Where do you put your short term savings for the best interest rate?

[dado potato]

One other thought on I Bonds...
the US Treasury sets the fixed rate portion (at their sole discretion, they do not disclose how they decide.) They use a publicly disclosed method of calculating the variable rate portion, based on CPI-U, reset every 6 months. There is no cap on the variable rate portion, so, hypothetically, if we have runaway inflation in the CPI-U, the I bonds will compound at that inflation rate, increasing every 6 months. To that extent, an I Bond is a hedge against inflation, backed by the full faith and credit of the United States.

Surveys indicate that the public does not expect inflation. Many commentators are of the opinion that the bond market is signaling a recession ahead. It is hard to find a commentator who says savers need to prepare for runaway inflation in consumer prices. However, since August 15, 1971 the global monetary system has consisted entirely of fiat money. The purchasing power of fiat money (US Dollars and all others) steadily declined. Permanent inflation has been generally accepted by central banks, such as the Federal Reserve. Central bankers say they are not content with "disinflation" less than 2%. The "Great Inflation" of the 1970s was characterized by double-digit annual increases in the CPI. I cannot say with certainty that the CPI will never again increase at double-digits.

[jp1]

However, if inflation does again reach double digit levels then the fed will be forced to raise interest rates and interest rates of all sorts of financial prodicts available to the public will rise. Back in the late 70’s my father bought several 30 year treasuries at 15% interest. Surprisingly they never got called so he collected that rate for the full 30 years.

[Tybee]

Where was he holding these JP1? There wasn't Treasury Direct in the 70's.

[jp1]

Where was he holding these JP1? There wasn't Treasury Direct in the 70's.

I have no idea. He bought them wherever one bought treasuries back then.

[Rogar]

My father had one of those older treasuries, too. I think there was a time before the digital age when you could buy paper bonds and also redeem them through a bank.

[kib]

I've always wondered if the flexibility of the CPI "bread basket" isn't manipulated to make inflation appear lower than it really is. Personally a fan of insured muni bonds. I've also discovered the (not really) joys of reward checking accounts - if you're willing to jump through hoops at rather mediocre online banks and put up with switching banks if the terms change, you can do pretty well. This site is good for picking out good deals on standard banking products - I'm currently earning 3.93% on my checking / short term savings balance. (their "earn" column is based on a balance of $5,000, how much you can theoretically earn is capped by the deposit limit.) https://www.depositaccounts.com/checking/reward-checking-accounts.html

[dado potato]

In my experience, selected municipal bonds have performed quite well.

MUB, essentially an index of muni bonds, reached an intraday high of 115.42 on August 15, 2019. I believe the demand for municipal bonds is part of a tendency for investors to "chase yield" in response to the Federal Reserve policy (suppressing interest rates generally).


With municipal bonds there is a risk that prices will drop while you own them. Generally the longer the period to maturity the greater the price fluctuations will be.

[iris lilies]

Re: municipal bonds. Some years ago when my employer, the public library, issued bonds for the purpose of raising money to renovate a major building, I thought it would be fun to buy some of those bonds but I had no idea how to do it. So I told our Edward Jones guy about them and he went out and got them for us. That has been a good investment for bonds. Later he called us about another library bond buying opportunity for a suburban library system, and we bought those as well.

[kib]

In my experience, selected municipal bonds have performed quite well.

MUB, essentially an index of muni bonds, reached an intraday high of 115.42 on August 15, 2019. I believe the demand for municipal bonds is part of a tendency for investors to "chase yield" in response to the Federal Reserve policy (suppressing interest rates generally).


With municipal bonds there is a risk that prices will drop while you own them. Generally the longer the period to maturity the greater the price fluctuations will be.

I try to buy bonds that are both under par and insured. (Quite a challenge lately). And I base my purchases on yield to worst and yield to maturity, not coupon rate. So basically I know my bond may not be worth what I paid for it at maturity but I know what I received over time. - I wouldn't recommend individual Muni's for short term holding, but I don't love bond funds all that much ... I don't trust bankers. Did you know Ken Griffin, Ray Dalio and James Simons, top-earning fund managers, earned a collective 7.7 billion dollars last year? I mean personally recieved that much income, in one year. Guess who paid them.

[dado potato]

I have bought individual muni bonds through a broker. There are certain types I will not consider, and I try to avoid municipalities with a publicized history of corruption. Also there is a limit how far down the scale of bond ratings I would go. I avoided bond funds because the future value is unpredictable, compared to holding an individual obligation until called or maturity, when the future value will be a certainty. When a bond trades at a premium, say 4 or 5% over par, I have taken profits on about 45% of my muni holdings... the premiums would of course drop to zero as maturity date approaches. Good Luck, @kib