“Dude, Where’s My Yield?”
While short-term bond yields are rising, bank deposit yields remain close to zero. Since December 2020, the Federal Reserve has raised short-term interest rates to 5.00%, but in the meantime, yields on bank savings deposit rates have increased to only 0.37%. We believe investors can pick up significantly more yield by using short-term high-quality fixed income investments.
Short-term Fixed Income Yields are Significantly Higher than the 0.37% Yield
on Bank Savings Deposits
- Yields of short-term high-quality fixed income investments versus bank deposits, as of March 23, 2023:
- The yield on bank savings deposits is 0.37%.
- The yield on short-term Treasury bonds is 4.52%.
- The yield on short-term investment grade corporate bonds is 5.06%.
- The yield on short-term municipal bonds is 4.37% (tax equivalent yield at a tax rate of 35%).
- Total U.S. bank deposits were at $19.2 trillion as of December 2022, barely off their peak of $19.9 trillion in March 2022.
Data as of 3/23/23. Source: Bloomberg, FDIC.
Learn more about SBH’s Fixed Income Strategies.
2/23: The Rise of Passive Bond Investments
1/23: End of a (Negative) Era: Negative Yields Reach Positive Territory Globally
12/22: Will the Upcoming Fed Interest Rates Projections Match the Current Market Expectations?
11/22: The “Sweet Spot” for Liability-Driven Investing (LDI)
10/22: The Credit Risk You May Not Realize You’re Taking
9/22: How Higher Yields Can Protect Fixed Income Investments