Vanguard Municipal Money Market VMSXX 1.39%

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Kevin M
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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by Kevin M » Sat May 19, 2018 8:59 pm

neurosphere wrote:
Sat May 19, 2018 6:09 pm
But I wish I could easily plot MM yields for a couple decades of data. I could brute-force it in about 30 minutes I suppose. Not not tonight. :D
I pretty quickly found my spreadsheet with the script in it, and ran it for muni MM from 1/4/1993, which is when SEC yields were first published (the fund inception was 6/10/1980). I'm not sure how easy it is to see any cycles with this much data in the chart, but here it is:

Image

The minor vertical gridlines are quarter boundaries, and just eyeballing a few segments, there do appear to be quarterly peaks. Wouldn't be hard to zoom in on a smaller number of years if you or anyone wants to request a chart of a subset of the years.

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by xilex » Sat May 19, 2018 9:59 pm

Kevin M wrote:
Sat May 19, 2018 8:59 pm
I pretty quickly found my spreadsheet with the script in it, and ran it for muni MM from 1/4/1993, which is when SEC yields were first published (the fund inception was 6/10/1980). I'm not sure how easy it is to see any cycles with this much data in the chart, but here it is:

Image
That's neat. I wonder if there's a db of historical high-yield savings account interest rates anywhere to compare to.

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by Kevin M » Sat May 19, 2018 10:19 pm

Here I zoomed in on 1995-2000:

Image

I do see lots of peaks at or near the quarter boundaries.

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by libralibra » Sun May 20, 2018 1:35 am

Artsdoctor wrote:
Mon Apr 09, 2018 11:22 pm
Bimmer wrote:
Thu Apr 05, 2018 11:46 pm
Is VMSXX FDIC insured? If not, should I worry about that?
Money market funds are not FDIC-insured. The likelihood of a Vanguard money market fund "breaking the buck" would have to be considered virtually zero and if it were to happen, you'd have a lot more things to worry about.
I've read this here before, but it seems to me the logic is reversed. I agree with the high unlikelihood part, but it's precisely when the need is greatest that your cash better be totally guaranteed and accessible.

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by abuss368 » Sun May 20, 2018 6:54 am

am wrote:
Sat May 19, 2018 7:00 pm
How about the Vang. Short term muni fund as a replacement for the money market at high brackets? The yield for short term muni is 1.76% and the price has fluctuated about 1% over the year. There’s also no frequent trading restriction as far as I know.
You could do this however this would involve a sale for any redemptions and thus reporting on your tax return. Money market funds avoid this as the NAV is $1.00.
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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by am » Sun May 20, 2018 8:46 am

abuss368 wrote:
Sun May 20, 2018 6:54 am
am wrote:
Sat May 19, 2018 7:00 pm
How about the Vang. Short term muni fund as a replacement for the money market at high brackets? The yield for short term muni is 1.76% and the price has fluctuated about 1% over the year. There’s also no frequent trading restriction as far as I know.
You could do this however this would involve a sale for any redemptions and thus reporting on your tax return. Money market funds avoid this as the NAV is $1.00.
I’m hoping my accountant won’t charge extra for that :)

Do you know if sec yield of short term muni is more stable than muni money market? I switched to muni mm at sec yield of 1.55 and now its 1.33 and dropping

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by gmaynardkrebs » Sun May 20, 2018 8:57 am

libralibra wrote:
Sun May 20, 2018 1:35 am
Artsdoctor wrote:
Mon Apr 09, 2018 11:22 pm
Bimmer wrote:
Thu Apr 05, 2018 11:46 pm
Is VMSXX FDIC insured? If not, should I worry about that?
Money market funds are not FDIC-insured. The likelihood of a Vanguard money market fund "breaking the buck" would have to be considered virtually zero and if it were to happen, you'd have a lot more things to worry about.
I've read this here before, but it seems to me the logic is reversed. I agree with the high unlikelihood part, but it's precisely when the need is greatest that your cash better be totally guaranteed and accessible.
I do consider the the Vanguard Treasury MMF to be as safe as deposits in an FDIC insured bank in any conceivable crisis. A run on Treasuries is a run on the full faith and credit of the US gov, and would therefore pose the same issues re the FDIC guarantee. I suppose a local brick and mortar bank with an ATM might provide more immediate access to cash, but that has nothing to do with the FDIC guarantee.

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by abuss368 » Sun May 20, 2018 9:02 am

am wrote:
Sun May 20, 2018 8:46 am
Do you know if sec yield of short term muni is more stable than muni money market? I switched to muni mm at sec yield of 1.55 and now its 1.33 and dropping
I do not know. The yield for the Prime Money Market fund has been increasing and is presently 1.86%.
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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by am » Sun May 20, 2018 9:06 am

abuss368 wrote:
Sun May 20, 2018 9:02 am
am wrote:
Sun May 20, 2018 8:46 am
Do you know if sec yield of short term muni is more stable than muni money market? I switched to muni mm at sec yield of 1.55 and now its 1.33 and dropping
I do not know. The yield for the Prime Money Market fund has been increasing and is presently 1.86%.
Tax equivalent yield of muni mm is 2.24% and short term muni 2.97 at my bracket calculated using this calculator.

https://funds.eatonvance.com/tax-equiva ... ulator.php

I’ll hold tight for now as I don’t know any better options for my short term cash savings.

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by neurosphere » Sun May 20, 2018 9:36 am

Kevin M wrote:
Sat May 19, 2018 10:19 pm
Here I zoomed in on 1995-2000:

Image

I do see lots of peaks at or near the quarter boundaries.
Your graphs are great Kevin, thanks for sharing! I agree, it seems these peaks are not a recent phenomenon. I've been researching to find an answer for these quarterly changes. Google has failed me so far. But in the process I've learned about muni "variable rate demand notes" (aka put bonds or 7-day floaters). Muni MM funds seem to have most of their holdings in these kinds of bonds, and I'm wondering if there is some feature of these bonds which is responsible for quarterly yield spikes. I'll keep digging! :)

P.S. When I plotted a couple years of old data, I thought I saw monthly peaks as well. Your graph also seems to show smaller peaks between the larger quarter peaks?

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by BlackcatCA » Sun May 20, 2018 10:21 am

Thanks Kevin and neurosphere for investigating the peaks observation.

Practically speaking, using the daily SEC yield to calculate the TEY for comparison with other investments might not be the best. As some have experiences (myself included), at peaks it gives a false impression that the muni MM is much much better than other investments. So what is a better way to have a more realistic sense of the true yield of a chosen muni mm fund? Would the average of distributed yield (historical) and SEC yeild ( future looking) be a better proxy at a specific point in time? Or are there easy way to calculate 'area under the curve' of the peaks, or other math maneuvers?

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by neurosphere » Sun May 20, 2018 10:39 am

BlackcatCA wrote:
Sun May 20, 2018 10:21 am
Practically speaking, using the daily SEC yield to calculate the TEY for comparison with other investments might not be the best. As some have experiences (myself included), at peaks it gives a false impression that the muni MM is much much better than other investments.
I'm under the impression that the SEC yield is the best measure of what your money will earn in the very short term. The distribution yield is historical. Muni interest rates can change rapidly day to day, and thus it doesn't make sense to know what the fund paid out last month. And at peaks, the rate of ANY volatile investment will tend to look "high". Likewise, at troughs or on the up-slope of a rapid rise the SEC yield (or any other similar measure) will underestimate the return.

All one can do is perhaps realize there is a quarterly peak effect, and figure out whether 1) when accounting for these, which fund might yield the most on average over a period of time or 2) attempt to take advantage of the short-term fluctuations by moving money in and out of munis based on where the rates are at any given day. At one point last month I estimated that if one had $1M is a money market fund they they moved back and forth between a muni fund and a Prime MM, one could eek about about $200-$500 in extra yield a year. This was based on current interest rates, and a marginal tax rate where the TE yields between Prime and muni MM funds crossed in an optimal way.

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by Kevin M » Sun May 20, 2018 2:17 pm

BlackcatCA wrote:
Sun May 20, 2018 10:21 am
Practically speaking, using the daily SEC yield to calculate the TEY for comparison with other investments might not be the best. As some have experiences (myself included), at peaks it gives a false impression that the muni MM is much much better than other investments. So what is a better way to have a more realistic sense of the true yield of a chosen muni mm fund? Would the average of distributed yield (historical) and SEC yeild ( future looking) be a better proxy at a specific point in time? Or are there easy way to calculate 'area under the curve' of the peaks, or other math maneuvers?
SEC yield for money market funds is annualized average of daily income distributions over previous seven days, so it tells you pretty much exactly what you earned, annualized, over last seven days. When we see it dropping, as it has been recently, you're earning a bit less today than you did over last seven days, so SEC yield slightly overstates what you're earning today.

I'm assuming it's seven calendar days, so anyone who can cite a reference stating otherwise, please let me know. So, yield for muni MM on 5/18 was 1.88%, representing annualized income distributions for 5/12-5/18. No yield is published for 5/12, which was a Saturday, but yield on 5/11 was 1.98% and on 5/14 it was 1.94%. So let's approximate yield on 5/12 as about 1.96%. So someone who thought they were earning 1.96% on 5/12 actually ended up earning 1.88% over the following week.

Of course when yields are increasing, it works the opposite way.

So the yield dropped about 8 basis points in a week, or roughly one basis point per day. I see basically the same drop for CA muni MM. Since we still appear to be on the downward path, which last time lasted about 1.5 months, and we're less than one month in now, I conclude that now probably is time for me to switch to Prime MM. My CA muni MM TEY was 1.91% as of 5/18, while Prime MM yield was 1.86%, so my CA muni MM TEY based on income distribution today probably already is lower then Prime MM yield.

In other words, if you want to optimize and earn a few more pennies, you probably want to switch a few days before the yields cross over, whether on the downswing or upswing, assuming that the quarterly cycle continues, and that the muni MM funds yields don't increase enough to beat Prime MM on an TEY basis even at the troughs of the cycles.

Note from the chart I posted earlier that the peaks of the Muni MM TEYs are much higher above Prime MM yield than the troughs are below, and the area of the the triangles above Prime MM yield are much larger than the area below for the last two cycles. So, if I didn't want to bother with a few mouse clicks to earn a few more pennies, I'd probably be better of just sticking with the muni MM funds as long as we see a similar pattern continuing.

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by Kevin M » Sun May 20, 2018 3:54 pm

If you want to take the time, you can actually figure out what your yield was yesterday--not averaged over previous seven days. In doing so, I calculate that the yield of CA muni MM dropped from 1.28% on 5/12 to 1.17% on 5/19 (yesterday). This equates to a drop in TEY for me of 1.97% to 1.80%, and the day I should have switched to Prime MM was 5/16, as on 5/17 TEY fell from 1.91% to 1.81%, with Prime MM SEC yield at 1.86%.

This is without calculating the actual daily yield on Prime, but SEC yield has been changing slowly and increasing, so I don't think that's necessary.

The way to do it is as follows. In your Balances and holdings screen, click on Balances by date tab. Note your accrued dividends on the most recent date available (currently 5/19--yesterday), and the day before. Subtract the latter from the former, divide by your account balance on the day before, and multiply by 365. If you think you are earning interest on accrued dividends, then add accrued dividends on day before to balance on day before for the denominator. In my case, it makes no difference to two decimal places, but a 0.001% difference to three decimal places.

I verified the accuracy of this by calculating the daily annualized yield for the previous seven days (not including 5/19), and taking the average. It came out to 1.24%, which is the SEC yield displayed for CA muni MM on 5/18.

Note that you can get accrued dividends on Saturday and Sunday by selecting the dates for those days. You will see the selected date revert to the date for Friday, but you will see your accrued dividends are higher than on the previous Friday. You can't get Sunday today because you only get data through yesterday, but you can select the previous Sunday to see that this works.

I am entering the order to exchange from from CA Muni MM to Prime MM now ... done.

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by BlackcatCA » Sun May 20, 2018 5:07 pm

Kevin M wrote:
Sun May 20, 2018 3:54 pm
If you want to take the time, you can actually figure out what your yield was yesterday--not averaged over previous seven days. In doing so, I calculate that the yield of CA muni MM dropped from 1.28% on 5/12 to 1.17% on 5/19 (yesterday). This equates to a drop in TEY for me of 1.97% to 1.80%, and the day I should have switched to Prime MM was 5/16, as on 5/17 TEY fell from 1.91% to 1.81%, with Prime MM SEC yield at 1.86.

Kevin
Thanks Kevin. I wish this is a widget that Vanguard would put on the dashboard for all to use, for those who want to monitor TEY. Alas I don't have your patience or time to monitor it too closely.

It does help me decide to buy Treasury notes next week though.

Still puzzling to me is why the CA mm yield (and presumably national muni?) is going down, whereas the Prime mm and other rates are going up. I am not aware of any adverse muni news that cause the muni market to change so much in the opposite direction. Anyone has a guess?

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by stocknoob4111 » Sun May 20, 2018 6:23 pm

This may be a silly question but I am planning to swap my VMSXX to the Prime Market Fund, do I lose the accumulated interest for the month? I bought VMSXX on 5/2. I would almost certainly think I would get the interest since that is earned by me but who knows sometimes some of these rules are nonsensical, I just wanted to double check.

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by Kevin M » Sun May 20, 2018 7:36 pm

stocknoob4111 wrote:
Sun May 20, 2018 6:23 pm
This may be a silly question but I am planning to swap my VMSXX to the Prime Market Fund, do I lose the accumulated interest for the month? I bought VMSXX on 5/2. I would almost certainly think I would get the interest since that is earned by me but who knows sometimes some of these rules are nonsensical, I just wanted to double check.
You get the accrued interest. You can see how much that was as of yesterday by looking at the Balances by date tab, and entering yesterday's date.

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by Kevin M » Sun May 20, 2018 7:39 pm

BlackcatCA wrote:
Sun May 20, 2018 5:07 pm
Still puzzling to me is why the CA mm yield (and presumably national muni?) is going down, whereas the Prime mm and other rates are going up. I am not aware of any adverse muni news that cause the muni market to change so much in the opposite direction. Anyone has a guess?
If you review the thread, you'll see that there is a cyclical effect in muni MM yields that seems to peak near calendar quarter divisions (although the most recent one lagged by almost a month). So it's going down now, but if the cycle holds, it will start moving up again in a few weeks, then it will go above Prime on a TEY basis (for me anyway), and again be the better value. I don't think anyone has yet been able to explain the reason for the cycle.

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by yeahman » Mon May 21, 2018 12:36 pm

Any easy way to adjust for the cyclical effect so I can see if it's worth it? You'd think this would be a published number. There's no way to compare without it.

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by Kevin M » Mon May 21, 2018 2:19 pm

yeahman wrote:
Mon May 21, 2018 12:36 pm
Any easy way to adjust for the cyclical effect so I can see if it's worth it? You'd think this would be a published number. There's no way to compare without it.
I kind of addressed this in this post earlier in the thread: viewtopic.php?f=1&t=246263#p3935760. This shows graphically that I would have done better just staying in the CA muni MM fund than in Prime MM fund since about mid-December 2017, and there is some verbiage to explain why. But it's so easy to exchange from one to another that I will continue to do so when it makes sense.

The published numbers are the SEC yields of the funds. You can then compute your TEYs for the appropriate muni MM, and calculate averages over the last two cycles, or create a chart like I did.

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by yeahman » Mon May 21, 2018 3:28 pm

I compared the past 3 months. The Muni MM returned 23.8% less than Prime. So a toss up for those in the 24% bracket, not worth it for those under, but worth it for those over.

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by Kevin M » Mon May 21, 2018 4:53 pm

yeahman wrote:
Mon May 21, 2018 3:28 pm
I compared the past 3 months. The Muni MM returned 23.8% less than Prime. So a toss up for those in the 24% bracket, not worth it for those under, but worth it for those over.
I calculated averages from 12/15/2017 through 5/18/2018, choosing the start date as when the first big upswing of the previous quarterly cycle began. I get 1.58% for Prime and 1.20% for Muni. You could characterize the muni as earning 24% less or 0.38 percentage (38 basis points) points less.

At my marginal tax rates of 27% and 8%, average muni TEY over this period was 1.70%, so 7.5% or 12 basis points more than Prime at 1.58%. CA muni MM did slightly better for me at 1.13%/1.74%, so 10.2% or 16 basis points more. Nothing to write home about, but 16 bps is about what you get for extending Treasury maturity from 2-years to 3-years, and you get it with a few mouse clicks instead of taking more term risk.

If I change the fed marginal tax rate to 24% and state tax rate to 0%, I get average 1.58% for muni MM, so come to same conclusion as you over this somewhat longer period--24% fed marginal rate with no state income tax would have been the breakeven point. Of course you do slightly better if you switch at the crossover points, and at these lower marginal rates, switching into Prime on the muni downswing crossover gives you more benefit, as you can see in this chart at these rates (compared to chart I shared in earlier reply for my tax rates):

Image

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by Kevin M » Mon May 21, 2018 5:00 pm

Similar conclusion by simply looking at YTD returns: Prime MM 0.61%, Muni MM = 0.46% = 0.61% * (1-24%).

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by Artsdoctor » Tue May 22, 2018 7:21 pm

libralibra wrote:
Sun May 20, 2018 1:35 am
Artsdoctor wrote:
Mon Apr 09, 2018 11:22 pm
Bimmer wrote:
Thu Apr 05, 2018 11:46 pm
Is VMSXX FDIC insured? If not, should I worry about that?
Money market funds are not FDIC-insured. The likelihood of a Vanguard money market fund "breaking the buck" would have to be considered virtually zero and if it were to happen, you'd have a lot more things to worry about.
I've read this here before, but it seems to me the logic is reversed. I agree with the high unlikelihood part, but it's precisely when the need is greatest that your cash better be totally guaranteed and accessible.
There is virtually no investment which is risk-free. When it comes to holding cash or cash-equivalents, you will always be flirting with a guaranteed loss because of inflation. Each of us will ultimately have to decide how much we want to pay for investment insurance. In the past, I have allowed myself to get caught up in financial minutiae but at some point, I had to pull back and take more of a global view. Deciding on which money market to use to really like dancing on the head of a pin, mostly because very few people have extremely high percentages in cash.

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by gmaynardkrebs » Tue May 22, 2018 9:58 pm

Artsdoctor wrote:
Tue May 22, 2018 7:21 pm
..very few people have extremely high percentages in cash.
True on Bogleheads. Leaving aside that fact that "most people" have little or no savings, many people in retirement kept most of their money in bank accounts or money markets before the rates went to zero. I suspect that if rates normalize, many will go back to that.

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by reallyconfused » Wed May 23, 2018 11:51 am

Kevin M wrote:
Sun May 20, 2018 7:36 pm
stocknoob4111 wrote:
Sun May 20, 2018 6:23 pm
This may be a silly question but I am planning to swap my VMSXX to the Prime Market Fund, do I lose the accumulated interest for the month? I bought VMSXX on 5/2. I would almost certainly think I would get the interest since that is earned by me but who knows sometimes some of these rules are nonsensical, I just wanted to double check.
You get the accrued interest. You can see how much that was as of yesterday by looking at the Balances by date tab, and entering yesterday's date.

Kevin
Does anyone know if there's similar functionality on the fidelity website? Where it might show accrued interest in money market funds?

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by neurosphere » Wed May 23, 2018 1:11 pm

Kevin M wrote:
Mon May 21, 2018 5:00 pm
Similar conclusion by simply looking at YTD returns: Prime MM 0.61%, Muni MM = 0.46% = 0.61% * (1-24%).
According the the following, the short term municipal bonds which make up money market funds (and represented by the "SIFMA" index) tend to track 65% of the 3-month LIBOR rates pretty closely. I wonder if changes in marginal tax brackets (for either individuals or corporations which hold munis) affect this relationship.

Image
Taken from this PDF: http://kpm-financial.com/wp-content/upl ... ps-KPM.pdf

I don't have time to compare the 3-month libor with the Prime MM, but I assume they track rather closely. Note that the graph above uses 6 month rolling averages, which of course smoothes out the short-term differences.

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by WanderingDoc » Sat Jun 02, 2018 10:38 am

Rats, VMSXX SEC yield is down to only 1.10%. TEY of only 1.45% at 24% tax bracket.

What's the best way to move these funds to my Ally savings account? I have never sold/moved a MMF before. I heard it's supposed to work like a checking account. Thanks in advance for your help.
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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by HEDGEFUNDIE » Sat Jun 02, 2018 11:02 am

You should move the funds to Prime Money Market instead; it’s paying 1.91%

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by Leif » Sat Jun 02, 2018 11:23 am

I'm wondering what is happening in the world of muni money market funds. I checked a while back and TEY for the CA Muni MM, VCTXX, was paying better then Prime, for me. This was surprising to me since I'm not in the highest state & federal tax rate. I moved some money into this fund.

Now I see a big gap. VCTXX is 1.01%. TEY for me is about 1.5%. Prime, VMMXX, is 1.91%. I switched my MM to VMMXX.

I don't want to switch back and forth with fluctuations in the market. Perhaps what I saw earlier with VCTXX was just a fluke. I'm thinking to stay with Prime. If anyone understands what is happening in this market I would like to know. Thanks.
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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by WanderingDoc » Sat Jun 02, 2018 11:46 am

HEDGEFUNDIE wrote:
Sat Jun 02, 2018 11:02 am
You should move the funds to Prime Money Market instead; it’s paying 1.91%
Will do. Is it as easy as logging into Vanguard and hitting "exchange" within the VMSXX? I guess I would then start receiving a tax form after doing this.
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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by gmaynardkrebs » Sat Jun 02, 2018 12:14 pm

Leif wrote:
Sat Jun 02, 2018 11:23 am
I'm wondering what is happening in the world of muni money market funds. I checked a while back and TEY for the CA Muni MM, VCTXX, was paying better then Prime, for me. This was surprising to me since I'm not in the highest state & federal tax rate. I moved some money into this fund.

Now I see a big gap. VCTXX is 1.01%. TEY for me is about 1.5%. Prime, VMMXX, is 1.91%. I switched my MM to VMMXX.

I don't want to switch back and forth with fluctuations in the market. Perhaps what I saw earlier with VCTXX was just a fluke. I'm thinking to stay with Prime. If anyone understands what is happening in this market I would like to know. Thanks.
I moved most of what had been in the Vanguard municipal MM to the VWSTX (Short Tax Exempt) which is at 1.7%. The duration is 1.1Y. I think that's good pay for taking a little term risk. We'll see.

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by drk » Sat Jun 02, 2018 12:15 pm

WanderingDoc wrote:
Sat Jun 02, 2018 11:46 am
Will do. Is it as easy as logging into Vanguard and hitting "exchange" within the VMSXX? I guess I would then start receiving a tax form after doing this.
Wouldn't you receive a tax form for tax-exempt funds, anyway? The interest is still reported, just as non-taxable.

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by WanderingDoc » Sat Jun 02, 2018 12:35 pm

No idea. First time I've owned a tax-exempt MMF. Just transferred to Prime MMF.

I am guessing that savings accounts and MMFs are taxed the same way/amount, so it looked like Vanguard Prime is slightly better than Ally savings, without the FDIC insurance.
drk wrote:
Sat Jun 02, 2018 12:15 pm
WanderingDoc wrote:
Sat Jun 02, 2018 11:46 am
Will do. Is it as easy as logging into Vanguard and hitting "exchange" within the VMSXX? I guess I would then start receiving a tax form after doing this.
Wouldn't you receive a tax form for tax-exempt funds, anyway? The interest is still reported, just as non-taxable.
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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by Kevin M » Sat Jun 02, 2018 1:09 pm

Leif wrote:
Sat Jun 02, 2018 11:23 am
I'm wondering what is happening in the world of muni money market funds. I checked a while back and TEY for the CA Muni MM, VCTXX, was paying better then Prime, for me. This was surprising to me since I'm not in the highest state & federal tax rate. I moved some money into this fund.

Now I see a big gap. VCTXX is 1.01%. TEY for me is about 1.5%. Prime, VMMXX, is 1.91%. I switched my MM to VMMXX.

I don't want to switch back and forth with fluctuations in the market. Perhaps what I saw earlier with VCTXX was just a fluke. I'm thinking to stay with Prime. If anyone understands what is happening in this market I would like to know. Thanks.
If you scan this thread, you'll see that the muni MM funds seem to cycle up and down on a roughly quarterly basis. The last downswing lasted about 1.5 months, and we are about one month into the current downswing. If the pattern continues the muni MM yields should start rising in a couple of weeks, and then maybe in a month or so after that the TEY for me should rise above Prime MM.

Whether you're better of sticking with Prime or a muni fund depends on how much higher than Prime your muni TEY goes on the upswing, how long it stays higher, how much below Prime it goes on the downswing, and how long it stays below it. I would have been better of sticking with the CA muni MM fund since mid-December 2017, but it's so easy to exchange from one to the other that I exchanged to Prime about when my CA muni MM TEY dropped below Prime MM yield.

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by Kevin M » Sat Jun 02, 2018 1:17 pm

WanderingDoc wrote:
Sat Jun 02, 2018 12:35 pm
No idea. First time I've owned a tax-exempt MMF. Just transferred to Prime MMF.

I am guessing that savings accounts and MMFs are taxed the same way/amount, so it looked like Vanguard Prime is slightly better than Ally savings, without the FDIC insurance.
drk wrote:
Sat Jun 02, 2018 12:15 pm
WanderingDoc wrote:
Sat Jun 02, 2018 11:46 am
Will do. Is it as easy as logging into Vanguard and hitting "exchange" within the VMSXX? I guess I would then start receiving a tax form after doing this.
Wouldn't you receive a tax form for tax-exempt funds, anyway? The interest is still reported, just as non-taxable.
Yes, you receive a 1099-DIV from Vanguard for all funds that pay dividends, whether tax-exempt or not. Dividends are reported in different boxes on the form, depending on the type (ordinary, qualified, tax-exempt). For a national muni MM fund, I would pay state income tax on the full amount, but for the CA muni MM fund I pay no federal or state tax (as a CA resident).

Although the Prime MM "dividends" are reported on 1099-DIV, and Ally savings interest is reported on 1099-INT, they are both taxed as ordinary income, so yes, basically the same.

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by WanderingDoc » Sat Jun 02, 2018 1:32 pm

Kevin M wrote:
Sat Jun 02, 2018 1:17 pm
WanderingDoc wrote:
Sat Jun 02, 2018 12:35 pm
No idea. First time I've owned a tax-exempt MMF. Just transferred to Prime MMF.

I am guessing that savings accounts and MMFs are taxed the same way/amount, so it looked like Vanguard Prime is slightly better than Ally savings, without the FDIC insurance.
drk wrote:
Sat Jun 02, 2018 12:15 pm
WanderingDoc wrote:
Sat Jun 02, 2018 11:46 am
Will do. Is it as easy as logging into Vanguard and hitting "exchange" within the VMSXX? I guess I would then start receiving a tax form after doing this.
Wouldn't you receive a tax form for tax-exempt funds, anyway? The interest is still reported, just as non-taxable.
Yes, you receive a 1099-DIV from Vanguard for all funds that pay dividends, whether tax-exempt or not. Dividends are reported in different boxes on the form, depending on the type (ordinary, qualified, tax-exempt). For a national muni MM fund, I would pay state income tax on the full amount, but for the CA muni MM fund I pay no federal or state tax (as a CA resident).

Although the Prime MM "dividends" are reported on 1099-DIV, and Ally savings interest is reported on 1099-INT, they are both taxed as ordinary income, so yes, basically the same.

Kevin
Thanks, that's helpful. I think I will just stick to Prime MMF for a while. Too much hassle to track and move around money every month for a few dollars in interest.
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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by Kevin M » Sat Jun 02, 2018 1:44 pm

WanderingDoc wrote:
Sat Jun 02, 2018 1:32 pm
Thanks, that's helpful. I think I will just stick to Prime MMF for a while. Too much hassle to track and move around money every month for a few dollars in interest.
Prime definitely is better now. I'm sure it will be reported in this thread when the muni MM funds start looking more attractive again, so as long as you continue to follow the thread, you'll know when to reconsider. Exchanging between funds takes less time than writing one of these replies.
:wink:

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by WanderingDoc » Sat Jun 02, 2018 2:58 pm

Kevin M wrote:
Sat Jun 02, 2018 1:44 pm
WanderingDoc wrote:
Sat Jun 02, 2018 1:32 pm
Thanks, that's helpful. I think I will just stick to Prime MMF for a while. Too much hassle to track and move around money every month for a few dollars in interest.
Prime definitely is better now. I'm sure it will be reported in this thread when the muni MM funds start looking more attractive again, so as long as you continue to follow the thread, you'll know when to reconsider. Exchanging between funds takes less time than writing one of these replies.
:wink:

Kevin
Maybe, but writing one of these replies is more enjoyable 8-)
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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by Kevin M » Sat Jun 02, 2018 3:15 pm

I thought it would be interesting to compare Prime MM and Muni MM the last time rates generally rose for a sustained period. Here is the chart for the SEC yields for 2005-2006 (inclusive):

Image

We still see much more volatility in the muni MM yield, but as neurosphere previously observed, there seems to be more of a monthly cycle than a quarterly cycle.

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by Leif » Sat Jun 02, 2018 3:48 pm

Kevin M wrote:
Sat Jun 02, 2018 1:09 pm
If you scan this thread, you'll see that the muni MM funds seem to cycle up and down on a roughly quarterly basis. The last downswing lasted about 1.5 months, and we are about one month into the current downswing. If the pattern continues the muni MM yields should start rising in a couple of weeks, and then maybe in a month or so after that the TEY for me should rise above Prime MM.

Whether you're better of sticking with Prime or a muni fund depends on how much higher than Prime your muni TEY goes on the upswing, how long it stays higher, how much below Prime it goes on the downswing, and how long it stays below it. I would have been better of sticking with the CA muni MM fund since mid-December 2017, but it's so easy to exchange from one to the other that I exchanged to Prime about when my CA muni MM TEY dropped below Prime MM yield.

Kevin
Thanks Kevin. I was not aware of the volatility of the muni MM. I agree it is easy to switch. For me I probably won't spend the time picking up a few coins off the "street". This is one area where a robo advisor might add value. You would think this would be arb'ed away.
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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by am » Sat Jun 02, 2018 7:28 pm

Kevin M wrote:
Sat Jun 02, 2018 3:15 pm
I thought it would be interesting to compare Prime MM and Muni MM the last time rates generally rose for a sustained period. Here is the chart for the SEC yields for 2005-2006 (inclusive):

Image

We still see much more volatility in the muni MM yield, but as neurosphere previously observed, there seems to be more of a monthly cycle than a quarterly cycle.

Kevin
Hard to believe we were getting those kinds of yields. You could get 50k/yr per million from prime mm in 2006.

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by Kevin M » Sat Jun 02, 2018 7:40 pm

am wrote:
Sat Jun 02, 2018 7:28 pm
Hard to believe we were getting those kinds of yields. You could get 50k/yr per million from prime mm in 2006.
Yeah, but inflation was higher then too. For much of 2005-2006, inflation was running at 3-4%, so your real return could have been 0% or less for much of that time. Inflation did drop a lot in mid to late 2006, so toward the end of the period shown the real return of the MM funds was quite good.

Image

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by libralibra » Sat Jun 02, 2018 7:54 pm

Maybe the income in some funds is just more bunched, e.g. at the end of the month or quarter. Then the 7 day rolling average of the fund's income yield would rise and fall.

If that was true, I wonder how the distribution is calculated. I.e. do you get paid based on the income that was received on the days you owned the fund, or is all income per month added up and divided pro-rata over the entire month?

(It seems like it'd have to be the latter or else you could just swap in and out right before the end of the month, right?)

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by Kevin M » Sat Jun 02, 2018 9:17 pm

libralibra wrote:
Sat Jun 02, 2018 7:54 pm
If that was true, I wonder how the distribution is calculated. I.e. do you get paid based on the income that was received on the days you owned the fund, or is all income per month added up and divided pro-rata over the entire month?

(It seems like it'd have to be the latter or else you could just swap in and out right before the end of the month, right?)
Dividends are accrued daily. You can see the accrued dividends in the Balances by Date screen. I think I posted earlier in the thread an example of this, showing that the distribution yield declines daily on the downswing (and of course increases daily on the upswing), so the SEC yield is a 7-day lagging average.

So you are paid the income on the days you own the fund.

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by Kevin M » Sat Jun 02, 2018 9:26 pm

Kevin M wrote:
Sat Jun 02, 2018 7:40 pm
Yeah, but inflation was higher then too. For much of 2005-2006, inflation was running at 3-4%, so your real return could have been 0% or less for much of that time. Inflation did drop a lot in mid to late 2006, so toward the end of the period shown the real return of the MM funds was quite good.
I downloaded the year over year CPI figures for 2005-2006 from FRED, and calculated the real yield of Prime MM. Here is the chart:

Image

Of course real MM yields have been negatilve for quite a few years lately. Maybe if inflation gets back down to the Fed target of 2%, we'll see positive real MM yields in the not too distant future.

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by neurosphere » Tue Jun 05, 2018 8:55 am

Kevin M wrote:
Sat Jun 02, 2018 1:44 pm
WanderingDoc wrote:
Sat Jun 02, 2018 1:32 pm
Thanks, that's helpful. I think I will just stick to Prime MMF for a while. Too much hassle to track and move around money every month for a few dollars in interest.
Prime definitely is better now. I'm sure it will be reported in this thread when the muni MM funds start looking more attractive again, so as long as you continue to follow the thread, you'll know when to reconsider. Exchanging between funds takes less time than writing one of these replies.
:wink:
I just calculated that, based on my fed+state/local tax rates, switching from my NY muni fund to Prime would currently earn me about $3/month in extra (after-tax) interest. NY taxes the entire Prime MM interest, even though part of the interest comes from Federal sources which would otherwise be tax free in other states or if held as individual bonds (at least, that's my understanding of bond/MM funds in NY). Anyway, I pulled the trigger, if only because the calculation took longer than swapping funds and I feel like I had to get SOME extra return for doing the math, lol.

Of note, the Prime MM continues it's climb, while muni funds continue to drop. It'll be interesting to see if/when the next muni "peak" occurs. :D

And yes, writing this post also took more time then swapping between Prime and Muni funds. :wink:

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by Leif » Tue Jun 05, 2018 11:00 am

WanderingDoc wrote:
Sat Jun 02, 2018 1:32 pm
Thanks, that's helpful. I think I will just stick to Prime MMF for a while. Too much hassle to track and move around money every month for a few dollars in interest.
Agreed.
Investors should diversify across many asset-classes so that whatever happens, we will not have all our investments in underperforming asset classes and thereby fail to meet our goals-Taylor Larimore

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by neurosphere » Tue Jun 12, 2018 11:03 am

The trend from the past 1-2 months continues: Prime MM up over 2% [edit: admiral shares], while the NY and CA MM fell below 1%. The national municipal money market is at 1.03%

According to one reference, the highest state+local rates in CA are 13.3% and in NY 12.7%. The highest federal rates are 32/35/37%. Adding the NIIT of 3.8% (let's round that to 4%) to the federal rates makes the top rates 36%/39%/41%.

It seem that very few people would have high enough incomes to benefit from municipal money markets right now. Of course there are those for whom tax items such as phaseouts or interest income which might cause cliffs and edge effects might put them into a high marginal rate regardless of tax "bracket".

[Edited to add: Although, the muni money market yields have been the same for 4 straight trading days, so perhaps that represents a local minimum and the beginning of the next up-swing has started! lol. ]

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Re: Vangaurd Municipal Money Market VMSXX 1.39%

Post by Kevin M » Tue Jun 12, 2018 4:44 pm

neurosphere wrote:
Tue Jun 12, 2018 11:03 am
[Edited to add: Although, the muni money market yields have been the same for 4 straight trading days, so perhaps that represents a local minimum and the beginning of the next up-swing has started! lol. ]
CA muni MM actually ticked up one basis point yesterday. It was 43 days from the previous peak (not the most recent one) to the end of the previous trough for CA muni MM, and it's been 43 days since the last peak to last Friday, so it wouldn't surprise me if we're now at the beginning of the next upswing.

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