Fidelity - SHV BIL or TBILL ladder (auto roll)

[jhogue]

Isn't it interesting that Fidelity has kept a relatively high ER for its money market funds at the same time its massive advertising campaign highlights its "low fees"?

Lower fees, however, will not fix the problem of systemic risk in the repo market. The FOMC's repeated injections of liquidity in the last six months do not give me a warm fuzzy about the future stability of money market funds.

My Cash quadrant is currently composed of FDLXX / T-bills under 1 year maturities/ and US Savings Bonds. This mix is 100% Treasury issues and 0% repos.

[dualstow]

Isn't it interesting that Fidelity has kept a relatively high ER for its money market funds at the same time its massive advertising campaign highlights its "low fees"?

Probably fewer than half of their clients notice or even know what an expense ratio is.

[jhogue]

dualstow,
You are probably correct that few people know what the ER is in their money market mutual fund.

However, the big money certainly knows: SPAXX, one of the cash sweep funds, has $152 billion in net assets. FDLXX, the Treasury only money market fund, has only $2.9 billion in net assets. Clearly, there is a marked preference for yield over safety.

[welderwannabe]

However, the big money certainly knows: SPAXX, one of the cash sweep funds, has $152 billion in net assets. FDLXX, the Treasury only money market fund, has only $2.9 billion in net assets. Clearly, there is a marked preference for yield over safety.

I don't believe FDLXX is offered as a sweep (aka core account as fidelity calls it) for any account types, while SPAXX is the default choice for many. My guess is SPAXX has more assets because people don't bother changing from the default sweep.

I keep my PP cash in this format:
50% FDLXX
50% auto roll t-bills

[jhogue]

You are right that FDLXX cannot be used as a sweep account and SPAXX can. That explains part of the disparity in the size of the funds, but not all of it--in my view.

[ppnewbie]

This thread is very helpful. I had a minor freak out today when I looked at my Fidelity FDRXX cash portion of my golden butterfly portfolio and realized there is over forty percent “repurchase obligations”!

I’m going to research a bit but will likely move it all to FDLXX and then start doing auto roll t-bills.

[ppnewbie]

I also went to totaled all my fidelity expense ratio's and realized they are siphoning off a significant chunk of money. Least of which they are charging me a large amount of money to hold cash and make it somehow risky using FDRXX (repo's). I'm going to buy t-bill at auction.

Does anyone have a thought about just buying all 3 month bills or is it better to do a 1,2,3,6 distributed evenly? It seems that the difference in yield may not really be worth effort. I am also going to put them on autoroll.

[ppnewbie]

Just put in 75% of my cash into 1 and 2 month t-bills auction for the tenth. I am going to put in an order for the rest at the next 3 month t-bill auction. (Auto-roll)

[yankees60]

I am concerned that Fidelity managers of FDRXX and SPAXX have been loading up with repos (now 46.60% and 48.98%, respectively) in their never-ending hunt for a minuscule improvement of yield in a super-low yield environment . US government repos are exposed to systemic risk that Treasury-issued securities lack. According to Investopedia:

“Nonetheless, in spite of regulatory changes over the last decade, there remain systemic risks to the repo space. The Fed continues to worry about a default by a major repo dealer that might inspire a fire sale among money funds which could then negatively impact the broader market. The future of the repo space may involve continued regulations to limit the actions of these transactors, or it may even eventually involve a shift toward a central clearinghouse system. For the time being, though, repurchase agreements remain an important means of facilitating short-term borrowing “

This is not how I want to be holding my cash in the next financial crisis.

Curious to see if you have checked to see if they have had any issues during this current "financial crisis"? Or, have we not yet reached the state of being in a "financial crisis"?

Vinny

[jhogue]

There are unresolved issues with the liquidity of the bond market, the extent of which are not entirely clear.

See:

Neil Irwin's article in the New York Times, "Something Weird Is Happening on Wall Street, and Not Just the Stock Sell-Off," March 12,2020.

and

Sonny Oh, "These are the 'highly unusual disruptions in the U.S. bond market that force the Fed to ramp up support to Wall Street," market watch.com, March 12, 2020.