Vanguard Cali Muni Money Market Yield Dropping

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WarChest
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Joined: Sat Dec 19, 2015 12:27 pm

Vanguard Cali Muni Money Market Yield Dropping

Post by WarChest » Tue Jul 24, 2018 6:22 pm

I have been noticing that the yield has been going DOWN the last few months. This has been the case for both the SEC yield and the distribution yield. Meanwhile, the Vanguard Prime money market yield has been going up. As of right now, Cali has a SEC yield of 0.87% vs prime money market SEC yield of 2.06%. When plugging this into a taxable equivalent calculator, it makes it seem like there is no advantage to Cali at all as Prime is still much higher.

HOWEVER, when I look at the latest distribution yields of 1.10% (Cali) and 1.98% (Prime) and plug them into a calculator, the Cali comes out slightly ahead if you use the very highest marginal tax rates. That said, if the current trend of Cali dropping and Prime rising continues, I suspect Prime will come out ahead against the taxable equivalent as of the next distribution.

I hate to move chunks of money around in search of a few basis points but it seems like something is funky with the relationship between the muni yields and the prime yields right now. Anyone else noticing this? And alas, as I am not in the very highest bracket, I think even right now the prime is going to beat cali for my situation by a bit. Trying to sit tight in Cali in hopes of a normalization but getting impatient. Anyone else in this boat and what are you doing or anticipating will happen with the yield differential?

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Artsdoctor
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Re: Vanguard Cali Muni Money Market Yield Dropping

Post by Artsdoctor » Tue Jul 24, 2018 6:36 pm

^ I agree that Prime Money Market's yield has left the CA money market in the dust, although money market yields can bounce around quite a bit. Everyone's marginal rates are different, so you'll have to do your own math. For me, I've been using the Short-term muni fund to "feed" the CA money market; that particular fund has an SEC yield of 1.59% which is a tax-equivalent yield of 2.60% for me. It has a very short duration and its price has been acceptably stable as a "holding fund," although it's not the same as a money market fund.

HEDGEFUNDIE
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Re: Vanguard Cali Muni Money Market Yield Dropping

Post by HEDGEFUNDIE » Tue Jul 24, 2018 6:40 pm

I quit CA muni for Prime last month and never looked back.

moehoward
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Re: Vanguard Cali Muni Money Market Yield Dropping

Post by moehoward » Tue Jul 24, 2018 6:42 pm

I sold VG CA fund and intermediate tax free funds a while ago.

Glasgow
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Re: Vanguard Cali Muni Money Market Yield Dropping

Post by Glasgow » Tue Jul 24, 2018 6:47 pm

moehoward wrote:
Tue Jul 24, 2018 6:42 pm
I sold VG CA fund and intermediate tax free funds a while ago.
What was the reason?

lukestuckenhymer
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Re: Vanguard Cali Muni Money Market Yield Dropping

Post by lukestuckenhymer » Tue Jul 24, 2018 7:01 pm

Yep, VMMXX is dominating as far as MMs go...

But when it comes to fixed income, VCAIX is a clear choice for me, even in my relatively low tax bracket (22% Fed/9.3% CA state, tax equivalent yield is almost identical to VBTLX). I hope that stays the same.

moehoward
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Re: Vanguard Cali Muni Money Market Yield Dropping

Post by moehoward » Wed Jul 25, 2018 8:57 am

"What was the reason?"
-I owned many individual Tax free Munis that have mostly been called in the last 5 years. (1 left)
-My plan for tax free income in retirement was eventually based on VG muni fund which wasn't much and the returns were bad.
-I've been simplifying by portfolio during retirement and the VG Munis honestly weren't needed. I really don't have a tax problem
-My whole tax free money stream was a good idea when munis were doing 4-5% and I was still working. Not anymore.

am
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Re: Vanguard Cali Muni Money Market Yield Dropping

Post by am » Wed Jul 25, 2018 6:54 pm

lukestuckenhymer wrote:
Tue Jul 24, 2018 7:01 pm
Yep, VMMXX is dominating as far as MMs go...

But when it comes to fixed income, VCAIX is a clear choice for me, even in my relatively low tax bracket (22% Fed/9.3% CA state, tax equivalent yield is almost identical to VBTLX). I hope that stays the same.
I wonder who the muni mm makes sense for anymore with such anemic yields (.93 for national muni)? What’s driving the yields so low?

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