Money market funds yielding more than 5% won’t last. Where to deploy idle cash instead

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Investment Strategy,Personal Finance,Bread Financial Holdings Inc

Yields in cash are poised to drop once the Federal Reserve pulls back rates.

Money market funds' siren song has become a little louder: With the timing of Federal Reserve rate cuts shaky, yields on cash are still hot – for now. After central bank policymakers last week highlighted a "lack of further progress" on tamping down inflation, Wall Street responded with widely varying expectations on the number of expected rate cuts in 2024, ranging from as few as one to as many as four.

Taxes are also a key consideration as you build out your fixed income sleeve. The interest you receive on corporate bonds, CDs and money market funds is subject to ordinary income taxes, which can be as high as 37% depending on your tax bracket. Interest income from Treasurys, meanwhile, is subject to federal income tax but exempt from state and local taxes.

 

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