully read the prospectus for any product before investing. Advertisements for bank money market rates, accounts, and funds should be reviewed by the appropriate tax, financial and legal advisors before making an investment.
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