If you have a Fidelity brokerage account, there is a good chance your uninvested cash is already sitting in Fidelity Government Money Market Fund (NASDAQ:SPAXX) and you have never given it a second thought. Fidelity parks uninvested cash in SPAXX by default, and most investors never look. That is fine for a while. It becomes expensive the moment short rates start moving and you do not notice.
SPAXX is a government money market mutual fund run by Fidelity that holds short-term U.S. government securities, Treasury repurchase agreements, and cash. Its job is simple: preserve $1 per share, pay interest daily, and stay liquid. It sits inside the Fidelity Hereford Street Trust and doubles as the core position, meaning it is where trade proceeds, dividends, and deposits land automatically until you invest them.
What You Pay to Hold Cash in SPAXX
Per the most recent prospectus dated June 26, 2026, SPAXX carries a gross and net expense ratio of 0.42%. That is the annual cost skimmed off the fund’s gross yield before you see a dime of interest. On a $50,000 cash balance, that works out to roughly $210 a year in fund expenses.
For a money market fund in a rate environment like this one, 0.42% is on the higher side of the peer group. Treasury-only funds and some competitor sweeps run cheaper, which is why the after-fee yield gap between SPAXX and its rivals is usually the whole story with money market funds. The formula is simple: short-term government paper and a fee.
How the Yield Tracks Short Rates
SPAXX does not publish a fixed rate. Its 7-day yield floats with what short-term Treasuries and overnight repo are paying, net of that 0.42% expense ratio. As of August 24, 2026, coupon-equivalent Treasury bill yields ran from 3.7% on the 4-week bill to 3.93% on the 26-week bill and 4.03% on the 52-week bill. The Treasury curve reads similarly, with the 1-month at 3.79% and 3-month at 3.87%.
That is the raw material SPAXX invests in, and it is the ceiling on what the fund can pay. The Federal Reserve’s federal funds target upper bound sits at 3.75% as of August 24, 2026, down 0.75% from a year ago. Translation: SPAXX’s yield has drifted lower over the past twelve months and would drift further if the Fed cuts again, because the fund’s holdings mature quickly and get reinvested at whatever the market pays that week.
One Caveat Most Sweep Holders Miss
SPAXX is not a bank deposit. It is not FDIC insured. The fund aims for a stable $1 net asset value, though that goal is not guaranteed, and government money funds have historically broken the buck only in extreme stress. Still, the risk is not zero, and cash held in SPAXX does not carry the same federal backstop as an FDIC-insured savings account or CD.
The comparison to bank cash is not flattering to banks at the moment. The FDIC national average 12-month CD rate was 1.71% APY as of August 1, 2026. That is the average, not the best available, but it frames why cash sitting in a checking account or a low-rate bank sweep is quietly losing purchasing power while short Treasury bills yield closer to 4%.
Who SPAXX Suits and Who Should Look Elsewhere
SPAXX makes sense for Fidelity brokerage customers who want their idle cash earning something close to short-Treasury rates without any manual work. Emergency-fund cash, dry powder waiting for a market entry, and the interim cash between trades are all reasonable uses. Retirees taking regular distributions from a Fidelity IRA also benefit because SPAXX keeps the next few withdrawals liquid and yielding.
Investors who want FDIC insurance, a locked-in rate, or a lower expense ratio have better options. Anyone holding six-figure cash balances at Fidelity for the long haul should at least compare SPAXX’s after-fee yield against a Treasury-only fund or a direct T-bill ladder, because 0.42% on a large balance is real money.
Related Funds Worth a Look
- Fidelity Treasury Only Money Market Fund (NASDAQ:FDLXX): A Fidelity sibling holding only Treasuries, often more state-tax friendly than SPAXX for investors in high-tax states.
- Vanguard Federal Money Market Fund (NASDAQ:VMFXX): Vanguard’s default sweep, historically cheaper than SPAXX and a natural comparison for cost-focused savers.
- SPDR Bloomberg 1-3 Month T-Bill ETF (NYSEARCA:BIL): The ETF alternative for investors outside Fidelity who want T-bill exposure tradable like a stock.
- iShares 0-3 Month Treasury Bond ETF (NYSEARCA:SGOV): Another ultra-short Treasury ETF, often carrying one of the lowest expense ratios in the category.
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