Rising interest rates and stock-market volatility over the past year have added extra allure to the high-yield savings accounts and certificates of deposit that banks offer.
Depositors at the two failed banks are getting access to all their money, not just the funds below the Federal Deposit Insurance Corporation’s $250,000 coverage limit. The Federal Reserve is also establishing a way for banks with any liquidity issues to tap cash. Statements from the “bridge banks” created in the FDIC receivership process said they are open and working.
“Rushed action leads to more pain,” said Eric Amzalag of Peak Financial Planning of Woodland Hills, Calif. “It is good to be decisive, but it’s a fine line between being decisive and being impulsive.” But Satyajit Das, a former banker and author of “A Banquet of Consequences — Reloaded,” wrote on MarketWatch on Monday: “The banking system’s problems may not be over. The collapse of Silicon Valley Bank highlighted the interest-rate risk of purchasing long-term securities financed with short-term deposits and the susceptibility to a liquidity run.”
“We have just gotten a harsh reminder that FDIC insurance limits matter, so managing cash properly to maximize yield, minimize cash drag and maintain FDIC insurance is as important as ever,” he said. Money-market funds and Treasury bills Think about cash investments as a variety of ways to rake in some return and retain quick access to money at a very low risk. There’s the APY from savings accounts and CDs.
Money-market funds are mutual funds comprised of short-term U.S. government debt, municipal and corporate debt that quickly matures. At the conservative end of the risk spectrum, investors can usually get their money from these funds in trade settlements that happen the same day the trade is executed, according to Charles Schwab Corp. SCHW .
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