The Economist has a great piece on the dilemma of today's prudent savers. It's hard to get excited about 1-2% yields on online savings accounts. And 5-yr treasuries yield only 2%.
There is hope in one end of the capital structure. High-grade corporate bonds that mature in the next 2-4 years offer compelling prospects (longer-term bonds have greater duration and therefore greater interest rate risk--think about possible medium-term inflation as we sell treasuries to Asia.) Spreads now are 400-600+ basis points above treasuries. Now, of course, this reflects perceived and actual risk, but with a little review of the underlying company's balance sheets and off-balance sheet stuff, you'll be rewarded by more than a few pennies.
Here are a few (non-callable bonds) worth considering as an alternative to idle cash:
Company | Rating | Maturity | Price | Coupon | Yield to Maturity | Current Yield
Alcoa BBB Jan/2012 87.88 6% 11.00% 6.83%
Kohls BBB Oct/2011 105.69 7.4% 5.02% 6.98%
Goldman A Feb/2012 99.30 5.3% 5.56% 5.4%
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