The yield starvation diet for American investors is over.
Investors who quit products with ultra-low yields are hungry again for certificates of deposit and money market funds as interest rates surge to levels unseen since 2011. The shift in gravity on interest rates represents a return to normalcy after nearly a decade of rock-bottom yields.
“Cash investors have been numb to yields,” said Pete Crane, president of money fund research firm Crane Data. “This money sensitivity to yields is slowly dawning.”
In the second quarter, bank deposits switched into higher-rate accounts at a 15.6 percent annual rate, up from 9.6 percent historically, according to data gathered by Novantas, a bank consulting firm. The rate of switching will likely reach 20 percent, it said.
Many accounts have a long way to climb. As of June, 65 percent of savings account balances pay no more than 0.25 percent, Novantas said.