4 ms·
"If the hikes play out, we'll land around what, 2-3% for the fed funds rate? That's low, historically." But it's not the 0.1% that drove money out of other ass
by mcguire 4y ago
"If the hikes play out, we'll land around what, 2-3% for the fed funds rate? That's low, historically."
But it's not the 0.1% that drove money out of other asset classes (i.e. bonds) because they couldn't generate any returns.
- arcticbull 4y agoDo you really see folks broadly moving from risk assets to a 2-3% interest savings account in a 3.x% inflationary environment?
- Spivak 4y agoI mean this sincerely if I could just park my savings in an “exactly matches inflation” account I would be over the moon. So yeah kinda, I believe it. Terrible interest rates have genuinely caused me to have to find somewhere to put my money that isn’t a bank.
- arcticbull 4y agoYou can! [1] Although it is slightly less liquid, if you're treating it as an emergency savings account, it's really not a big deal. [1] https://www.treasurydirect.gov/indiv/products/prod_ibonds_glance.htm https://www.treasurydirect.gov/indiv/products/prod_ibonds_gl...
- mcguire 4y agoYes. But think institutional investors of various flavors rather than personal, individual accounts. The 2-3% is the Fed funds rate; actual rates on government and commercial bonds will be somewhat higher. (A friend recently pointed out the current 6% advertised rate on lower-grade commercial bonds.) Couple that with much lower risks (on things that aren't those 6% bonds) and it becomes a good third option for anyone whose previous choice was between -3% inflationary return on cash and stock market risks.