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Money Market Substitutes Get Hit |
HenryTo
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Joined: 06 Aug 2004
Posts: 11740
Location: Los Angeles, California
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 Posted: Tue Aug 14, 2007 9:45 am Post subject: Money Market Substitutes Get Hit |
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http://news.morningstar.com/articlenet/article.aspx?id=203490&fsection=Comm1&pgid=wwhome1a&lpos=Commentary
| Quote: | The category truly has the lowest risk when it comes to interest-rate risk as its funds have the lowest duration of any taxable funds around. We define ultrashort bond funds as those with durations of less than a year. Because they are naturally owned by investors with pretty short-time horizons most of the funds don't take on much credit risk. However, ultrashort bond funds are allowed to take on more credit risk than money market funds, and some do so. Moreover much of the subprime bonds these funds own are actually rated AA or AAA, so the risks didn't seem like all that much until now.
Usually ultrashort funds' returns are bunched within a few basis points but the subprime problems have scattered them. At one end, the usually steady SSgA Yield Plus (SSYPX) has lost 6.26% for the trailing four weeks and 4.14% for the year. At the other end is Pacific Capital U.S. Govt Short F/I A (PCUAX), which is up 0.78% for the four weeks and 2.74% for the year to date. |
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