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It should be clarified that the advice is to purchase short-dated Treasuries, which have negligible exposure to short term volatility (and are typically the pla

It should be clarified that the advice is to purchase short-dated Treasuries, which have negligible exposure to short term volatility (and are typically the place people park money in times of distress). Also, an important note is that none of the major banks in the US pay 4% or anywhere near that amount on deposits. Think 0.01%. Long term bonds, as you correctly point out are extremely sensitive to changes in interest rates. In the current (rather unusual) situation, where deposits pay nothing and short term Treasuries pay reasonably well, this advice is sound.

tompccs 2y ago
if savings rates in the UK were as bad as they seem to be in the US then I admit I would be tempted. However, a shock at the wrong time can cause those "safe" T-bills to suddenly be much less than what was paid for them. Something similar happened to Silicon Valley bank - it wouldn't have been a problem if their depositors hadn't all demanded their money at once, but these are the scenarios that banks are regulated to avoid.
- zbobet2012 2y ago
  You've a mis-understanding of how funds like FDLXX are managed. In a T-BILL only fund even a decrease in past asset value doesn't matter because they are by law managed to 1$ of net asset value. That is they most hold 1$ of _current_ asset value for every 1$ deposited _at all times_. The only situation where the value of the fund can be less than what you put in is the collapse of US currency, which savings account insurance can not protect against either.
  - tivert 2y ago
    > The only situation where the value of the fund can be less than what you put in is the collapse of US currency, which savings account insurance can not protect against either. I don't think so: suppose the company offering the fund was mismanaged and failed to comply with the regulations. Maybe not likely, but definitely more likely than the "collapse of US currency."
    - zbobet2012 2y ago
      Sure, but you are most likely using these funds as core positions in an account which is SPIC covered to 500k. If you have more than 500k of assets in this form, you should have multiple funds and bank accounts. Again, you need the collapse of the US currency if you are a) not exceptionally wealthy or b) not wealthy and incredibly financially uninformed.
kevin_thibedeau 2y ago
You can get 4+% at US online banks. Short term CDs have been over 5% for the past year. You have to skip the brick and mortar banks with high overhead.
- js2 2y ago
  Ally Savings right now is 4.2%. Their high-yield 6 month CD is 5%. Both are subject to state and federal income tax. FDLXX 7-day yield is 4.93%. 99.5% exempt from state income tax. The most recent 4-week treasury is 5.24%. Exempt from state income tax. There is very very slightly more risk in the FDLXX MMF than a savings account. I started using Fidelity as my primary "bank" years ago and haven't looked back.
  - silisili 2y ago
    Same. I'll admit I didn't want to, because I hate their dated website and app so much. But once you sit down and compare features, absolutely nothing comes close to Fidelity.
    - attentive 2y ago
      I'd say Vanguard's VUSXX at 5.26% clearly beats it.
      - js2 2y ago
        I was with Vanguard for many years. Fidelity has too many things I like to split between two brokerages. Using 4-week treasuries on auto-roll is close enough to VUSXX for me. You really can't go wrong with Fidelity, Vanguard, or Schwab if all you need is a brokerage. But Fidelity has a much broader set of products that it offers compared to Vanguard. https://www.bogleheads.org/wiki/Fidelity:_one_stop_shop https://www.bogleheads.org/wiki/Fidelity:_one_stop_shop
      - silisili 2y ago
        That's if you're only judging by APY. Vanguard has an atrocious app, and is missing many 'bank-like' features that Fidelity provides - I've enumerated some in a sibling comment. I don't think Vanguard even has a debit card, unless that's changed recently.
chomp 2y ago
> none of the major banks in the US pay 4% I'm getting 4.4% with Apple.
- loeg 2y ago
  Yeah, but money market funds pay 5.2% or whatever.
stouset 2y ago
> none of the major banks in the US Literally all you have to do is just stop using shitty megabanks. It isn’t even hard.
Dalewyn 2y ago
>important note is that none of the major banks in the US pay 4% or anywhere near that amount on deposits. Tell us you don't live in America without telling us you don't live in America. Anecdata: Bank with US Bank, enjoying 4.16% interest.
- stavros 2y ago
  Anecdata: Bank with US bank, enjoying 0.01% interest (Chase).
  - happymellon 2y ago
    That just sounds like poor personal decisions.
    - stavros 2y ago
      No, it's a fact that Chase, one of the major banks, offers nowhere near 4% interest. The GP made a snarky reply that "US bank" offers 4% interest, without even naming the bank.
      - Dalewyn 2y ago
        US Bank is literally the 5th biggest and 2nd oldest bank[1] in the US. [1]: https://en.wikipedia.org/wiki/U.S._Bancorp https://en.wikipedia.org/wiki/U.S._Bancorp
        stavros 2y ago
        Huh, I've never heard of this. I thought you meant "a US bank".
        Dalewyn 2y ago
        The lack of an "a" and the capitalized "B" in "US Bank" were for a reason, I like to believe English still means something.

tompccs 2y ago

if savings rates in the UK were as bad as they seem to be in the US then I admit I would be tempted. However, a shock at the wrong time can cause those "safe" T-bills to suddenly be much less than what was paid for them. Something similar happened to Silicon Valley bank - it wouldn't have been a problem if their depositors hadn't all demanded their money at once, but these are the scenarios that banks are regulated to avoid.

zbobet2012 2y ago
You've a mis-understanding of how funds like FDLXX are managed. In a T-BILL only fund even a decrease in past asset value doesn't matter because they are by law managed to 1$ of net asset value. That is they most hold 1$ of _current_ asset value for every 1$ deposited _at all times_. The only situation where the value of the fund can be less than what you put in is the collapse of US currency, which savings account insurance can not protect against either.
- tivert 2y ago
  > The only situation where the value of the fund can be less than what you put in is the collapse of US currency, which savings account insurance can not protect against either. I don't think so: suppose the company offering the fund was mismanaged and failed to comply with the regulations. Maybe not likely, but definitely more likely than the "collapse of US currency."
  - zbobet2012 2y ago
    Sure, but you are most likely using these funds as core positions in an account which is SPIC covered to 500k. If you have more than 500k of assets in this form, you should have multiple funds and bank accounts. Again, you need the collapse of the US currency if you are a) not exceptionally wealthy or b) not wealthy and incredibly financially uninformed.

kevin_thibedeau 2y ago

You can get 4+% at US online banks. Short term CDs have been over 5% for the past year. You have to skip the brick and mortar banks with high overhead.

js2 2y ago
Ally Savings right now is 4.2%. Their high-yield 6 month CD is 5%. Both are subject to state and federal income tax. FDLXX 7-day yield is 4.93%. 99.5% exempt from state income tax. The most recent 4-week treasury is 5.24%. Exempt from state income tax. There is very very slightly more risk in the FDLXX MMF than a savings account. I started using Fidelity as my primary "bank" years ago and haven't looked back.
- silisili 2y ago
  Same. I'll admit I didn't want to, because I hate their dated website and app so much. But once you sit down and compare features, absolutely nothing comes close to Fidelity.
  - attentive 2y ago
    I'd say Vanguard's VUSXX at 5.26% clearly beats it.
    - js2 2y ago
      I was with Vanguard for many years. Fidelity has too many things I like to split between two brokerages. Using 4-week treasuries on auto-roll is close enough to VUSXX for me. You really can't go wrong with Fidelity, Vanguard, or Schwab if all you need is a brokerage. But Fidelity has a much broader set of products that it offers compared to Vanguard. https://www.bogleheads.org/wiki/Fidelity:_one_stop_shop https://www.bogleheads.org/wiki/Fidelity:_one_stop_shop
    - silisili 2y ago
      That's if you're only judging by APY. Vanguard has an atrocious app, and is missing many 'bank-like' features that Fidelity provides - I've enumerated some in a sibling comment. I don't think Vanguard even has a debit card, unless that's changed recently.

chomp 2y ago

> none of the major banks in the US pay 4% I'm getting 4.4% with Apple.

loeg 2y ago
Yeah, but money market funds pay 5.2% or whatever.

stouset 2y ago

> none of the major banks in the US Literally all you have to do is just stop using shitty megabanks. It isn’t even hard.

Dalewyn 2y ago

>important note is that none of the major banks in the US pay 4% or anywhere near that amount on deposits. Tell us you don't live in America without telling us you don't live in America. Anecdata: Bank with US Bank, enjoying 4.16% interest.

stavros 2y ago
Anecdata: Bank with US bank, enjoying 0.01% interest (Chase).
- happymellon 2y ago
  That just sounds like poor personal decisions.
  - stavros 2y ago
    No, it's a fact that Chase, one of the major banks, offers nowhere near 4% interest. The GP made a snarky reply that "US bank" offers 4% interest, without even naming the bank.
    - Dalewyn 2y ago
      US Bank is literally the 5th biggest and 2nd oldest bank[1] in the US. [1]: https://en.wikipedia.org/wiki/U.S._Bancorp https://en.wikipedia.org/wiki/U.S._Bancorp
      - stavros 2y ago
        Huh, I've never heard of this. I thought you meant "a US bank".
        Dalewyn 2y ago
        The lack of an "a" and the capitalized "B" in "US Bank" were for a reason, I like to believe English still means something.