What's happening with Muni Money Market fund yields?

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GreendaleCC
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What's happening with Muni Money Market fund yields?

Post by GreendaleCC » Sat Mar 21, 2020 1:53 pm

FCFXX (Fidelity® California Municipal Money Market Fund) 7-day Yield
2/29/2020: 0.70%
3/20/2020: 2.17% (Daily Market Value: $1.0010)

VCTXX (Vanguard California Municipal Money Market Fund) 7-day Yield
2/29/2020: ?
3/20/2020: 1.71% (Daily Market Value: $0.9978)

Why so high compared to just about everything?

am
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Re: What's happening with Muni Money Market fund yields?

Post by am » Sat Mar 21, 2020 2:00 pm

I asked the same question today. I read on WSJ that investors are dumping billions of dollars of munis causing thinly traded issues to be sold. Price goes down yields climb for muni funds like we’ve been seeing this last week. Muni money market doesn’t go below a buck however so only yield up. But the yield ain’t free. The market is signaling that short term defaults may happen if cases keep rising and revenues dry up. No one knows how long this will last and how deep the damage will be.

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Re: What's happening with Muni Money Market fund yields?

Post by HoberMallow » Sat Mar 21, 2020 2:23 pm

The Vanguard California Municipal Money Market Fund (VCTXX) now has a higher yield than the California Long-Term Bond Fund (VCITX) - 1.71% vs 1.47%.

Despite recent moves from the Fed, muni bonds are still under some major stress. I moved all my cash from VCTXX to the Treasury MM fund (VUSXX) about a week ago and I'm glad I did. The muni fund will probably be fine, but not worth the risk to me.

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Re: What's happening with Muni Money Market fund yields?

Post by Scooter57 » Sat Mar 21, 2020 4:52 pm

It is also worth remembering that the muni money market funds periodically have a month with high yields that then drop. Go look at the Distribution history over on Vanguard's fund page and you will see a similar spike a year ago.

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Re: What's happening with Muni Money Market fund yields?

Post by Kevin M » Sat Mar 21, 2020 6:37 pm

Scooter57 wrote:
Sat Mar 21, 2020 4:52 pm
It is also worth remembering that the muni money market funds periodically have a month with high yields that then drop. Go look at the Distribution history over on Vanguard's fund page and you will see a similar spike a year ago.
Although it's true that muni MM yields are somewhat cyclical, which has been discussed at length in several other threads over the last couple of years, what we are seeing now is nothing like what we've seen in the cyclical peaks since the beginning of 2019. Here's a chart showing my taxable-equivalent yields (TEYs) for the various Vanguard MM funds since 1/2/2019:

Image

We see a peak around the beginning of March in 2019, but the muni MM yields were closer to a trough by late March 2019. We saw a similar peak around the beginning of March this year, but the spike after that, especially the last two days, is nothing like we've seen in previous cycles.

I think what we're seeing now is more related to panic around municipal securities, related to liquidity and credit risk, although I would think that the Fed announcement about buying short-term munis would have caused yields to come down. But we saw a yield increase of about 40 bps in muni MM just on Friday. Yield has increased 100 bps since 3/9. The Fed just announced this new program Friday, so maybe it just hasn't had time to show results yet.

Thanks to OP for pointing this out. I had not been checking lately. I'm wondering whether this is mostly a liquidity crunch, in which case taking advantage of the higher yields could make sense, but if the Fed program works, these high yields won't last long.

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GreendaleCC
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Re: What's happening with Muni Money Market fund yields?

Post by GreendaleCC » Sat Mar 21, 2020 7:03 pm

Thanks, everyone!

Kevin M, I've been a big fan of your fixed income analyses over the years.

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GreendaleCC
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Re: What's happening with Muni Money Market fund yields?

Post by GreendaleCC » Mon Mar 23, 2020 11:49 am

FCFXX (Fidelity® California Municipal Money Market Fund) 7-day Yield
2/29/2020: 0.70%
3/20/2020: 2.17%
3/22/2020: 3.41%

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Re: What's happening with Muni Money Market fund yields?

Post by shelanman » Mon Mar 23, 2020 12:06 pm

Bond markets are funny things -- even though the market is huge, so many bonds are very thinly traded even in ordinary times.

Even on bonds not as thinly traded as what the muni MMs own, I've seen bid-ask spreads balloon, and order books with no buyers at all. One of the short-term corporates I was watching (trades of 10k-50k at a time is typical), I saw an order for $5,000,000 go through at a price 15% away from the existing market. (It sold to a market maker/broker/dealer and was resold minutes later, netting the market maker a 9% markup)

This market as a whole is exhibiting signs that it may cease to clear, and maybe *is* ceasing to clear for very short periods. Except in the heaviest traded issues, market makers seem to be reaching the limits of how much market they are prepared to make.

This is the actual reason the fed announced their unlimited asset purchase plan. More than managing prices, the fed seeks to keep the markets liquid and clearing. Too much of the daily functioning of banks (and, really, of society) is built in the assumption that these securities all have a market price at all times.

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Re: What's happening with Muni Money Market fund yields?

Post by gmaynardkrebs » Mon Mar 23, 2020 12:12 pm

Is the Fed guaranteeing the $1 NAV On muni mm funds? Not clear to me.

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Re: What's happening with Muni Money Market fund yields?

Post by garlandwhizzer » Mon Mar 23, 2020 1:18 pm

Is the Fed guaranteeing the $1 NAV On muni mm funds? Not clear to me.
Apparently so, article from 4 days ago:

https://www.americanbanker.com/articles ... tual-funds

Our economy is absolutely dependent on the security and liquidity of "not breaking the buck" with MMF. Allowing MMF to "break the buck" would produce widespread panic and a liquidity crisis. It is financial suicide. As we can see from current FED actions and the massive stimulus package working its way through Congress, throwing money at a problem is not an issue when confidence in the financial system is in question. Much was learned from the disastrous loss of confidence and freezing up of credit markets that played out after allowing Lehman to go bankrupt. If worst comes to worst, the government can print all the dollars it needs to plug the holes in the financial system. The problem is not really the acute crisis, but the long term effects of massive deficits and ultra-low bond yields which slowly increase over longer time frames.

Garland Whizzer

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Re: What's happening with Muni Money Market fund yields?

Post by gmaynardkrebs » Mon Mar 23, 2020 1:40 pm

garlandwhizzer wrote:
Mon Mar 23, 2020 1:18 pm
Is the Fed guaranteeing the $1 NAV On muni mm funds? Not clear to me.
Apparently so, article from 4 days ago:

https://www.americanbanker.com/articles ... tual-funds
even after reading the article, I’m not so sure that providing unlimited liquidity is the same as guaranteeing a one dollar NAV. It has been a long time, but I believe the guarantee of the one dollar NAV was explicit in 2008. I have my cash in the treasury money market fund now, and despite the potential tax savings, I want to see it spelled out before I move it back into the Muni money market fund.

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Re: What's happening with Muni Money Market fund yields?

Post by Kevin M » Mon Mar 23, 2020 7:48 pm

Cross-posting from a related thread:
Kevin M wrote:
Mon Mar 23, 2020 7:45 pm
Crazy! VMSXX SEC yield jumped more than 150 bps over the weekend from 2.10% on Friday to 3.77% today. For me that's a TEY of 4.77%.

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Re: What's happening with Muni Money Market fund yields?

Post by GreendaleCC » Tue Mar 24, 2020 11:18 am

FCFXX (Fidelity® California Municipal Money Market Fund) 7-day Yield
2/29/2020: 0.70%
3/20/2020: 2.17%
3/22/2020: 3.41%
3/23/2020: 3.97%

retiringwhen
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Re: What's happening with Muni Money Market fund yields?

Post by retiringwhen » Tue Mar 24, 2020 1:01 pm

Just remember this when folks say Munis are low-risk.

I own VNJUX (NJ long-term) for a portion of my bond holdings and have no intention of selling any of them in the next few years, and boy am I glad.

I had money targeted for 1-2 years out in VMLUX (limited term muni) and sold on March 6th for a small loss. I realize I was taking way too much risk there. That money is back in VUSXX (treasury mm) where it belonged all along. Lesson learned.

I sold all my muni MM funds (VMSXX and VNJXX) a couple years ago (after tax law changes) and simplified to VUSXX mostly (plus Prime), glad I did.

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Re: What's happening with Muni Money Market fund yields?

Post by Kevin M » Tue Mar 24, 2020 8:00 pm

The craziness continues:

Image

Vanguard muni MM yield jumped another 40 bps today from 3.37% to 3.77%. CA muni MM increase since the spike began has been less, but still significant.

I included limited-term and intermediate term muni funds to show that while these yields also have increased, their increases are nothing compared to the muni MM fund yields.

I included Prime MM as a baseline money market yield, which as we see has continued to gradually decline.

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patrick013
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Re: What's happening with Muni Money Market fund yields?

Post by patrick013 » Tue Mar 24, 2020 9:26 pm

Financial markets work well most of the time, but they sometimes
shut down or crash due to lack of liquidity. Muni's and also to some
extent Corp's seem to be in a lack of liquidity stage. No buyers
which is odd but in crises anything isn't odd.

Unless massive injections of buyer liquidity by banks, investors,
or the government many financial markets can effectively dry up.
Prices lower to sellers and ratings may drop and the AAA bonds should
stay stable if it isn't while the treasury gets the flight to quality money
as usual.

I always thought most AAA bonds apart from treasuries enjoyed price
stability and some gains in an equity drawdown but today there's
less liquidity then needed for the quality of bonds available there.
What do they know we don't know ? Muni MM's are considered ultra
high-quality and any losses there would be most surprising. Hopefully
that market doesn't get any unwarranted buyer boycotts.
age in bonds, buy-and-hold, 10 year business cycle

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Re: What's happening with Muni Money Market fund yields?

Post by marky2kk » Tue Mar 24, 2020 10:35 pm

How can these yields be so high? I don't get it.

VWAHX has a 2.2% SEC yield and that's high yield & long duration. Against that, how can VMSXX have a 3.4% yield? Could somebody please explain it to me :?

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Re: What's happening with Muni Money Market fund yields?

Post by gmaynardkrebs » Tue Mar 24, 2020 11:51 pm

Kevin M wrote:
Tue Mar 24, 2020 8:00 pm
The craziness continues:
Vanguard muni MM yield jumped another 40 bps today from 3.37% to 3.77%. CA muni MM increase since the spike began has been less, but still significant.

I included limited-term and intermediate term muni funds to show that while these yields also have increased, their increases are nothing compared to the muni MM fund yields.

I included Prime MM as a baseline money market yield, which as we see has continued to gradually decline.

Kevin
I think that's backwards looking, and includes several days of pre Fed intervention, when rates shot as high as 10% in some areas. Bloomberg is showing the 1Y at 2.5% No real reason I can see for <1Y to be so much higher at this point, with Fed liquidity now. I recall the ARS weirdness in 2008, which persisted because the Fed said it could not legally intervene. Apparently, it can now.

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Re: What's happening with Muni Money Market fund yields?

Post by gmaynardkrebs » Wed Mar 25, 2020 12:06 am

retiringwhen wrote:
Tue Mar 24, 2020 1:01 pm
Just remember this when folks say Munis are low-risk.
High rated munis are low risk, just not riskless. Unlike corporates, they are typically backed by a lot of collateral, or large rainy day funds. The risk/reward ratio looks quite attractive now, at least to me.

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Re: What's happening with Muni Money Market fund yields?

Post by GreendaleCC » Wed Mar 25, 2020 9:25 am

FCFXX (Fidelity® California Municipal Money Market Fund) 7-day Yield
2/29/2020: 0.70%
3/20/2020: 2.17%
3/22/2020: 3.41%
3/23/2020: 3.97%
3/24/2020: 4.49%

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Re: What's happening with Muni Money Market fund yields?

Post by retiringwhen » Wed Mar 25, 2020 9:41 am

gmaynardkrebs wrote:
Wed Mar 25, 2020 12:06 am
retiringwhen wrote:
Tue Mar 24, 2020 1:01 pm
Just remember this when folks say Munis are low-risk.
High rated munis are low risk, just not riskless. Unlike corporates, they are typically backed by a lot of collateral, or large rainy day funds. The risk/reward ratio looks quite attractive now, at least to me.
If you look at the evolution of yields for Vanguard Intermediate Tax-Exempt and Intermediate Corporate Bond funds, it is almost identical. Unlike Treasuries, they are flying to the moon. I believe the liquidity risk (what we are seeing now) appears to be almost identical between corporates and tax-exempt bonds. I was not watching this closely in 2008-9, but my understanding is the same behavior manifest itself.

On top of that, NJ for example is already publicly stating they are shutting down projects due to precipitous drops in sales-tax revenue. They are not in a place to back stop the local muni bonds right now so there may be medium term default risk short of a Fed bailout.

Back to liquidity, I think anyone putting money into a muni money market has to consider the real possibility that gates will be implemented and the money may not be available on an immediate time-frame as we are accustomed to. That has nothing to do with the safety of the bond, but the log-jam in the market-place.

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Re: What's happening with Muni Money Market fund yields?

Post by Ricchan » Wed Mar 25, 2020 10:13 am

I have an Excel sheet automatically tracking Vanguard MM yields that I look at once every couple weeks.
When I opened it this morning, I thought for sure either my formulas or data sources broke.

Image

This is really going to screw up my vertical axis range going forward.

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Re: What's happening with Muni Money Market fund yields?

Post by gmaynardkrebs » Wed Mar 25, 2020 10:27 am

retiringwhen wrote:
Wed Mar 25, 2020 9:41 am
gmaynardkrebs wrote:
Wed Mar 25, 2020 12:06 am
retiringwhen wrote:
Tue Mar 24, 2020 1:01 pm
Just remember this when folks say Munis are low-risk.
High rated munis are low risk, just not riskless. Unlike corporates, they are typically backed by a lot of collateral, or large rainy day funds. The risk/reward ratio looks quite attractive now, at least to me.
If you look at the evolution of yields for Vanguard Intermediate Tax-Exempt and Intermediate Corporate Bond funds, it is almost identical. Unlike Treasuries, they are flying to the moon. I believe the liquidity risk (what we are seeing now) appears to be almost identical between corporates and tax-exempt bonds. I was not watching this closely in 2008-9, but my understanding is the same behavior manifest itself.

On top of that, NJ for example is already publicly stating they are shutting down projects due to precipitous drops in sales-tax revenue. They are not in a place to back stop the local muni bonds right now so there may be medium term default risk short of a Fed bailout.

Back to liquidity, I think anyone putting money into a muni money market has to consider the real possibility that gates will be implemented and the money may not be available on an immediate time-frame as we are accustomed to. That has nothing to do with the safety of the bond, but the log-jam in the market-place.
I'm just dipping my toe into moving some back into Vang muni short-term and Vang muni intermediate. While I think I am getting paid to take the risk, the risks have increased. Note: The Vanguard Intermediate muni is not an index fund, which is good. While they do mostly follow the index, they do actively filter out what they think is the bad stuff hiding in the index. I like that feature.

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Re: What's happening with Muni Money Market fund yields?

Post by am » Wed Mar 25, 2020 11:17 am

gmaynardkrebs wrote:
Wed Mar 25, 2020 10:27 am
retiringwhen wrote:
Wed Mar 25, 2020 9:41 am
gmaynardkrebs wrote:
Wed Mar 25, 2020 12:06 am
retiringwhen wrote:
Tue Mar 24, 2020 1:01 pm
Just remember this when folks say Munis are low-risk.
High rated munis are low risk, just not riskless. Unlike corporates, they are typically backed by a lot of collateral, or large rainy day funds. The risk/reward ratio looks quite attractive now, at least to me.
If you look at the evolution of yields for Vanguard Intermediate Tax-Exempt and Intermediate Corporate Bond funds, it is almost identical. Unlike Treasuries, they are flying to the moon. I believe the liquidity risk (what we are seeing now) appears to be almost identical between corporates and tax-exempt bonds. I was not watching this closely in 2008-9, but my understanding is the same behavior manifest itself.

On top of that, NJ for example is already publicly stating they are shutting down projects due to precipitous drops in sales-tax revenue. They are not in a place to back stop the local muni bonds right now so there may be medium term default risk short of a Fed bailout.

Back to liquidity, I think anyone putting money into a muni money market has to consider the real possibility that gates will be implemented and the money may not be available on an immediate time-frame as we are accustomed to. That has nothing to do with the safety of the bond, but the log-jam in the market-place.
I'm just dipping my toe into moving some back into Vang muni short-term and Vang muni intermediate. While I think I am getting paid to take the risk, the risks have increased. Note: The Vanguard Intermediate muni is not an index fund, which is good. While they do mostly follow the index, they do actively filter out what they think is the bad stuff hiding in the index. I like that feature.
Agree. I also like that they do their own research in bond offerings instead of relying on agencies.

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Re: What's happening with Muni Money Market fund yields?

Post by oaktownesq » Wed Mar 25, 2020 3:52 pm

These high "yields" have yet to be reflected in an actual March *distribution* from any of these funds, as far as I can tell.

If the high yield is simply a product of falling prices on the thinly traded underlying securities, and these funds are cycling in and out to maintain the $1.0000, how *mechanically* is that supposedly high yield going to be translated into an actual March or April or May distribution that equals the listed yields?

Serious question, not snarky!

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Re: What's happening with Muni Money Market fund yields?

Post by Kevin M » Wed Mar 25, 2020 4:54 pm

oaktownesq wrote:
Wed Mar 25, 2020 3:52 pm
These high "yields" have yet to be reflected in an actual March *distribution* from any of these funds, as far as I can tell.

If the high yield is simply a product of falling prices on the thinly traded underlying securities, and these funds are cycling in and out to maintain the $1.0000, how *mechanically* is that supposedly high yield going to be translated into an actual March or April or May distribution that equals the listed yields?

Serious question, not snarky!
From the Vanguard website:
The SEC yield for a money market fund is calculated by annualizing its daily income distributions for the previous 7 days.
So these yields represent actual "income distributions" that the fund owners have accrued over the previous 7 days. You can actually view your accrued dividends in the "Balances by date" screen. You can use the difference between accrued dividends on two subsequent dates to calculate your annualized yield for the most recent day, but you must have a large enough balance to get the necessary precision.

I've actually done this for MM funds in which I've had large balances, and I was able to calculate a 7-day SEC yield that agreed with the published SEC yield by annualizing the accrued dividends over 7 days.

I have a few thousand dollars in Treasury MM that I'll exchange most of into muni MM fund tomorrow if the yield still is high enough today, then will calculate the daily yield in a few days (latest date available in Balances by date is previous day, so I think I'll be able to see two days of accrued dividends as of Friday on Saturday). I'm not sure it's enough to get enough precision to exactly match the SEC yield with 7 days of accrued dividends, but I think it will get in the ballpark. I wish I had thought of doing this a few days ago, as it's not enough money that I'm worried about getting locked up due to liquidity gate or whatever.

The March distribution yield will include the high yields we've seen in recent days, but also the much lower yields for more than the first half of the month, starting at 1.08% for VMSXX, and only up to 1.26% on 3/18 before the big ramp began on 3/19. The average of the SEC yields from 3/1 through 3/24 is 1.50%, so if there were a distribution yesterday, that would be in the ballpark of the distribution yield calculated for that time period.

Kevin
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Re: What's happening with Muni Money Market fund yields?

Post by oaktownesq » Wed Mar 25, 2020 5:13 pm

Ah, great, thanks for the clarification.

I couldn't find any information but monthly distributions for Vanguard and Schwab. Sounds like the dividends (1) accrue daily (2) can be viewed daily by those actually holding the security (3) are in fact so accruing as stated by the SEC yield #s and (4) are actually paid out with the monthly distribution.

If only we could get a little more clarification on whether the fed MM backstop extends to these muni MMs unconditionally -- still haven't seen totally clear reporting or language on that.

If so, this seems like the obvious no-brainer best way to hold cash unless your risk tolerance is zero point zero point zero. (Says the guy who watched ICSH and JPST blow up in his face.)

And of course, who knows how long these yields will continue.

Thanks again for the info.

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Re: What's happening with Muni Money Market fund yields?

Post by Electron » Wed Mar 25, 2020 5:32 pm

This article highlights some of the recent problems in the short term municipal bond market. We knew there were significant risks in leveraged closed end municipal bond funds, but who could have imagined the impact on the funds mentioned.

https://www.bloomberg.com/news/articles ... d-by-havoc

The SIFMA Municipal Swap Index Yield which is updated every Wednesday dropped from 5.20% last week to 4.71%. That may suggest higher rates ahead for the tax exempt money market funds at least in the short term.

https://www.bloomberg.com/quote/MUNIPSA:IND

To see the chart click on 1Y and then View Full Chart.

The SIFMA Municipal Swap index is a 7-day high-grade market index comprised of tax-exempt VRDO reset rates that are reported to the Municipal Securities Rule Making Board's SHORT reporting system.
Electron

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Re: What's happening with Muni Money Market fund yields?

Post by GreendaleCC » Thu Mar 26, 2020 6:58 pm

FCFXX (Fidelity® California Municipal Money Market Fund) 7-day Yield
2/29/2020: 0.70%
3/20/2020: 2.17%
3/22/2020: 3.41%
3/23/2020: 3.97%
3/24/2020: 4.49%
3/25/2020: 4.91%

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Re: What's happening with Muni Money Market fund yields?

Post by Kevin M » Thu Mar 26, 2020 7:58 pm

We saw the 7-day yields start to come down today:

Image.

A post in the related thread shows why:
DanFromNewYork wrote:
Thu Mar 26, 2020 4:56 pm
I have some money in the NY muni money market at vanguard and computed the daily yield from my accrued dividends (if I average over 7 days I match the posted SEC yields). It looks like the yield peaked on the 19th and has only slowly been decreasing. The daily yield was 3.48% as of yesterday.

Image
Today is the 26th, and I believe the SEC yields shown for the 26th in my chart are based on the 7-day period ending the 25th. Until the 25th, a much lower daily yield was being replaced by a much higher daily yield, causing the 7-day average to continue to increase even though the daily yield has been gradually declining since the 19th.

The yields published today represent the first day that only the higher yields were included in the average. I might not be reasoning this out exactly right to the day, but I think the general idea is correct. We now should see the 7-day yield gradually decline as a new lower daily yield replaces the an older higher daily yield.

Note also that the slope of the decline in daily yields has increased in magnitude for the latest daily yield plotted, which could indicate an acceleration of declining daily yields as the Fed continues to buy short-term munis.

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Re: What's happening with Muni Money Market fund yields?

Post by Noobvestor » Thu Mar 26, 2020 8:11 pm

So it won't last, but where will it land? I've been using the Federal Money Market for years, and am assuming that's heading toward zero given fed target rates. Aside from this temporary spike: worth moving to the muni MM and accepting small risk of buck-breaking or temporary freezes?
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

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Re: What's happening with Muni Money Market fund yields?

Post by gmaynardkrebs » Thu Mar 26, 2020 10:46 pm

Noobvestor wrote:
Thu Mar 26, 2020 8:11 pm
So it won't last, but where will it land? I've been using the Federal Money Market for years, and am assuming that's heading toward zero given fed target rates. Aside from this temporary spike: worth moving to the muni MM and accepting small risk of buck-breaking or temporary freezes?
My feeling is that a MM fund is not the place I want to take risk with my cash. I'd want a TEY of at least 50 basis points above the Fed MM on a sustainable basis even to consider putting a significant amount of my cash in there. It's clearly the least liquid of the Vanguard MM offerings.

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Re: What's happening with Muni Money Market fund yields?

Post by am » Fri Mar 27, 2020 7:41 am

gmaynardkrebs wrote:
Thu Mar 26, 2020 10:46 pm
Noobvestor wrote:
Thu Mar 26, 2020 8:11 pm
So it won't last, but where will it land? I've been using the Federal Money Market for years, and am assuming that's heading toward zero given fed target rates. Aside from this temporary spike: worth moving to the muni MM and accepting small risk of buck-breaking or temporary freezes?
My feeling is that a MM fund is not the place I want to take risk with my cash. I'd want a TEY of at least 50 basis points above the Fed MM on a sustainable basis even to consider putting a significant amount of my cash in there. It's clearly the least liquid of the Vanguard MM offerings.
“Clearly the least liquid”. What is the basis for this statement?

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Re: What's happening with Muni Money Market fund yields?

Post by DanFromNewYork » Fri Mar 27, 2020 7:43 am

Kevin M wrote:
Thu Mar 26, 2020 7:58 pm
Today is the 26th, and I believe the SEC yields shown for the 26th in my chart are based on the 7-day period ending the 25th.
From what I am seeing this isn't quite correct. Based on my computed daily yields, the SEC yields for the 26th would be the average of the 7-day period ending on the 26th. The story remains the same, however.

For my NY muni position, the decrease keeps accelerating with the daily yield for the 26th at 2.92% and the 7-day average of 3.84%.

Here is my daily yield:
Image

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gmaynardkrebs
Posts: 2006
Joined: Sun Feb 10, 2008 11:48 am

Re: What's happening with Muni Money Market fund yields?

Post by gmaynardkrebs » Fri Mar 27, 2020 8:14 am

am wrote:
Fri Mar 27, 2020 7:41 am
gmaynardkrebs wrote:
Thu Mar 26, 2020 10:46 pm
Noobvestor wrote:
Thu Mar 26, 2020 8:11 pm
So it won't last, but where will it land? I've been using the Federal Money Market for years, and am assuming that's heading toward zero given fed target rates. Aside from this temporary spike: worth moving to the muni MM and accepting small risk of buck-breaking or temporary freezes?
My feeling is that a MM fund is not the place I want to take risk with my cash. I'd want a TEY of at least 50 basis points above the Fed MM on a sustainable basis even to consider putting a significant amount of my cash in there. It's clearly the least liquid of the Vanguard MM offerings.
“Clearly the least liquid”. What is the basis for this statement?
Before the Fed stepped in, the bid/ask spread blew out. In some cases, the rate on overnight was as high as 10%. That was clearly liquidity, not solvency.You may also recall the ARS fiasco of 2008, which showed a similar illiquidity pattern when the market makers stepped out.

However, if you think that the Fed backstop guarantees the $1 NAV (I do not), then it shouldn't be a concern for you. I imagine a loss, if any, would be very minor. The way I look at, for a few basis points in TEY, I don't want to waste my time thinking about it -- I've got enough on my mind.

am
Posts: 3260
Joined: Sun Sep 30, 2007 9:55 am

Re: What's happening with Muni Money Market fund yields?

Post by am » Fri Mar 27, 2020 8:59 am

gmaynardkrebs wrote:
Fri Mar 27, 2020 8:14 am
am wrote:
Fri Mar 27, 2020 7:41 am
gmaynardkrebs wrote:
Thu Mar 26, 2020 10:46 pm
Noobvestor wrote:
Thu Mar 26, 2020 8:11 pm
So it won't last, but where will it land? I've been using the Federal Money Market for years, and am assuming that's heading toward zero given fed target rates. Aside from this temporary spike: worth moving to the muni MM and accepting small risk of buck-breaking or temporary freezes?
My feeling is that a MM fund is not the place I want to take risk with my cash. I'd want a TEY of at least 50 basis points above the Fed MM on a sustainable basis even to consider putting a significant amount of my cash in there. It's clearly the least liquid of the Vanguard MM offerings.
“Clearly the least liquid”. What is the basis for this statement?
Before the Fed stepped in, the bid/ask spread blew out. In some cases, the rate on overnight was as high as 10%. That was clearly liquidity, not solvency.You may also recall the ARS fiasco of 2008, which showed a similar illiquidity pattern when the market makers stepped out.

However, if you think that the Fed backstop guarantees the $1 NAV (I do not), then it shouldn't be a concern for you. I imagine a loss, if any, would be very minor. The way I look at, for a few basis points in TEY, I don't want to waste my time thinking about it -- I've got enough on my mind.
It’s a lot more than a few basis points. It’s like a tax free cash bonus if this lasts for weeks. It’s a few clicks, easy money. Vanguard won’t break a buck on their MM funds and I believe fed would step in the worst of cases.

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WoodSpinner
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Re: What's happening with Muni Money Market fund yields?

Post by WoodSpinner » Fri Mar 27, 2020 9:57 am

am wrote:
Fri Mar 27, 2020 8:59 am
gmaynardkrebs wrote:
Fri Mar 27, 2020 8:14 am
am wrote:
Fri Mar 27, 2020 7:41 am
gmaynardkrebs wrote:
Thu Mar 26, 2020 10:46 pm
Noobvestor wrote:
Thu Mar 26, 2020 8:11 pm
So it won't last, but where will it land? I've been using the Federal Money Market for years, and am assuming that's heading toward zero given fed target rates. Aside from this temporary spike: worth moving to the muni MM and accepting small risk of buck-breaking or temporary freezes?
My feeling is that a MM fund is not the place I want to take risk with my cash. I'd want a TEY of at least 50 basis points above the Fed MM on a sustainable basis even to consider putting a significant amount of my cash in there. It's clearly the least liquid of the Vanguard MM offerings.
“Clearly the least liquid”. What is the basis for this statement?
Before the Fed stepped in, the bid/ask spread blew out. In some cases, the rate on overnight was as high as 10%. That was clearly liquidity, not solvency.You may also recall the ARS fiasco of 2008, which showed a similar illiquidity pattern when the market makers stepped out.

However, if you think that the Fed backstop guarantees the $1 NAV (I do not), then it shouldn't be a concern for you. I imagine a loss, if any, would be very minor. The way I look at, for a few basis points in TEY, I don't want to waste my time thinking about it -- I've got enough on my mind.
It’s a lot more than a few basis points. It’s like a tax free cash bonus if this lasts for weeks. It’s a few clicks, easy money. Vanguard won’t break a buck on their MM funds and I believe fed would step in the worst of cases.
Sigh, this is where I start to question the Fed’s actions. Why should they prop up this area of the market and cause these types of distortions. It’s as if the RISK of these assets being invested in doesn’t matter.

Can’t say I blame you for seizing an opportunity, I just hope you are correct on your risk assessment.

WoodSpinner

am
Posts: 3260
Joined: Sun Sep 30, 2007 9:55 am

Re: What's happening with Muni Money Market fund yields?

Post by am » Fri Mar 27, 2020 10:15 am

WoodSpinner wrote:
Fri Mar 27, 2020 9:57 am
am wrote:
Fri Mar 27, 2020 8:59 am
gmaynardkrebs wrote:
Fri Mar 27, 2020 8:14 am
am wrote:
Fri Mar 27, 2020 7:41 am
gmaynardkrebs wrote:
Thu Mar 26, 2020 10:46 pm
My feeling is that a MM fund is not the place I want to take risk with my cash. I'd want a TEY of at least 50 basis points above the Fed MM on a sustainable basis even to consider putting a significant amount of my cash in there. It's clearly the least liquid of the Vanguard MM offerings.
“Clearly the least liquid”. What is the basis for this statement?
Before the Fed stepped in, the bid/ask spread blew out. In some cases, the rate on overnight was as high as 10%. That was clearly liquidity, not solvency.You may also recall the ARS fiasco of 2008, which showed a similar illiquidity pattern when the market makers stepped out.

However, if you think that the Fed backstop guarantees the $1 NAV (I do not), then it shouldn't be a concern for you. I imagine a loss, if any, would be very minor. The way I look at, for a few basis points in TEY, I don't want to waste my time thinking about it -- I've got enough on my mind.
It’s a lot more than a few basis points. It’s like a tax free cash bonus if this lasts for weeks. It’s a few clicks, easy money. Vanguard won’t break a buck on their MM funds and I believe fed would step in the worst of cases.
Sigh, this is where I start to question the Fed’s actions. Why should they prop up this area of the market and cause these types of distortions. It’s as if the RISK of these assets being invested in doesn’t matter.

Can’t say I blame you for seizing an opportunity, I just hope you are correct on your risk assessment.

WoodSpinner
Muni market needs to function properly for municipalities. It’s not the fed causing distortions it’s a liquidity issue, a lot of selling into a thinly traded market. The risk of muni mm breaking the buck at vanguard AND fed not coming in for the rescue is lower than the risk of another 50% market losses from here in my opinion.

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WoodSpinner
Posts: 1329
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Re: What's happening with Muni Money Market fund yields?

Post by WoodSpinner » Fri Mar 27, 2020 10:27 am

To me this is a good reason why there should not be a Muni MM fund....

Or a HY MM fund

Fine with it as long as the expectation is that it will break the buck in times of great volatility.

But what do I know....

WoodSpinner

User avatar
gmaynardkrebs
Posts: 2006
Joined: Sun Feb 10, 2008 11:48 am

Re: What's happening with Muni Money Market fund yields?

Post by gmaynardkrebs » Fri Mar 27, 2020 10:34 am

WoodSpinner wrote:
Fri Mar 27, 2020 9:57 am
am wrote:
Fri Mar 27, 2020 8:59 am
gmaynardkrebs wrote:
Fri Mar 27, 2020 8:14 am
am wrote:
Fri Mar 27, 2020 7:41 am
gmaynardkrebs wrote:
Thu Mar 26, 2020 10:46 pm
My feeling is that a MM fund is not the place I want to take risk with my cash. I'd want a TEY of at least 50 basis points above the Fed MM on a sustainable basis even to consider putting a significant amount of my cash in there. It's clearly the least liquid of the Vanguard MM offerings.
“Clearly the least liquid”. What is the basis for this statement?
Before the Fed stepped in, the bid/ask spread blew out. In some cases, the rate on overnight was as high as 10%. That was clearly liquidity, not solvency.You may also recall the ARS fiasco of 2008, which showed a similar illiquidity pattern when the market makers stepped out.

However, if you think that the Fed backstop guarantees the $1 NAV (I do not), then it shouldn't be a concern for you. I imagine a loss, if any, would be very minor. The way I look at, for a few basis points in TEY, I don't want to waste my time thinking about it -- I've got enough on my mind.
It’s a lot more than a few basis points. It’s like a tax free cash bonus if this lasts for weeks. It’s a few clicks, easy money. Vanguard won’t break a buck on their MM funds and I believe fed would step in the worst of cases.
Sigh, this is where I start to question the Fed’s actions. Why should they prop up this area of the market and cause these types of distortions. It’s as if the RISK of these assets being invested in doesn’t matter.

Can’t say I blame you for seizing an opportunity, I just hope you are correct on your risk assessment.

WoodSpinner
The Fed is only removing liquidity risk, not solvency risk. Unfortunately, there's solvency risk in munis that wasn't there just 45 days ago. Neither the Fed nor the federal government is guaranteeing muni repayment at this time. Solvency risk is still there. Toll roads with no cars, stadiums with no sports, state colleges with no students, and far less sales tax revenues, are going to hit hard. See this column by the very sharp Catherine Rampell in WaPo, which lays out this changed landscape in some detail:

https://www.washingtonpost.com/opinions ... story.html

Topic Author
GreendaleCC
Posts: 18
Joined: Sun Dec 22, 2019 3:24 am

Re: What's happening with Muni Money Market fund yields?

Post by GreendaleCC » Fri Mar 27, 2020 10:36 am

FCFXX (Fidelity® California Municipal Money Market Fund) 7-day Yield
2/29/2020: 0.70%
3/20/2020: 2.17%
3/22/2020: 3.41%
3/23/2020: 3.97%
3/24/2020: 4.49%
3/25/2020: 4.91%
3/26/2020: 4.72%

am
Posts: 3260
Joined: Sun Sep 30, 2007 9:55 am

Re: What's happening with Muni Money Market fund yields?

Post by am » Fri Mar 27, 2020 10:54 am

gmaynardkrebs wrote:
Fri Mar 27, 2020 10:34 am
WoodSpinner wrote:
Fri Mar 27, 2020 9:57 am
am wrote:
Fri Mar 27, 2020 8:59 am
gmaynardkrebs wrote:
Fri Mar 27, 2020 8:14 am
am wrote:
Fri Mar 27, 2020 7:41 am


“Clearly the least liquid”. What is the basis for this statement?
Before the Fed stepped in, the bid/ask spread blew out. In some cases, the rate on overnight was as high as 10%. That was clearly liquidity, not solvency.You may also recall the ARS fiasco of 2008, which showed a similar illiquidity pattern when the market makers stepped out.

However, if you think that the Fed backstop guarantees the $1 NAV (I do not), then it shouldn't be a concern for you. I imagine a loss, if any, would be very minor. The way I look at, for a few basis points in TEY, I don't want to waste my time thinking about it -- I've got enough on my mind.
It’s a lot more than a few basis points. It’s like a tax free cash bonus if this lasts for weeks. It’s a few clicks, easy money. Vanguard won’t break a buck on their MM funds and I believe fed would step in the worst of cases.
Sigh, this is where I start to question the Fed’s actions. Why should they prop up this area of the market and cause these types of distortions. It’s as if the RISK of these assets being invested in doesn’t matter.

Can’t say I blame you for seizing an opportunity, I just hope you are correct on your risk assessment.

WoodSpinner
The Fed is only removing liquidity risk, not solvency risk. Unfortunately, there's solvency risk in munis that wasn't there just 45 days ago. Neither the Fed nor the federal government is guaranteeing muni repayment at this time. Solvency risk is still there. Toll roads with no cars, stadiums with no sports, state colleges with no students, and far less sales tax revenues, are going to hit hard. See this column by the very sharp Catherine Rampell in WaPo, which lays out this changed landscape in some detail:

https://www.washingtonpost.com/opinions ... story.html
I can’t see the article because I am not a Wash post subscriber

Sure there is dramatically increased solvency risk, but if the fed gov is saving private companies, do you think they would let municipalities fail and not bail out?

bck63
Posts: 990
Joined: Fri Sep 28, 2018 4:59 pm

Vanguard Municipal MMF Yield is 3.93%. Why?

Post by bck63 » Fri Mar 27, 2020 10:56 am

Can anyone explain why Vanguard Municipal Money Market Fund (VMSXX) is so high? Thinking of moving all my cash over from the Treasury fund but I'm sure this is some kind of blip that won't last.

[Merged into the pre-existing thread on the same topic. Moderator Misenplace]

User avatar
gmaynardkrebs
Posts: 2006
Joined: Sun Feb 10, 2008 11:48 am

Re: What's happening with Muni Money Market fund yields?

Post by gmaynardkrebs » Fri Mar 27, 2020 11:09 am

am wrote:
Fri Mar 27, 2020 10:54 am
gmaynardkrebs wrote:
Fri Mar 27, 2020 10:34 am
WoodSpinner wrote:
Fri Mar 27, 2020 9:57 am
am wrote:
Fri Mar 27, 2020 8:59 am
gmaynardkrebs wrote:
Fri Mar 27, 2020 8:14 am
Before the Fed stepped in, the bid/ask spread blew out. In some cases, the rate on overnight was as high as 10%. That was clearly liquidity, not solvency.You may also recall the ARS fiasco of 2008, which showed a similar illiquidity pattern when the market makers stepped out.

However, if you think that the Fed backstop guarantees the $1 NAV (I do not), then it shouldn't be a concern for you. I imagine a loss, if any, would be very minor. The way I look at, for a few basis points in TEY, I don't want to waste my time thinking about it -- I've got enough on my mind.
It’s a lot more than a few basis points. It’s like a tax free cash bonus if this lasts for weeks. It’s a few clicks, easy money. Vanguard won’t break a buck on their MM funds and I believe fed would step in the worst of cases.
Sigh, this is where I start to question the Fed’s actions. Why should they prop up this area of the market and cause these types of distortions. It’s as if the RISK of these assets being invested in doesn’t matter.

Can’t say I blame you for seizing an opportunity, I just hope you are correct on your risk assessment.

WoodSpinner
The Fed is only removing liquidity risk, not solvency risk. Unfortunately, there's solvency risk in munis that wasn't there just 45 days ago. Neither the Fed nor the federal government is guaranteeing muni repayment at this time. Solvency risk is still there. Toll roads with no cars, stadiums with no sports, state colleges with no students, and far less sales tax revenues, are going to hit hard. See this column by the very sharp Catherine Rampell in WaPo, which lays out this changed landscape in some detail:

https://www.washingtonpost.com/opinions ... story.html
I can’t see the article because I am not a Wash post subscriber

Sure there is dramatically increased solvency risk, but if the fed gov is saving private companies, do you think they would let municipalities fail and not bail out?
As I believe such a discussion would violate the site rules, I will send a short PM to you.

lukestuckenhymer
Posts: 251
Joined: Wed May 30, 2018 11:53 am

Re: What's happening with Muni Money Market fund yields?

Post by lukestuckenhymer » Fri Mar 27, 2020 11:11 am

am wrote:
Fri Mar 27, 2020 8:59 am
gmaynardkrebs wrote:
Fri Mar 27, 2020 8:14 am
am wrote:
Fri Mar 27, 2020 7:41 am
gmaynardkrebs wrote:
Thu Mar 26, 2020 10:46 pm
Noobvestor wrote:
Thu Mar 26, 2020 8:11 pm
So it won't last, but where will it land? I've been using the Federal Money Market for years, and am assuming that's heading toward zero given fed target rates. Aside from this temporary spike: worth moving to the muni MM and accepting small risk of buck-breaking or temporary freezes?
My feeling is that a MM fund is not the place I want to take risk with my cash. I'd want a TEY of at least 50 basis points above the Fed MM on a sustainable basis even to consider putting a significant amount of my cash in there. It's clearly the least liquid of the Vanguard MM offerings.
“Clearly the least liquid”. What is the basis for this statement?
Before the Fed stepped in, the bid/ask spread blew out. In some cases, the rate on overnight was as high as 10%. That was clearly liquidity, not solvency.You may also recall the ARS fiasco of 2008, which showed a similar illiquidity pattern when the market makers stepped out.

However, if you think that the Fed backstop guarantees the $1 NAV (I do not), then it shouldn't be a concern for you. I imagine a loss, if any, would be very minor. The way I look at, for a few basis points in TEY, I don't want to waste my time thinking about it -- I've got enough on my mind.
It’s a lot more than a few basis points. It’s like a tax free cash bonus if this lasts for weeks. It’s a few clicks, easy money. Vanguard won’t break a buck on their MM funds and I believe fed would step in the worst of cases.
Not worth the risk for a few weeks of interest. And I wouldn't feel comfortable with moving millions (even if I had it) in and out of a Muni MM to make that few weeks worth it. The risk isn't nonexistant.

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indexfundfan
Posts: 2899
Joined: Tue Feb 20, 2007 11:21 am
Contact:

Re: What's happening with Muni Money Market fund yields?

Post by indexfundfan » Fri Mar 27, 2020 11:22 am

The fewer people take advantage of this, the longer it will last...
My signature has been deleted.

Topic Author
GreendaleCC
Posts: 18
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Re: What's happening with Muni Money Market fund yields?

Post by GreendaleCC » Fri Mar 27, 2020 11:36 am

Net inflow into FCFXX (Fidelity® California Municipal Money Market Fund) jumped from $85k (3/25) to $9.5M (3/26).

(Net outflow on 3/18 was $38M.)

You can also see the decline and quick jump in liquidity (75% to 70%, then back up to 76%) at https://fundresearch.fidelity.com/mutua ... /316061100.

am
Posts: 3260
Joined: Sun Sep 30, 2007 9:55 am

Re: What's happening with Muni Money Market fund yields?

Post by am » Fri Mar 27, 2020 11:36 am

lukestuckenhymer wrote:
Fri Mar 27, 2020 11:11 am
am wrote:
Fri Mar 27, 2020 8:59 am
gmaynardkrebs wrote:
Fri Mar 27, 2020 8:14 am
am wrote:
Fri Mar 27, 2020 7:41 am
gmaynardkrebs wrote:
Thu Mar 26, 2020 10:46 pm
My feeling is that a MM fund is not the place I want to take risk with my cash. I'd want a TEY of at least 50 basis points above the Fed MM on a sustainable basis even to consider putting a significant amount of my cash in there. It's clearly the least liquid of the Vanguard MM offerings.
“Clearly the least liquid”. What is the basis for this statement?
Before the Fed stepped in, the bid/ask spread blew out. In some cases, the rate on overnight was as high as 10%. That was clearly liquidity, not solvency.You may also recall the ARS fiasco of 2008, which showed a similar illiquidity pattern when the market makers stepped out.

However, if you think that the Fed backstop guarantees the $1 NAV (I do not), then it shouldn't be a concern for you. I imagine a loss, if any, would be very minor. The way I look at, for a few basis points in TEY, I don't want to waste my time thinking about it -- I've got enough on my mind.
It’s a lot more than a few basis points. It’s like a tax free cash bonus if this lasts for weeks. It’s a few clicks, easy money. Vanguard won’t break a buck on their MM funds and I believe fed would step in the worst of cases.
Not worth the risk for a few weeks of interest. And I wouldn't feel comfortable with moving millions (even if I had it) in and out of a Muni MM to make that few weeks worth it. The risk isn't nonexistant.
High rated munis did well during the Great Depression with fed making things worse. You think current situation is worse?

User avatar
gmaynardkrebs
Posts: 2006
Joined: Sun Feb 10, 2008 11:48 am

Re: What's happening with Muni Money Market fund yields?

Post by gmaynardkrebs » Fri Mar 27, 2020 11:46 am

am wrote:
Fri Mar 27, 2020 11:36 am
lukestuckenhymer wrote:
Fri Mar 27, 2020 11:11 am
am wrote:
Fri Mar 27, 2020 8:59 am
gmaynardkrebs wrote:
Fri Mar 27, 2020 8:14 am
am wrote:
Fri Mar 27, 2020 7:41 am


“Clearly the least liquid”. What is the basis for this statement?
Before the Fed stepped in, the bid/ask spread blew out. In some cases, the rate on overnight was as high as 10%. That was clearly liquidity, not solvency.You may also recall the ARS fiasco of 2008, which showed a similar illiquidity pattern when the market makers stepped out.

However, if you think that the Fed backstop guarantees the $1 NAV (I do not), then it shouldn't be a concern for you. I imagine a loss, if any, would be very minor. The way I look at, for a few basis points in TEY, I don't want to waste my time thinking about it -- I've got enough on my mind.
It’s a lot more than a few basis points. It’s like a tax free cash bonus if this lasts for weeks. It’s a few clicks, easy money. Vanguard won’t break a buck on their MM funds and I believe fed would step in the worst of cases.
Not worth the risk for a few weeks of interest. And I wouldn't feel comfortable with moving millions (even if I had it) in and out of a Muni MM to make that few weeks worth it. The risk isn't nonexistant.
High rated munis did well during the Great Depression with fed making things worse. You think current situation is worse?
Yes. As of late last year, only about half the states had the funds they need to weather even a moderate recession, according to Moody’s Analytics. Many states have yet to recover from the 2008 GFC.

am
Posts: 3260
Joined: Sun Sep 30, 2007 9:55 am

Re: What's happening with Muni Money Market fund yields?

Post by am » Fri Mar 27, 2020 12:50 pm

gmaynardkrebs wrote:
Fri Mar 27, 2020 11:46 am
am wrote:
Fri Mar 27, 2020 11:36 am
lukestuckenhymer wrote:
Fri Mar 27, 2020 11:11 am
am wrote:
Fri Mar 27, 2020 8:59 am
gmaynardkrebs wrote:
Fri Mar 27, 2020 8:14 am
Before the Fed stepped in, the bid/ask spread blew out. In some cases, the rate on overnight was as high as 10%. That was clearly liquidity, not solvency.You may also recall the ARS fiasco of 2008, which showed a similar illiquidity pattern when the market makers stepped out.

However, if you think that the Fed backstop guarantees the $1 NAV (I do not), then it shouldn't be a concern for you. I imagine a loss, if any, would be very minor. The way I look at, for a few basis points in TEY, I don't want to waste my time thinking about it -- I've got enough on my mind.
It’s a lot more than a few basis points. It’s like a tax free cash bonus if this lasts for weeks. It’s a few clicks, easy money. Vanguard won’t break a buck on their MM funds and I believe fed would step in the worst of cases.
Not worth the risk for a few weeks of interest. And I wouldn't feel comfortable with moving millions (even if I had it) in and out of a Muni MM to make that few weeks worth it. The risk isn't nonexistant.
High rated munis did well during the Great Depression with fed making things worse. You think current situation is worse?
Yes. As of late last year, only about half the states had the funds they need to weather even a moderate recession, according to Moody’s Analytics. Many states have yet to recover from the 2008 GFC.
I’m hoping vanguard analysts avoided those.

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