Muni Money Market funds starting to look good!

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hornet96
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Re: Muni Money Market funds starting to look good!

Post by hornet96 » Thu Jan 11, 2018 11:03 am

I noticed this the other day, where the muni money market yield was around 1.41%. When I peaked under the hood, I noticed that the NAV of the fund was something like $0.9998. So, technically it had "broken the buck," which is why the SEC yield looked so high.

As of today, the NAV is back to $1.0000.

Not meaning to cause alarm, but just wanted to point out the likely reason for the seemingly large fluctuations in the SEC yield.

aabcd
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Re: Muni Money Market funds starting to look good!

Post by aabcd » Thu Jan 11, 2018 8:23 pm

I have a question, why would ppl use online saving account instead of the tax free Muni money market?

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BogleMelon
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Re: Muni Money Market funds starting to look good!

Post by BogleMelon » Thu Jan 11, 2018 10:51 pm

aabcd wrote:
Thu Jan 11, 2018 8:23 pm
I have a question, why would ppl use online saving account instead of the tax free Muni money market?
1- They are in a lower tax bracket anyways
2- They prefer the stable interest rate, unlike Muni that keep changed
3- Saving accounts are FDIC insured
4- They don't have much in saving account anyways (i.e: $100,000 in saving account with 1.25% - 15% tax bracket yields $1,062 yr, while MM fund tax free fund of 1.38% = $1,380 $1,240. Difference of $26.5$14.83/mo extra may seem not so attractive)
5- Status quo
6- They didn't hear before about such funds/ or unawareness of what bonds are in general and look at any financial product with the word stock or bond as a "wall street gambling product that should be avoided!!"
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

onourway
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Re: Muni Money Market funds starting to look good!

Post by onourway » Fri Jan 12, 2018 6:21 am

aabcd wrote:
Thu Jan 11, 2018 8:23 pm
I have a question, why would ppl use online saving account instead of the tax free Muni money market?
Also, until about 2 weeks ago, yields in the muni funds were low enough that even after tax you were coming out ahead in a good savings account. Prime MM has been rising steadily for the last year or so, but muni's jumped late in the year. Where they will level off?

So largely, MM funds have fallen out of favor for more than a decade now, so few people are familiar with using them anymore.

zzz
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Re: Muni Money Market funds starting to look good!

Post by zzz » Fri Jan 12, 2018 9:30 am

Exactly, the rates were around 0.77%. At an AGI of $51,000 that makes for a 1.4x multiplier and thus only a 1.08% effective rate. There were definitely many better savings accounts rates available than that. Even the highest tax bracket, with its 1.985x multiplier would get a 1.53% rate. There were (and still are) online saving accounts that were in the 1.55%-1.6% range. With the rate currently at 1.21%, the effective rates are now 1.7% and 2.4%. So it definitely makes sense for someone in the highest tax bracket but someone in the federal 22% bracket (and associated NY tax bracket) the 1.4x multiplier is only slightly better than the best savings account rate. FDIC insurance and a more stable interest rate would make the people in the lower tax brackets stay with the savings account.
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aabcd
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Re: Muni Money Market funds starting to look good!

Post by aabcd » Fri Jan 12, 2018 11:23 am

Learned so much from this form, let’s say if I buy one of the Muni fund. Do I buy them on the brokerage account or the Roth account.

Thanks

onourway
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Re: Muni Money Market funds starting to look good!

Post by onourway » Fri Jan 12, 2018 11:26 am

aabcd wrote:
Fri Jan 12, 2018 11:23 am
Learned so much from this form, let’s say if I buy one of the Muni fund. Do I buy them on the brokerage account or the Roth account.

Thanks
The point of holding a municipal fund is to avoid paying taxes, so one would hold them in a taxable brokerage account as your Roth is already shielded from taxes, so you'd take the (generally) higher yields of the regular Prime fund if holding in Roth.

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whodidntante
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Re: Muni Money Market funds starting to look good!

Post by whodidntante » Tue Jan 16, 2018 12:19 am

For those watching the bouncing ball, your muni fund yield has likely fallen off a bit.

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bligh
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Re: Muni Money Market funds starting to look good!

Post by bligh » Wed Jan 17, 2018 2:35 pm

whodidntante wrote:
Tue Jan 16, 2018 12:19 am
For those watching the bouncing ball, your muni fund yield has likely fallen off a bit.
Yup, looks like they are all lower than when this thread started. So far it still works better than a savings account after taxes. So far.

Oh well, it was nice while it lasted. :sharebeer

ZinCO
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Re: Muni Money Market funds starting to look good!

Post by ZinCO » Wed Jan 17, 2018 4:00 pm

bligh wrote:
Wed Jan 17, 2018 2:35 pm
whodidntante wrote:
Tue Jan 16, 2018 12:19 am
For those watching the bouncing ball, your muni fund yield has likely fallen off a bit.
Yup, looks like they are all lower than when this thread started. So far it still works better than a savings account after taxes. So far.

Oh well, it was nice while it lasted. :sharebeer
But still well above November, so I'll take it...

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heartwood
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Re: Muni Money Market funds starting to look good!

Post by heartwood » Thu Jan 25, 2018 4:34 pm

minesweep wrote:
Mon Jan 01, 2018 11:26 am
bligh wrote:
Wed Dec 27, 2017 2:06 pm
So the thread about the Prime Money Market fund made me take a quick look at the rates on some of the Municipal Money market funds and they are looking really good (for people in high tax brackets)!

As of right now here are yields :

Vanguard Municipal Money Market Fund (VMSXX) - 1.20%
Vanguard New York Municipal Money Market Fund (VYFXX) - 1.20%
Vanguard California Municipal Money Market Fund (VCTXX) 1.14%

These are tax free yields, and New York's in particular looks really good. I can see these guys providing a better return than what you would get in a savings account .. for those in higher tax brackets these would be almost as good as CD rates, but with the liquidity of a savings account.

Looks like a pretty sweet deal! I just transfered by cash reserve over to my state's municipal money market fund at Vanguard and I am seeing a pretty big jump in after tax yield as a result.

Just wanted to get the word out. :sharebeer
Today I'm seeing:
Vanguard Municipal Money Market Fund (VMSXX) - 1.29%
Vanguard New York Municipal Money Market Fund (VYFXX) - 1.29%
Vanguard California Municipal Money Market Fund (VCTXX) 1.22%
PA Municipal Money Market Fund (VPTXX) - 1.33%
NJ Municipal Money Market Fund (VNJXX) - 1.23%
Vanguard Prime Money Market (VMMXX) - 1.36%

money market funds
Just a place saver if this comes up again at yrs-end 2018:

01/25/18 I'm seeing:
Vanguard Municipal Money Market Fund (VMSXX) - 1.08%
Vanguard New York Municipal Money Market Fund (VYFXX) - 1.06%
Vanguard California Municipal Money Market Fund (VCTXX) 1.01%
PA Municipal Money Market Fund (VPTXX) - 1.03%
NJ Municipal Money Market Fund (VNJXX) - 1.01%
Vanguard Prime Money Market (VMMXX) - 1.45%

edit: Vanguard Federal Money Market (VMFXX) - 1.27% end edit

Seems to bear out my vague recollection above that Dan Wiener has noted this end of year spike in tax-free rates relative to taxable in past years.

TxInjun
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Re: Muni Money Market funds starting to look good!

Post by TxInjun » Thu Jan 25, 2018 9:34 pm

I was looking at the Muni Money Market Funds from Fidelity, and I found one for CA (my state of residence): FCFXX. The web page is here.

A few questions:
  • The ER is 0.49% !!!! This is similar to other muni money market funds. How can this be a good deal for Bogleheads?
  • I'm not exactly clear how the dividend / interest is calculated. Does it work kinda like my Savings Account? I.e., the interest is calculated for the running balance each day, and credited to the account at the end of the month? So if I deposited on the 2nd of a month and withdrew on the 29th,I would get 28 days of interest instead of 30.
  • My FCU gives 1.25% on my Savings and Checking accounts, am I better off there? I'm thinking (roughly) that the tax-equivalent yield of 1.61% - 0.49% ER = 1.12% effective yield (I know this is approximate), not as good as the Savings account.
Thanks for your thoughts!

TxInjun

patrick
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Re: Muni Money Market funds starting to look good!

Post by patrick » Thu Jan 25, 2018 9:45 pm

The end of year muni money market yield spike is indeed rather strange. However, it comes in at just the right time if you are looking for somewhere to temporarily hold the proceeds from tax loss harvesting.

nexesn
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Re: Muni Money Market funds starting to look good!

Post by nexesn » Thu Jan 25, 2018 9:57 pm

What do people think about VWIUX? We are in a high tax bracket, so the tax-exempt payout is nice.

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heartwood
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Re: Muni Money Market funds starting to look good!

Post by heartwood » Thu Jan 25, 2018 10:25 pm

nexesn wrote:
Thu Jan 25, 2018 9:57 pm
What do people think about VWIUX? We are in a high tax bracket, so the tax-exempt payout is nice.
I had to look it up for you: Vanguard Intermediate-Term Tax-Exempt Fund Admiral Shares

You don't provide enough details of your use for the funds to comment beyond generalities. It's not a MM fund, so I believe it's a completely different discussion than this thread. You'd get better answers starting a new thread around intermediate tax exempt bond funds.

It's duration is 5.4 years. If that conforms to your time horizon for the money its probably a fine tax exempt fund.

A couple of years ago I reached for some yield and used Vanguard Limited-Term Tax-Exempt Fund Investor Shares (VMLTX) for monies from a LLC received several times a year and disbursed a couple of times a year. Ins were roughly every few months; outs were semi-annual, but with unconventional spacing.

VMLTX's current duration is 2.8 years, with a current SEC yield of 1.71%. Over the course of about 2 years I lost about 1%, including reinvested dividends, due to the specific dates I bought and sold shares. It was the wrong vehicle for my time frame and situation. The online tables showed 1, 3, 5 yr total returns as positive.

Lesson learned from that specific situation, I now use a tax exempt money market and accept less yield than a limited term (or intermediate term) bond fund, but I don't lose money that I use within a one year window or less.

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Re: Muni Money Market funds starting to look good!

Post by mega317 » Fri Jan 26, 2018 1:32 am

TxInjun wrote:
Thu Jan 25, 2018 9:34 pm
I was looking at the Muni Money Market Funds from Fidelity, and I found one for CA (my state of residence): FCFXX. The web page is here.
I was ready to say this is a bad deal, but I see the yield is the same as Vanguard's CA muni MM. Not sure why the difference. Note that the stated yield is net of expenses. If your CA + federal tax is >19% you come out ahead with the muni fund.

TxInjun
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Re: Muni Money Market funds starting to look good!

Post by TxInjun » Fri Jan 26, 2018 12:12 pm

mega317 wrote:
Fri Jan 26, 2018 1:32 am

I was ready to say this is a bad deal, but I see the yield is the same as Vanguard's CA muni MM. Not sure why the difference. Note that the stated yield is net of expenses. If your CA + federal tax is >19% you come out ahead with the muni fund.
Hello mega317, I didn't follow your calculation, can you expand on that a little - thanks.

I didnt realize that the stated yield is net of expenses - thanks for the clarification.

Do you know how the interest is calculated - prorated daily and credited at month-end?

Thanks!

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BogleMelon
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Re: Muni Money Market funds starting to look good!

Post by BogleMelon » Fri Jan 26, 2018 1:38 pm

TxInjun wrote:
Thu Jan 25, 2018 9:34 pm
I was looking at the Muni Money Market Funds from Fidelity, and I found one for CA (my state of residence): FCFXX. The web page is here.

A few questions:
  • The ER is 0.49% !!!! This is similar to other muni money market funds. How can this be a good deal for Bogleheads?
My understanding is that the SEC yield is AFTER the ER
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

FactualFran
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Re: Muni Money Market funds starting to look good!

Post by FactualFran » Sat Jan 27, 2018 1:02 pm

Here are end of week SEC yields obtained from the Vanguard web site over the past few weeks of the Vanguard Municipal Money Market fund and Vanguard Prime Money Market fund.

Code: Select all

Date        Muni   Prime  Difference
2017-12-08  0.88%  1.22%  -0.34%
2017-12-15  0.93%  1.27%  -0.34%
2017-12-22  1.07%  1.34%  -0.27%
2017-12-29  1.29%  1.36%  -0.07%
2018-01-05  1.37%  1.38%  -0.01%
2018-01-12  1.22%  1.42%  -0.20%
2018-01-19  1.13%  1.44%  -0.31%
2018-01-26  1.07%  1.45%  -0.38%
The difference between the Municipal and Prime fund decreased approaching the start of the new year and then increased to about what it had been before the decrease. It is not unusual for this to happen.

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bligh
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Re: Muni Money Market funds starting to look good!

Post by bligh » Tue Feb 13, 2018 12:39 am

Just a heads up. Looks like the "party" is pretty much over.

As of right now :

Vanguard Municipal Money Market Fund (VMSXX) - 0.93%
Vanguard New York Municipal Money Market Fund (VYFXX) - 0.90%
Vanguard California Municipal Money Market Fund (VCTXX) - 0.89%


I just transferred my cash back to my Savings account. :sharebeer

percolate
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Re: Muni Money Market funds starting to look good!

Post by percolate » Tue Feb 13, 2018 2:20 am

That’s still a 1.5% tax-equivalent yield for some folks, the party isn’t over yet! I’m keeping my main cashflow account in Fidelity’s equivalent fund, which beats most checking accounts.

This isn’t as safe as an FDIC-insured bank account, but could a redemption freeze actually happen in this regulatory environment? How would that even work in a CMA account? Would Fidelity cover the withdrawal from my available margin?

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bligh
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Re: Muni Money Market funds starting to look good!

Post by bligh » Wed Feb 14, 2018 5:12 pm

percolate wrote:
Tue Feb 13, 2018 2:20 am
That’s still a 1.5% tax-equivalent yield for some folks, the party isn’t over yet! I’m keeping my main cashflow account in Fidelity’s equivalent fund, which beats most checking accounts.

This isn’t as safe as an FDIC-insured bank account, but could a redemption freeze actually happen in this regulatory environment? How would that even work in a CMA account? Would Fidelity cover the withdrawal from my available margin?
Marcus / GSBank is paying 1.5% in an FDIC insured savings account that is more liquid and requires less monitoring. At this point it is better to keep the first $250K of an emergency fund in a savings account than deal with the hassle and minutely increased risk of a Money Market fund.

What is the equivalent Fidelity fund you are referring to?

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jainn
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Re: Muni Money Market funds starting to look good!

Post by jainn » Wed Feb 14, 2018 5:51 pm

As of Feb 13 2018:
Vanguard Municipal Money Market Fund (VMSXX) SEC yield 0.92%
Vanguard Federal Money Market Fund (VMFXX) SEC yield 1.29%
Vanguard Prime Money Market Fund (VMMXX) SEC yield 1.46%

2018 33% federal bracket + 0% state bracket + 3.8% NIIT* = 36.8%
VMSXX 0.92% tax equivalent yield = 1.46%


Using this calculator: https://www.calcxml.com/do/inc11 (I add up the federal + NIIT and put 36.8, with 0 for state and 0.92 for tax-free yield)

Unless I am calculating incorrectly, the above scenario of combined brackets concludes:
Vanguard Municipal Money Market Fund (VMSXX) SEC yield 0.92% = Vanguard Prime Money Market Fund (VMMXX) SEC yield 1.46%

last year tax rates, but easy to see chart: https://www.nuveen.com/Home/Documents/D ... leId=35423

*(NIIT) - This tax generally applies to net investment income if the taxpayer’s adjusted gross income exceeds certain threshold amounts, which are $250,000 in the case of married couples ling joint returns and $200,000 in the case of single individuals. Tax-exempt interest income is generally not included in net investment income for purposes of this tax.

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Makaveli
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Re: Muni Money Market funds starting to look good!

Post by Makaveli » Thu Feb 15, 2018 8:25 am

bligh wrote:
Tue Feb 13, 2018 12:39 am
Just a heads up. Looks like the "party" is pretty much over.

As of right now :

Vanguard Municipal Money Market Fund (VMSXX) - 0.93%
Vanguard New York Municipal Money Market Fund (VYFXX) - 0.90%
Vanguard California Municipal Money Market Fund (VCTXX) - 0.89%


I just transferred my cash back to my Savings account. :sharebeer
Agreed, as someone sub 33% marginal rate I swapped back to Ally.

percolate
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Re: Muni Money Market funds starting to look good!

Post by percolate » Thu Feb 15, 2018 12:27 pm

bligh wrote:
Wed Feb 14, 2018 5:12 pm
What is the equivalent Fidelity fund you are referring to?
Fidelity New York AMT Tax-Free Money Market Fund: https://fundresearch.fidelity.com/mutua ... /316337500

I also keep a separate emergency fund in an FDIC-insured savings account. The MM fund is just for my checking account, which can handle the moderate risk of a redemption freeze or loss of value.

zeugmite
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Re: Muni Money Market funds starting to look good!

Post by zeugmite » Thu Feb 15, 2018 12:50 pm

ohai wrote:
Wed Dec 27, 2017 2:37 pm
Also, if you believe in market risk premium, whatever your alternative investment was when rates were lower should have similar excess return to what they had when interest rates were lower.
Risk premium isn't static. It is in the processing of increasing but it's very low still.

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