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What Do Rising Interest Rates Mean For Money Market Yields?

Over the last few years, numerous money market funds decided to decrease the expense ratios of their funds (in some cases even running their funds at a loss) to avoid microscopic returns or even negative returns.  Now, as the Federal Reserve starts to increase interest rates, guess which will go up first, yields or expense ratios?  Expense ratios of course!  The higher the expense ratio on the fund, the longer it will take for yields to increase.  These high expense funds include brokerage house money funds that pay commissions, mutual fund supermarket platforms (this is one of their primary sources of income) and funds sponsored by mutual fund groups such as Federated, Alliance and Scudder (retail side) to name a few that pay commissions to independent advisors, brokerage firms and the banking industry.

For further information, contact Louis P. Stanasolovich, CFPä  at (412) 635-9210 or e-mail him at legend@legend-financial.com.




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