What is the difference between a money market mutual fund and a money market deposit account?

Money market deposit account

The money market account is treated like a bank savings account and will have FDIC or NCUA protections.

nThe money market mutual fund is treated like a mutual fund, and has no protections from the FDIC or NCUA.

The mutual fund version can lose money.

This is referred to as u201cbreaking the bucku201d and is rare but has occurred.

Money market account rates

A lot of this boils down to supply demand but generally speaking in the US.

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traditional CD pricing roughly tracks LIBOR rates for the duration of the CD in addition to any additional risk for the bank which the investors demand in the pricing as it is considered unsecured funding.

There are also some higher risk CDs which are also known as structured notes and are priced based on the underlying asset made available by the bank.

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Money market accounts tend to track the return on short term treasury bills plus any fund specific risk (e.

g.

liquidity) as this money is invested by asset management teams at a bank via bankruptcy remote SPVs, eliminating bank specific credit risk.

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mortgage rates depend on the underlying risk and rates in the securitization markets (e.

g.

RMBS, CMBS etc.

) which in turn roughly depends on treasury rates + tranche specific risk.

Low risk borrower with higher quality collateral and guaranteed by an agency like FNMA will pay a lower mortgage rate within a range.