TEY are for my particular marginal tax rates.

Congratulations in your high tax bracket in a high tax state. Munis make sense for highly taxed individuals.DanFromNewYork wrote: ↑Tue Apr 23, 2019 11:55 amBig spike in Muni Yields for tax day.
TEY are for my particular marginal tax rates.
![]()
Well, not really for tax day, but for the period surrounding tax day, and really starting to ramp up more steeply a few days after tax day.
Yes, but my thoughts depend on the amount of money you intend to transfer.deskjockey wrote: ↑Wed Apr 24, 2019 11:02 amThe TEY of VMSXX just exceed that of VUSXX for me today. I wonder if I should switch the funds I have in VMSXX to ride the crest or not. Last year the crest for me lasted under a month, so it wasn't exactly worth it. Any thoughts?
I switched last year for a couple of weeks to ride the crest but it complicated my tax return. So, unless the advantage is significant, I will not bother.deskjockey wrote: ↑Wed Apr 24, 2019 11:02 amThe TEY of VMSXX just exceed that of VUSXX for me today. I wonder if I should switch the funds I have in VMSXX to ride the crest or not. Last year the crest for me lasted under a month, so it wasn't exactly worth it. Any thoughts?
It's only about $100K, so the extra income would probably be round $5-$20 if the crest only lasts a few weeks and the TEY of VMSXX doesn't go very much above VUSXX. Definitely not worth it in that scenario.neurosphere wrote: ↑Wed Apr 24, 2019 11:11 am
Yes, but my thoughts depend on the amount of money you intend to transfer.![]()
For me, the tax-free yields are just probably just at or slightly under the taxable yields. I could maybe make a $5-$25/year in extra after-tax income if I switch. But eh, I'm lazy. I'd rather take those few minutes and write one more post on BH.![]()
This is interesting, seems like again, almost to the day a year later we are at another Muni MM spike. I was about to move my money but happened upon this thread. Seems like it'll be temporary and not stay up this high. Is that correct?Kevin M wrote: ↑Sat May 19, 2018 5:44 pmI made my own chart. This is only for one year, and shows TEYs for my marginal tax rates of 27% and 8%.neurosphere wrote: ↑Sat May 19, 2018 3:43 pmGreat, thanks! I was in the process of updating the chart and then got distracted and moved on to something else. Thanks for adding the quarter-lines. It emphasises that indeed there is a quarterly spike in muti rates. I also "see" this effect in the Prime MM, just a smaller magnitude, as I previously mentioned.
First obvious observations is that we're approaching the point at which I will exchange from CA muni MM to Prime MM.
Another observation is that the previous peaks in the spikes occurred very close to the beginning of a calendar quarter, but the most recent one didn't occur until almost a month after the beginning of the quarter (4/26/2018).
Kevin
The cycles aren't identical from year to year, but it does appear that the increase in muni MM SEC yield is tapering off. After increasing 5 basis points per day from 4/18 - 4/24, it increased 3 bps on 4/25 and 2 bps on 4/26.
I went ahead and exchanged most of my Treasury MM to CA Muni MM yesterday. It took more than a minute, because the holding is split between cash and margin positions (after 30 days, it moves from cash to margin), and it was a little confusing as to how to exchange most but not all of both of them. For some reason, you can't exchange from both at the same time, like you usually can, and you can't exchange all shares out of one without exchanging all out of both.Kevin M wrote: ↑Sat Apr 27, 2019 12:46 pmIt only takes a about a minute to exchange everything from one MM fund to another, so I might switch to CA muni MM. If you have enough in the fund to see the required resolution in daily interest, you can calculate the actual daily interest by looking at the change in accrued interest from one day to the next, then annualizing the rate. This way you can fine tune your timing in switching back out of the fund, especially since the Treasury MM yield (and even Prime MM yield) is unlikely to change much as long as the federal funds rate doesn't change.
The standard Boglehead philosophy is to stay the course, and not change your asset allocation based on changes in market dynamics. Based on this philosophy, you probably should just stick with the fund you're in for your taxable bonds.jainn wrote: ↑Tue Apr 30, 2019 10:28 amI see the muni market fund VMSXX SEC yield is 2.01% today and the intermediate VWIUX is 2.11%. All our bonds in our taxable account are in the intermediate. If the majority of total return from the bonds is interest payments, the VWIUX distribution payments are 2.82%, I guess I shouldn’t compare only the SEC yields? The duration risk when only comparing SEC yields seems unfavorable to be in intermediate...but I don’t plan on selling the bond fund shares or spending the monthly muni dividends for several years...so that means I should stay in the intermediate fund if I recall prior discussions and articles I’ve read.
On the same note, I posted this yesterday in a more recent thread that was started on this topic:deskjockey wrote: ↑Thu May 09, 2019 11:26 amWell, the party is over for me--today the ATY on VMSXX is likely to drop below that of VUSXX (calculated using accrued dividends). It was just a hair higher yesterday (and ten basis points lower than the SEC yield), so I've gone ahead and moved everything back to VUSXX.
As expected, daily yield (calculated from accrued dividends) and SEC yield of CA muni MM both dropped again yesterday, so even though my TEY based on SEC yield was slightly higher than that of Treasury MM on 5/8, TEY based on my daily yield was lower.Kevin M wrote: ↑Wed May 08, 2019 2:39 pmDaily yield of CA Muni MM for 5/7 was 1.71% (down 2 bps), and SEC yield was 1.76% (down 3 bps). As expected, the 7-day average of my daily yields equals the SEC yield of 1.76%, which increases my confidence that I'm calculating the daily yield correctly.
At yesterday's daily yield of 1.71%, TEY of CA Muni MM for me was equal to TEY of Treasury MM at 2.63%. That means that the CA Muni MM TEY today probably is lower than Treasury MM, but I think I'll hold CA Muni MM one more day just to track the daily yield for another day.
I also note that that national Muni MM SEC yield is declining a bit more slowly than the CA Muni MM yield, so to earn a few more pennies, I could switch into that for a few days, but I'm not going to bother doing that.
Interesting. Since I exchanged out of CA Muni MM to Treasury Muni MM yesterday, I don't have accrued dividends for 5/9 to check myself.DanFromNewYork wrote: ↑Fri May 10, 2019 11:54 amI noticed something interesting today. The SEC yields for all of the Vanguard muni money market funds was unchanged from May 8 to May 9. However, this does not match what the behavior should have been based on a 7-day lagged average of the daily accrual computed yield based on my holdings in the NY muni fund, which predicted that the 7-day average should have decreased by 6 bps. I checked every day of the past two weeks and my estimated 7-day average yields match the SEC yields (with less than 1 bp difference due to rounding). But for May 9, I am off by 6 bps. Has anyone seen something like this before?
Is this in a brokerage account or mutual fund account?In checking all this today, I also noticed that the distribution I am paid out at the end of the month does not match what was shown as accrued dividends as of the end of the month. The distribution at the end of April was smaller than the accrued dividends and the distribution at the end of March was larger than the accrued dividends. I would guess the mismatch was due to capital gains and losses of the underlying paper. If so, it might not be as straight forward for me to compare the money market yields to bank account rates as I thought it was. Does anyone have any thoughts?
That was very surprising and I had wondered if the unchanged data was correct. It's possible there is an explanation in the average maturity of the portfolios and also the daily liquid assets. Here is some interesting data on the Tax Exempt Money Market fund.The SEC yields for all of the Vanguard muni money market funds was unchanged from May 8 to May 9.
1st post so my apologies if I don't get the reply quoting right, but in reply to danfromnewyork's 2 observations....
That was a big 1-day drop! From 1.92 to 1.80, so 12 basis points in one day. CA muni MM dropped 11 basis points from 1.73 to 1.62.
Glad you've started posting! Keep it up. You got the reply quoting perfectly.briaspa wrote: ↑Sat May 11, 2019 2:40 am1st post so my apologies if I don't get the reply quoting right, but in reply to danfromnewyork's 2 observations....
Another interesting observation. Thanks for sharing.1. Something strange happened to the vusxx treasury fund around the same time. On 5/7 and 5/8 the daily dividend rate (based on the daily balance incremental change divided by the previous days balance) dropped from an annualized rate of just under 2.35% to just over 2.30%. On 5/9 and 5/10 it returned to around 2.35% where it has been for the last month or so.
I just checked one of my bond funds in a mutual fund account. The accrued dividends showed $0 on 4/30, the date the dividend was paid. The dividend amount was 10.68 more than the accrued dividends on 4/29, and the accrued dividend on 5/1 was 10.65, so my guess is that the 10.68 was the additional dividend accrual for 4/30.2. While checking these daily balance numbers for vusxx rates I also noted that the paid dividend doesn't match the accrued dividend for the last day of the month (as shown on the balance by date page). In fact for me the accumulated dividends are zeroed out for the last 1-3 days of the month and begin to show accumulation on the first day of the next month.
That would be great. If you do it in its own thread, please post a pointer in this thread.While I haven't yet managed to calculate the exact same figure as the paid dividend based on the published monthly distribution $/share figures it looks like the paid dividend might be based on balances up to 2 days before the date of record (when they start to show as 0 accumulated dividends) plus the carryover of the previous months final '0' accumulation days.
If I figure out the exact formula that works consistently across different funds I will probably update the thread or perhaps this belongs in its own thread.
Good to know, as it seems that things work a bit differently in brokerage and (old platform) mutual fund (only) accounts.Note this is based on a regular non tax advantaged holding in a brokerage account not a mutual fund account.
Very kind of you to say so!Also as this is my first post I just wanted to thank Kevin for his wisdom and excellent contributions over the years and also recognize the contributions of a few other longtime members (doc and neuro spring to mind but are by no means the only ones). Thank you to you all.
That may be the explanation. Here is a document with some information.DanFromNewYork wrote: ↑Fri May 10, 2019 11:54 amIn checking all this today, I also noticed that the distribution I am paid out at the end of the month does not match what was shown as accrued dividends as of the end of the month. The distribution at the end of April was smaller than the accrued dividends and the distribution at the end of March was larger than the accrued dividends. I would guess the mismatch was due to capital gains and losses of the underlying paper.
Dropped another 6 basis points to 1.57% today. Has been dropping about 6 basis points per day since 5/8.
First, at those tax rates, based on SEC yield of 1.57%, your TEY for VMSXX is 2.49%, so still slightly higher than VMMXX at 2.43%. However, the daily yield probably is lower than the SEC yield, so you probably are at about the crossover point.
How are you getting 2.49 TEY for muni mm at 35 fed and 5 state? I am using this calculator: https://www.calcxml.com/do/inc11?skn=#results and getting 2.415 fed tax exempt. I assume I am paying state taxes since this a national muni mm.Kevin M wrote: ↑Wed May 15, 2019 10:56 amFirst, at those tax rates, based on SEC yield of 1.57%, your TEY for VMSXX is 2.49%, so still slightly higher than VMMXX at 2.43%. However, the daily yield probably is lower than the SEC yield, so you probably are at about the crossover point.
But TEY of Treasury MM (VUSXX) at SEC 2.34% is 2.54% at your tax rates, so this would be the clear choice for you in terms of money market funds.
Switching from an MM fund to a bond fund of any sort clearly is chasing yield; i.e., increasing risk for higher yield. I'm not saying you shouldn't do that, but just be aware that the risk would go up along with the yield.
TEY of Limited term tax exempt admiral (VMLUX) is 2.98% at your tax rates. With a duration of 2.4 years, you earn 44 basis points of extra yield, which is only 18 bps per extra year of duration, relative to Treasury MM at 2.54% TEY and 0-year duration. That's a bit on the low side of extra yield for the extra term risk, but it does reduce your reinvestment risk as well.
Kevin
That calculator is bogus--it doesn't calculate TEY in the conventional sense. Big hint: you do not use tax-free rate to calculate TEY (in the conventional sense). TEY stands on its own, all rates of interest can be converted to TEY, including any tax-free rate, so one is comparing apples to apples.am wrote: ↑Wed May 15, 2019 12:11 pmHow are you getting 2.49 TEY for muni mm at 35 fed and 5 state? I am using this calculator: https://www.calcxml.com/do/inc11?skn=#results and getting 2.415 fed tax exempt. I assume I am paying state taxes since this a national muni mm.Kevin M wrote: ↑Wed May 15, 2019 10:56 amFirst, at those tax rates, based on SEC yield of 1.57%, your TEY for VMSXX is 2.49%, so still slightly higher than VMMXX at 2.43%. However, the daily yield probably is lower than the SEC yield, so you probably are at about the crossover point.
<snip>
Switching from an MM fund to a bond fund of any sort clearly is chasing yield; i.e., increasing risk for higher yield. I'm not saying you shouldn't do that, but just be aware that the risk would go up along with the yield.
TEY of Limited term tax exempt admiral (VMLUX) is 2.98% at your tax rates. With a duration of 2.4 years, you earn 44 basis points of extra yield, which is only 18 bps per extra year of duration, relative to Treasury MM at 2.54% TEY and 0-year duration. That's a bit on the low side of extra yield for the extra term risk, but it does reduce your reinvestment risk as well.
Like I said, I'm not saying not to do it, just to be aware of the additional risk. You don't get much extra yield for the extra interest-rate risk, but you do reduce your reinvestment risk.The short term muni fund seems to be slightly higher risk fluctuating in price <1%. I think I can tolerate that. But agree that it’s yield chasing. But is it all bad?
Right. The national muni fund taxable equivalent yield (TEY) is approaching that of Treasury MM fund for me, but not quite there yet. Be sure to check TEY of the Treasury and Fed MM funds if you pay state income tax. Last time I switched, earlier this year, the CA muni MM TEY was only higher for me for about one week.
I don't pay State income tax (I live in FL) so I believe that makes Muni MM higher by ~20 basis points over Treasury MM (on a tax equivalent basis). Vanguard Prime MM is also higher than Treasury by 3 basis points. Is there a difference between Prime MM and Treasury?Kevin M wrote: ↑Fri Jun 28, 2019 3:40 pmRight. The national muni fund taxable equivalent yield (TEY) is approaching that of Treasury MM fund for me, but not quite there yet. Be sure to check TEY of the Treasury and Fed MM funds if you pay state income tax. Last time I switched, earlier this year, the CA muni MM TEY was only higher for me for about one week.
Kevin
These yield spikes have tended to be very short lived historically (usually lasting one month of part of one month). Every 10bps TEY picked up (for an entire month) amounts to $8.33 per month per $100K invested. Even if you could pick up 30bps doing this for a full month (over where your cash is otherwise invested) is it worth the bother at $25 per $100K? Even if you did it with $1.0 million it only amounts to $250. And considering the peak in these yield spikes is days or a week and not a month, very likely to be a fraction of those amounts.
A few mouse clicks for a few bucks is worth it to some. Plus it feels good to maximize every ounce of portfolio.MikeG62 wrote: ↑Sat Jun 29, 2019 9:28 amThese yield spikes have tended to be very short lived historically (usually lasting one month of part of one month). Every 10bps TEY picked up (for an entire month) amounts to $8.33 per month per $100K invested. Even if you could pick up 30bps doing this for a full month (over where your cash is otherwise invested) is it worth the bother at $25 per $100K? Even if you did it with $1.0 million it only amounts to $250. And considering the peak in these yield spikes is days or a week and not a month, very likely to be a fraction of those amounts.
Just wondering if it's really worth the effort - much as I like as much yield as I can get.
As the prior poster stated for a few clicks I'm happy to pick up $25 or $250. But also, every "month" i'm in Muni is one month I'm not in a taxable fund. As such, this lowers my total taxable income which assists in me not getting into the next tax higher bracket. So it's worth slightly more than just the interest.MikeG62 wrote: ↑Sat Jun 29, 2019 9:28 amThese yield spikes have tended to be very short lived historically (usually lasting one month of part of one month). Every 10bps TEY picked up (for an entire month) amounts to $8.33 per month per $100K invested. Even if you could pick up 30bps doing this for a full month (over where your cash is otherwise invested) is it worth the bother at $25 per $100K? Even if you did it with $1.0 million it only amounts to $250. And considering the peak in these yield spikes is days or a week and not a month, very likely to be a fraction of those amounts.
Just wondering if it's really worth the effort - much as I like as much yield as I can get.
Tax-exempt income is also free from NIIT...sperry8 wrote: ↑Sat Jun 29, 2019 12:36 pmAs the prior poster stated for a few clicks I'm happy to pick up $25 or $250. But also, every "month" i'm in Muni is one month I'm not in a taxable fund. As such, this lowers my total taxable income which assists in me not getting into the next tax higher bracket. So it's worth slightly more than just the interest.MikeG62 wrote: ↑Sat Jun 29, 2019 9:28 amThese yield spikes have tended to be very short lived historically (usually lasting one month of part of one month). Every 10bps TEY picked up (for an entire month) amounts to $8.33 per month per $100K invested. Even if you could pick up 30bps doing this for a full month (over where your cash is otherwise invested) is it worth the bother at $25 per $100K? Even if you did it with $1.0 million it only amounts to $250. And considering the peak in these yield spikes is days or a week and not a month, very likely to be a fraction of those amounts.
Just wondering if it's really worth the effort - much as I like as much yield as I can get.
If it truly happens every month I wonder if anyone ever did an analysis if it's worth just staying in - that is, 2 weeks it beats, 2 weeks it loses but in totality it ties. A tie is a win in my book (due to the aforementioned tax issue).
Based upon the past, it seems to happen two or three times per year (April, July and I believe January). In those months there are only days or a week or two where the yield is more than insignificantly better in VMSXX. And usually this is not clear until after the fact since we are usually looking at the trailing 7-day yield to identify the opportunity in the first place. The other times you would earn more elsewhere.sperry8 wrote: ↑Sat Jun 29, 2019 12:36 pmAs the prior poster stated for a few clicks I'm happy to pick up $25 or $250. But also, every "month" i'm in Muni is one month I'm not in a taxable fund. As such, this lowers my total taxable income which assists in me not getting into the next tax higher bracket. So it's worth slightly more than just the interest.MikeG62 wrote: ↑Sat Jun 29, 2019 9:28 amThese yield spikes have tended to be very short lived historically (usually lasting one month of part of one month). Every 10bps TEY picked up (for an entire month) amounts to $8.33 per month per $100K invested. Even if you could pick up 30bps doing this for a full month (over where your cash is otherwise invested) is it worth the bother at $25 per $100K? Even if you did it with $1.0 million it only amounts to $250. And considering the peak in these yield spikes is days or a week and not a month, very likely to be a fraction of those amounts.
Just wondering if it's really worth the effort - much as I like as much yield as I can get.
If it truly happens every month I wonder if anyone ever did an analysis if it's worth just staying in - that is, 2 weeks it beats, 2 weeks it loses but in totality it ties. A tie is a win in my book (due to the aforementioned tax issue).