The Wall Street Journal (WSJ) reported on the 30th (local time) that the highest level of interest rates in more than 20 years is becoming an unexpected blessing for individual investors.
The yield on three-month and six-month government bonds has reportedly risen to about 5.5 percent, the highest since 2001.
MMF, which invests in ultra-short-term government bonds or deposits cash in the Federal Reserve, guarantees a return of more than 5%, and a one-year certificate of deposit (CD) also provides a return of 5.4%.
The Fed raised its benchmark interest rate by 0.25 percentage points to 5.00 to 5.25% on the 26th. This is the highest level in 22 years since 2001.
Earlier, the Fed implemented an ultra-low interest rate policy to stimulate the COVID-19 economy and has been aggressively raising interest rates since early last year.
Amid such rate fluctuations, some individual investors borrowed money at fixed interest rates with very low interest rates during the pandemic, and after interest rates rise sharply, they make profits by rolling extra cash.
MMF’s assets surged to a record $5.5 trillion as people flocked to cash-based investments.
Banks are also increasing their use of CDs to attract deposits.
CD refers to an anonymous product that can be transferred among banks’ regular deposits. CDs pay higher interest than general deposit accounts, but depositors usually have to deposit cash for a fixed period of time, such as six months or one year.
At the same time, the iShares ETF (iShares ETF), which invests in government bonds with maturity of less than three months, is gaining huge popularity this year, the WSJ reported.
Laura, 44, a communications consultant who lost money on stock investments in 2021, is also one of the examples of recent cash rolling fun.
Laura made a profit by purchasing short-term government bonds with a yield of 5.5% through the government website.
