“Dude, Where’s My Yield?”

Fixed Inceom Chart of the Month: March 2023

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.

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