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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35365  
Subject: Re: Some yield de juour Date: 11/11/2005 1:58 PM
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"The 6-month T-bill (3.24%) and the Vanguard Short-Term Federal Bond Fund (4.38%, not an index fund, may not be completely taxable by your state) are also looking mighty tasty.

Don't let greed get'cha."

I don't know about the short term stuff, but I am definitely looking at TIPS, probably 10-year, though even 5-year are suddenly attractive. Given my default for 5-year CDs (my Credit Union) and 4% state tax, 10-year TIPS would have to have a little over 2.5% inflation adjustments and 5-years 2.6% to be winning choices. Since I'm more worried about inflation taking off than getting a bit extra return elsewhere if it is low, these look like good choices. I think TIPS, at current fixed yields, will still be my choice if I can get 5.25% (pre-tax) on a CD come January auctions. Of course, I'm rooting for some sudden sell-off of TIPS driving them over 3% in next 2 months.

I also think the short term bond index is looking pretty good under circumstances where liquidity matters or where CDs or individual TIPS/Treasuries are not available (e.g., many 401ks, etc.) or where low maintenance is desirable (i.e., aging parents/grandparents). I'd still wait, if possible, for a couple more bumps by the Fed, which seem to be in the offing, maybe pushing the yield on the fund up to about 5%.

How much of the Federal Fund is state/local tax exempt? The Treasury funds should be about 100% state/local tax exempt. Short Term Treasury is yield of 3.88%, duration 1.7. I'll take the Index fund (not because I worship index funds, but I like the yield, and some of it is state tax exempt).
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