“Why is the Missouri Stable Income Fund rate currently lower than higher yielding savings accounts or Certificate of Deposit (CD) rates?” We’ve gotten this question a lot lately and the answer is rather complex. What you need to understand first is that high yield savings accounts, CDs, and stable income funds are different types of investment options, and their rates are not calculated the same. The economy plays a big role in the declared rates for each of these investment options. We have been in a rapidly rising interest rate environment since March 2022, an environment that has not been experienced for over 40 years. This has led to an inverted yield curve and an environment where high yield savings and money market accounts tend to thrive. This is a huge reason why rates within these options are higher at the moment. If we look at historical data, there have been 20 yield curve inversions since 1962 and all were temporary. In addition, bond yields typically increase as the Federal Reserve raises interest rates. This drives down current bond market values and ultimately the stable income crediting rate which is backed by a portfolio of underlying high-quality bonds. At some point, we will see the Fed start to lower interest rates and we anticipate that this will create a more normalized yield curve and an environment where the stable income fund would produce a more attractive return. Remember, the goal of the stable income fund isn’t to consistently outperform other investment options, but to provide protection of principal and steady growth over time. It is designed to provide positive returns during both falling and rising interest rate environments relative to money market funds and short-term bond funds and prior to this most recent period has outperformed money market fund yields since the stable income fund inception in 2006. Even at a lower crediting rate, as we see now, the stable value is still accomplishing its primary objective.
