Mortgages, home equity loans, and even car loans are typically adjustedquickly to reflect the demand for money. But those rate increases filter down more slowly when it comes to what the bank is paying you versuswhat you are paying them. The spread, in layman's terms, is profit. Maintaining a reasonable spread is crucial to the life of the bank. But there are other institutions which operate on a more narrow spread.
Investment companies purchase short-term debt on the market.
This collection of debt makes up a mutual fund known as a money market. They are doing this in such large numbers that the narrow spread becomes a large figure in dollar terms. While some of my best friends are bankers, I'm not related to any of them. And they're not cutting me a deal on my short-term money. They arein business to make money, and I am in the business of making the most on my money.