Fidelity reporting tax equivalent yield for muni money market funds - misleading?

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noraz123
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Fidelity reporting tax equivalent yield for muni money market funds - misleading?

Post by noraz123 »

I was looking at Fidelity's selection of money market funds, and I came across Fidelity California Municipal Money Market Fund - Premium Class. I noticed that it reports tax equivalent yield, see here:
Image

In this case, it is reporting a tax equivalent yield of 2.53%, with a 7-day SEC yield of 1.26%. There are no footnotes or explanation of how they report this. This brings up a few questions
  • What nominal rate do they use to calculate? 7-day SEC yield?
  • If yes, basic math says they are using a tax rate of ~50%, which seems to be for the highest California tax bracket (12.3%) + highest tax bracket US Federal (37%). Is this a standard way to report this?
I was caught off guard that Fidelity would even report a number since everyone's tax rate is different. Moreover, I thought some people in lower tax brackets might latch on to this higher interest rate without knowing that it doesn't apply to them.
student
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Joined: Fri Apr 03, 2015 6:58 am

Re: Fidelity reporting tax equivalent yield for muni money market funds - misleading?

Post by student »

I find it misleading without a footnote.
retiringwhen
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Joined: Sat Jul 08, 2017 10:09 am
Location: New Jersey, USA

Re: Fidelity reporting tax equivalent yield for muni money market funds - misleading?

Post by retiringwhen »

In almost all cases, I have found the TEY reported by any institution useless as they almost always report against the highest possible tax rate.

It is much better to be student of your own tax rate, develop a simple spreadsheet that allows you calculate a personal TEY to make it actionable.
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