The yield of the Vanguard Prime Money Market Fund (Symbol: VMMXX) is now at 2.51%. The Vanguard Federal Money Market Fund (Symbol: VMFXX) is also approaching 2.50% mark. It currently stands at 1 basis point short at 2.49%. The Federal Reserve is expected to raise the rate at the next meeting, so these rates should approach 3% in the next few months.
I hope Vanguard comes up with a new “Low Duration” or “Ultra Short Bond” type of fund to fill the gap between the Money Market Funds and Short Term Bond Funds. Almost all other major fund complexes provide such a fund. The duration of this type of fund should be between 6 months and 1 year.