Muni Money Fund Yields Hit 4%
Barron's says, "Muni Money-Market Fund Yields Hit 4%." The article tells us, "Investors can now get a 4% yield on low-risk municipal money-market mutual funds -- but that rate may not last because yields in the sector are volatile. Municipal money-market funds are formerly a hot and now backwater area of the tax-exempt market that offers investors an alternative to the much larger taxable money-market funds. There are about $130 billion of muni money-market funds, according to Morningstar, against more than $5 trillion of taxable money funds. The muni total is down from $500 billion prior to the financial crisis. Vanguard, Fidelity, Charles Schwab, and JPMorgan Chase are leading players in muni money funds." It continues, "Recently, yields on muni money-market funds have spiked, resulting in roughly 4% yields on the $16 billion Vanguard Municipal Money Market Fund (VMSXX) and the $6.7 billion Fidelity Investments Money Market Tax Exempt (FTCXX).... A 4% yield on a municipal money-market fund is equivalent to a yield of more than 6% for someone in the 35% federal tax bracket. The current yields can make tax-exempt muni funds an alternative to taxable funds. Taxable money-fund yields have risen to 4.5% or higher on some funds as the Federal Reserve recently lifted the key federal-fund rate to a range of 4.75% to 5%. The giant Vanguard Federal Money Market Fund (VMFXX) with over $200 billion in assets yields about 4.75%." Barron's adds, "Yields could stay elevated in April on muni money-market funds because many investors redeem money-fund holdings to pay taxes, decreasing demand. There are single-state muni money-market funds that offer a full tax exemption to in-state residents on interest income. The bulk of the single-state funds are focused on California and New York, the two most populous high-tax states. Schwab, Fidelity, JP Morgan, and Vanguard all have New York and California-focused funds." For more money fund mentions, see The Wall Street Journal articles, "Investors Seek Safety in Tech Stocks, Money-Market Funds" and "Individual Investors Slow Stock Purchases, Leaving Markets Vulnerable."
