Vanguard Municipal Money Market VMSXX 1.39%

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Kevin M
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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by Kevin M » Sat Jul 14, 2018 12:00 pm

am wrote:
Sat Jul 14, 2018 11:38 am
Yes I’ve switched to prime again. I think I’m going to stick with it because the yield is stable and only going up. 2.05% is competitive with the best non risk liquid yields.
I switched from CA muni MM to Prime on 5/21/2018, as that's when the TEY of the muni fund fell below Prime yield. I then switched to Treasury MM on 6/14/2018 after it was pointed out here that the TEY of the Treasury fund could be higher for those paying state income tax, and I verified that it was for me. Treasury TEY is only about 2 basis points higher than Prime MM for me right now, so as of now it's pretty much a wash.

Based on the previous two cycles and the rate of increase on the most recent upswing, I expected the muni MM fund TEYs to go above Prime MM sometime in July, but it peaked before that happened, and now is well into the downswing of whatever the heck cycle we're in now.

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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by mickeyd » Sat Jul 14, 2018 1:45 pm

I expected the muni MM fund TEYs to go above Prime MM sometime in July, but it peaked before that happened,
Come on Kevin, you know that market timing seldom works.
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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by neurosphere » Sat Jul 14, 2018 2:03 pm

mickeyd wrote:
Sat Jul 14, 2018 1:45 pm
I expected the muni MM fund TEYs to go above Prime MM sometime in July, but it peaked before that happened,
Come on Kevin, you know that market timing seldom works.
Ha, yes, but when the technical analysis looks like the chart in this post (viewtopic.php?f=1&t=246263&start=150#p3981166) it's a free lunch. Or something like that. :D
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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by Leif » Sat Jul 14, 2018 7:45 pm

am wrote:
Sat Jul 14, 2018 11:38 am
Yes I’ve switched to prime again. I think I’m going to stick with it because the yield is stable and only going up. 2.05% is competitive with the best non risk liquid yields.
I came to the same conclusion last cycle. Now I'm in the Treasury fund (has the best TEY for me). Even though Kevin's spreadsheet is very convenient, making changes back and forward with a Muni fund doesn't seem worth picking a penny or two off the "Street".

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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by welderwannabe » Sun Jul 15, 2018 7:52 am

Kevin M wrote:
Sat Jul 14, 2018 12:00 pm
Based on the previous two cycles and the rate of increase on the most recent upswing, I expected the muni MM fund TEYs to go above Prime MM sometime in July, but it peaked before that happened, and now is well into the downswing of whatever the heck cycle we're in now.
I thought the same thing. I never moved out of the muni MM but this last 'peak' looked like the Browns last season.

Going to stay in the muni MM for now hoping once schools are back in session short term muni paper's yields will rise. I don't understand how a muni MM can have this low of a TEY yield. Even at the highest tax bracket with NIIT prime is still a better deal right now. Obviously I am not the only idiot to lazy to move to Prime right now.
I am not an investment professional, but I did stay at a Holiday Inn Express last night.

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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by gmaynardkrebs » Sun Jul 15, 2018 8:02 am

welderwannabe wrote:
Sun Jul 15, 2018 7:52 am
Kevin M wrote:
Sat Jul 14, 2018 12:00 pm
Based on the previous two cycles and the rate of increase on the most recent upswing, I expected the muni MM fund TEYs to go above Prime MM sometime in July, but it peaked before that happened, and now is well into the downswing of whatever the heck cycle we're in now.
I thought the same thing. I never moved out of the muni MM but this last 'peak' looked like the Browns last season.

Going to stay in the muni MM for now hoping once schools are back in session short term muni paper's yields will rise. I don't understand how a muni MM can have this low of a TEY yield. Even at the highest tax bracket with NIIT prime is still a better deal right now. Obviously I am not the only idiot to lazy to move to Prime right now.
There's no lazier idiot than myself, but even I don't find hitting a few keystroke to transfer to Prime excessively taxing (no pun intended).

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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by welderwannabe » Sun Jul 15, 2018 8:09 am

gmaynardkrebs wrote:
Sun Jul 15, 2018 8:02 am
There's no lazier idiot than myself, but even I don't find hitting a few keystroke to transfer to Prime excessively taxing (no pun intended).
Then I am proof there is a lazier idiot than you! :sharebeer
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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by am » Sun Jul 15, 2018 8:48 am

Leif wrote:
Sat Jul 14, 2018 7:45 pm
am wrote:
Sat Jul 14, 2018 11:38 am
Yes I’ve switched to prime again. I think I’m going to stick with it because the yield is stable and only going up. 2.05% is competitive with the best non risk liquid yields.
I came to the same conclusion last cycle. Now I'm in the Treasury fund (has the best TEY for me). Even though Kevin's spreadsheet is very convenient, making changes back and forward with a Muni fund doesn't seem worth picking a penny or two off the "Street".
It’s more than a penny or two if you have a big account. Pays for a good dinner for the misses and me :D

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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by Electron » Sun Jul 15, 2018 4:00 pm

welderwannabe wrote:
Sun Jul 15, 2018 7:52 am
Even at the highest tax bracket with NIIT Prime is still a better deal right now. Obviously I am not the only one too lazy to move to Prime right now.
I noticed the same thing. There are probably a lot of people who just assume they are better off in a tax-exempt money market fund and don't look at the alternatives.

There is one other factor but I don't know how much it applies with the 2018 tax changes. The dividend income from taxable money market funds increases Adjusted Gross Income which is not the case for tax-exempt funds. That can impact remaining phaseouts and also the AMT. MAGI for some calculations is a separate case and may include tax-exempt income. Note also that VMSXX has a portion of income subject to the AMT.
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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by Electron » Sun Jul 22, 2018 11:29 am

Liquidity in the Municipal VRDO market has been mentioned as a possible factor in the yield variations. The VRDO market appears to be about $200B which is quite small compared with the taxable money market. The U.S. Commercial Paper market is over $1T. Add in Treasuries, Government paper, CDs, Repurchase Agreements, Yankee CDs and Yankee Commercial Paper and the taxable money market appears to be huge by comparison.

The large supply of taxable money market instruments may explain the different behavior seen in the taxable Money Market funds.

A recent Vanguard Annual Report included an interesting statistic. Money Market reform resulted in more than $1T moving industry wide from Prime Money Market funds to Government Money Market funds.
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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by gmaynardkrebs » Sun Jul 22, 2018 12:45 pm

Electron wrote:
Sun Jul 22, 2018 11:29 am
Liquidity in the Municipal VRDO market has been mentioned as a possible factor in the yield variations. The VRDO market appears to be about $200B which is quite small compared with the taxable money market. The U.S. Commercial Paper market is over $1T. Add in Treasuries, Government paper, CDs, Repurchase Agreements, Yankee CDs and Yankee Commercial Paper and the taxable money market appears to be huge by comparison.

The large supply of taxable money market instruments may explain the different behavior seen in the taxable Money Market funds.

I definitely think liquidity (or lack thereof) is a factor. It can also play to your advantage, without the dramatic fluctuations of the MM fund, if you don't mind going slightly out on duration. The the price of the Vanguard short Muni (1.1Y duration) is at or near multi year lows, currently yielding about 1.6%. For higher bracket taxpayers, that's pretty close to a 3% TEY, which is not at all bad for 1.1Y duration. Of course, you might not want to go all in with money you may need in the next year or two. Illiquidity is a two-way street.

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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by am » Sun Jul 22, 2018 3:03 pm

gmaynardkrebs wrote:
Sun Jul 22, 2018 12:45 pm
Electron wrote:
Sun Jul 22, 2018 11:29 am
Liquidity in the Municipal VRDO market has been mentioned as a possible factor in the yield variations. The VRDO market appears to be about $200B which is quite small compared with the taxable money market. The U.S. Commercial Paper market is over $1T. Add in Treasuries, Government paper, CDs, Repurchase Agreements, Yankee CDs and Yankee Commercial Paper and the taxable money market appears to be huge by comparison.

The large supply of taxable money market instruments may explain the different behavior seen in the taxable Money Market funds.

I definitely think liquidity (or lack thereof) is a factor. It can also play to your advantage, without the dramatic fluctuations of the MM fund, if you don't mind going slightly out on duration. The the price of the Vanguard short Muni (1.1Y duration) is at or near multi year lows, currently yielding about 1.6%. For higher bracket taxpayers, that's pretty close to a 3% TEY, which is not at all bad for 1.1Y duration. Of course, you might not want to go all in with money you may need in the next year or two. Illiquidity is a two-way street.
How much do you think the short term muni can go down in the worst of cases? For some reason, I don’t have a good feel of the downside risk I’m taking in these muni funds.

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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by Kevin M » Sun Jul 22, 2018 3:21 pm

am wrote:
Sun Jul 22, 2018 3:03 pm
How much do you think the short term muni can go down in the worst of cases? For some reason, I don’t have a good feel of the downside risk I’m taking in these muni funds.
You can at least see the monthly historical returns since Jan 1985 using Portfolio Visualizer backtest for VWSTX. Maximum monthly drawdown was -0.81%. Click on the drawdowns tab to see all historical drawdowns.

The most recent was a drawdown of -0.49% from Sep 2017 through Nov 2017, with recovery by the end of May 2018, so six months "under water".

Since PV only shows monthly data, the intra-month drawdowns could be a bit worse.

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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by am » Sun Jul 22, 2018 3:46 pm

Kevin M wrote:
Sun Jul 22, 2018 3:21 pm
am wrote:
Sun Jul 22, 2018 3:03 pm
How much do you think the short term muni can go down in the worst of cases? For some reason, I don’t have a good feel of the downside risk I’m taking in these muni funds.
You can at least see the monthly historical returns since Jan 1985 using Portfolio Visualizer backtest for VWSTX. Maximum monthly drawdown was -0.81%. Click on the drawdowns tab to see all historical drawdowns.

The most recent was a drawdown of -0.49% from Sep 2017 through Nov 2017, with recovery by the end of May 2018, so six months "under water".

Since PV only shows monthly data, the intra-month drawdowns could be a bit worse.

Kevin
Thanks for that. <1% is definitely tolerable. But how about if the day of reckoning comes for the pensions, or another “expert” predicts defaults, etc.

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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by Kevin M » Sun Jul 22, 2018 4:03 pm

am wrote:
Sun Jul 22, 2018 3:46 pm
Thanks for that. <1% is definitely tolerable. But how about if the day of reckoning comes for the pensions, or another “expert” predicts defaults, etc.
I don't think anyone can predict the pension thing, but I think as long as you stick with fairly short-term maturities and high quality, you'll probably be OK. It takes time for a muni bond to get downgraded, and then more time for it to default.

In terms of expert predictions of defaults ...

From the Wikipedia article on Meredith Whitney:
On December 19, 2010, in an interview on the CBS television program 60 Minutes, Whitney stated that 50 to 100 counties, cities, and towns in the United States would have "significant" municipal bond defaults totaling "hundreds of billions" of dollars, and that "it'll be something to worry about within the next 12 months."[3] Since the record amount of municipal bond defaults in one year was just over $8 billion at the time, Whitney's comments about hundreds of billions in defaults briefly shook the market and drew a great deal of attention, much of it critical.
Going back to the PV backtest, VWSTX return for December 2010 was -0.14%, but the following monthly returns were mostly positive, and the CAGR through Dec 2011 was 1.34%.

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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by gmaynardkrebs » Sun Jul 22, 2018 6:24 pm

am wrote:
Sun Jul 22, 2018 3:46 pm
Kevin M wrote:
Sun Jul 22, 2018 3:21 pm
am wrote:
Sun Jul 22, 2018 3:03 pm
How much do you think the short term muni can go down in the worst of cases? For some reason, I don’t have a good feel of the downside risk I’m taking in these muni funds.
You can at least see the monthly historical returns since Jan 1985 using Portfolio Visualizer backtest for VWSTX. Maximum monthly drawdown was -0.81%. Click on the drawdowns tab to see all historical drawdowns.

The most recent was a drawdown of -0.49% from Sep 2017 through Nov 2017, with recovery by the end of May 2018, so six months "under water".

Since PV only shows monthly data, the intra-month drawdowns could be a bit worse.

Kevin
Thanks for that. <1% is definitely tolerable. But how about if the day of reckoning comes for the pensions, or another “expert” predicts defaults, etc.
What I fear more is a change to the highly favorable tax treatment accorded to muni bonds. I can say that getting out from under the AMT certainly made the Vanguard Muni MM, which is 18% AMT, 18% more attractive to me. However, the excessive volatility in the interest rates has led me to abandon it in favor of the Vang sht muni.

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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by Electron » Wed Jul 25, 2018 9:16 pm

Here is an updated chart with data through 7-24-18.

The SEC yield on the taxable money market funds has continued to rise slightly as the yield on VMSXX has continued to fall.

Image
Electron

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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by gmaynardkrebs » Wed Jul 25, 2018 9:48 pm

Electron wrote:
Wed Jul 25, 2018 9:16 pm
Here is an updated chart with data through 7-24-18.

The SEC yield on the taxable money market funds has continued to rise slightly as the yield on VMSXX has continued to fall.

Image
Are there really enough high bracket investors to sustain demand this level of demand at the current TEY spread?

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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by Electron » Thu Jul 26, 2018 1:15 pm

gmaynardkrebs wrote:
Wed Jul 25, 2018 9:48 pm
Are there really enough high bracket investors to sustain demand this level of demand at the current TEY spread?
We're all wondering the same thing. There are quite a few Institutional Tax-Exempt Variable NAV Money Market funds but I don't know how much money is invested. It's also not clear if any large investors or related funds buy directly in the VRDO market. As mentioned earlier, it may just be that a percentage of investors are not evaluating the taxable alternatives.
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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by welderwannabe » Thu Jul 26, 2018 1:29 pm

Electron wrote:
Wed Jul 25, 2018 9:16 pm
Here is an updated chart with data through 7-24-18.

The SEC yield on the taxable money market funds has continued to rise slightly as the yield on VMSXX has continued to fall.

Image
Yah, VMSXX is awful right now. Just awful. Even this lazy guy moved some money out of it into Prime. Finally.
I am not an investment professional, but I did stay at a Holiday Inn Express last night.

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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by neurosphere » Thu Jul 26, 2018 1:44 pm

welderwannabe wrote:
Thu Jul 26, 2018 1:29 pm

Yah, VMSXX is awful right now. Just awful. Even this lazy guy moved some money out of it into Prime. Finally.
I'm going to make a prediction that the next spike in VMSXX yields will be very large. I'm simply assuming that there is going to be re-pricing trigger of some sort soon and yields will have to rise to keep up with demand. I have no actual additional knowledge or understanding with which to back up my opinion. :D

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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by Electron » Thu Jul 26, 2018 6:25 pm

neurosphere wrote:
Thu Jul 26, 2018 1:44 pm
I'm going to make a prediction that the next spike in VMSXX yields will be very large. I'm simply assuming that there is going to be re-pricing trigger of some sort soon and yields will have to rise to keep up with demand.
What we need is a past calendar of new issues to see how large offerings might have lined up with yield spikes.

There may be at least one large buyer of VRDOs where tax equivalent yield is not a consideration. Think about the total assets in all Municipal Bond funds. These funds all have a cash position which by design would need to be invested in tax-exempt issues. In addition, most of these funds have a percentage of assets in securities maturing in one year and less. In total these funds would be adding to the overall demand in the VRDO marketplace.
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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by welderwannabe » Thu Jul 26, 2018 7:06 pm

neurosphere wrote:
Thu Jul 26, 2018 1:44 pm
I'm going to make a prediction that the next spike in VMSXX yields will be very large. I'm simply assuming that there is going to be re-pricing trigger of some sort soon and yields will have to rise to keep up with demand. I have no actual additional knowledge or understanding with which to back up my opinion. :D
A lot of states/municipalities have their fiscal year end on 7/31. It is also summer and school is out, and a lot of municipal spending is school. So who knows...it might go bananas starting in September.

I didn't want to change the money market. I have checkwriting, auto investments etc. Whatever, I have suffered long enough! :)
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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by neurosphere » Tue Jul 31, 2018 3:08 pm

welderwannabe wrote:
Thu Jul 26, 2018 1:29 pm
Yah, VMSXX is awful right now. Just awful. Even this lazy guy moved some money out of it into Prime. Finally.
Yes, but the gap has closed in the past few days, just a bit. Is this the start of a big upturn?

This local minimum in muni yields occurred earlier (relative to the most recent peak) than in the previous two cycles.

I'm too lazy to post an updated chart right now. :D
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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by welderwannabe » Tue Jul 31, 2018 3:32 pm

neurosphere wrote:
Tue Jul 31, 2018 3:08 pm
welderwannabe wrote:
Thu Jul 26, 2018 1:29 pm
Yah, VMSXX is awful right now. Just awful. Even this lazy guy moved some money out of it into Prime. Finally.
Yes, but the gap has closed in the past few days, just a bit. Is this the start of a big upturn?

This local minimum in muni yields occurred earlier (relative to the most recent peak) than in the previous two cycles.

I'm too lazy to post an updated chart right now. :D
SEC yield of VMSXX is .94% as of today. We are cooking with gas now!
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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by gmaynardkrebs » Tue Jul 31, 2018 4:04 pm

Municipal-Bond Funds Draw Flood of Cash as Market Extends Gains
By Danielle Moran
July 25, 2018, 1:41 PM EDT

Funds got a $1.68B inflow last week, most since January
Eleven straight weeks of inflows follows positive return
From Bloomberg. Looks like the demand is picking up. Why, is not clear. It looks to me like even those in the top brackets still do better with Treasury MM funds in TEY.

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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by ivk5 » Tue Jul 31, 2018 4:08 pm

I’d guess that demand is at somewhat greater durations, not in the <12w end of the curve.

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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by gmaynardkrebs » Tue Jul 31, 2018 4:44 pm

ivk5 wrote:
Tue Jul 31, 2018 4:08 pm
I’d guess that demand is at somewhat greater durations, not in the <12w end of the curve.
Makes sense. Bloomberg ran a recent article saying that closed end funds were dumping stuff earlier in the year. That might have trickled down to <12M, if there were some short stuff in these funds. Or it might have been the ce funds needed cash cushions for redemptions. (Apparently, the cash for redemptions must be in muni mm paper.) Anyway, that's all I know, which isn't much...

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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by neurosphere » Mon Aug 06, 2018 10:45 pm

neurosphere wrote:
Thu Jul 26, 2018 1:44 pm

I'm going to make a prediction that the next spike in VMSXX yields will be very large. I'm simply assuming that there is going to be re-pricing trigger of some sort soon and yields will have to rise to keep up with demand. I have no actual additional knowledge or understanding with which to back up my opinion. :D
I do wish to say, that when my prediction stated "large" I was also intending to mean "early" and "rapid". :wink: It seems that is indeed the case. I'm not able to post a graph right now, but muni money markets had a sudden upturn earlier than the previous 4 cycles, and also steeper. I just spent about 30 seconds of my life moving from Prime MM fund to NY muni MM. And then another 5 minute to tell you all about it. :D
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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by ivk5 » Tue Aug 07, 2018 3:59 am

Good call and thanks for posting to flag this- looks like unadjusted SEC yield is up 20bp over the past week. For 40.8% federal / 0% state, TEY still 12bp behind Prime on SEC yield basis (1.93% vs 2.05%). Given that that's a slightly lagging indicator, and the steepness of climb in past couple days (+12bp yesterday unadjusted, +21bp TEY), the true forward yield has likely already crossed. I put in order to exchange today.

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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by gmaynardkrebs » Tue Aug 07, 2018 9:31 am

ivk5 wrote:
Tue Aug 07, 2018 3:59 am
Good call and thanks for posting to flag this- looks like unadjusted SEC yield is up 20bp over the past week. For 40.8% federal / 0% state, TEY still 12bp behind Prime on SEC yield basis (1.93% vs 2.05%). Given that that's a slightly lagging indicator, and the steepness of climb in past couple days (+12bp yesterday unadjusted, +21bp TEY), the true forward yield has likely already crossed. I put in order to exchange today.
I'd also look at Short-Term Tax-Exempt Fund Investor Shares (VWSTX) (1.45% = 2.45 TEY). Duration 1.1Y. Seems to me you're getting paid to take the risk. 1.1 duration is just a bit more than that of 1 yr t-bill, not exactly risky.

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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by Kevin M » Tue Aug 07, 2018 12:50 pm

Here's the updated chart for my marginal tax rates of 27% fed and 8% CA:

Image

Interesting that Prime MM yield dropped one basis point over the weekend, when the muni MM yields jumped.

Treasury MM still has highest TEY for me at 2.12% (but I'm now earning 2.50% APY in a local bank account, so not keeping much in MM funds now).

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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by happenstance » Sun Aug 19, 2018 1:06 pm

I found this interesting paper from Schwab, What are the major influences on Municipal Money Market Yields?, in which they try and explain some of the volatility of municipal MMF yields:
Just like shifts in supply and demand occurring over long cycles have an impact on MMMF yield trends over many years, day-to-day swings in supply and demand patterns can alter the yield environment very quickly.

[…]

Some MMMF yield spikes and valleys can be explained by “seasonality.” For example, because a disproportionately high amount of municipal bonds are issued with July 1 interest payment dates and maturities, demand for short-term “holding place” investments like Muni VRDNs tends to rise sharply in early July (and also in early January, the opposite semi-annual interest payment date from July)

[…]

An opposite disruption often occurs in April. MMMFs are usually attractive to high-income earners, given their desire for tax-advantaged investment options. The combination of this unique investor base and the high liquidity of MMMFs, results in a disproportionately significant amount of individual income tax payments being drawn from MMMFs.

[…]

From time to time, MMMF yields ascend to a point where they become competitive with returns available in the taxable market. When this happens, taxable money market funds and other investors who usually have a taxable mandate cross over and bring a new source of demand to reestablish the supply/demand balance.
The paper also discusses some less-predicable influences on the rates, such as changes in tax and monetary policy. Specifically, they mention that there is only an indirect relationship between the federal funds rate and the yield of municipal money market funds, due to the way that MMMFs are typically constructed.

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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by neurosphere » Sun Aug 19, 2018 6:21 pm

happenstance wrote:
Sun Aug 19, 2018 1:06 pm
I found this interesting paper from Schwab, What are the major influences on Municipal Money Market Yields?, in which they try and explain some of the volatility of municipal MMF yields:
Thanks for that! It essentially confirms what we've speculated. But personally, I'm surprised at the magnitude of the seasonal variability, and that there aren't some other contra-acting forces to mitigate/arbitrage it away. Given that the effect is known enough for Schwab to write a piece on it (and for us on BH to be talking about it for many months), I can only assume that effective arbitrage is not profitable, if possible.

For now, it's still interesting and "fun" to follow/trend the ups and downs each quarter, and speculate why any particular peak or valley is smaller/larger/earlier/later than otherwise. :D

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neurosphere
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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by neurosphere » Tue Aug 21, 2018 2:34 pm

It's been two weeks since the last image was posted, and there has been continued increase in muni MM yields relative to Prime.

Below is my example, using an arbitrary 35% federal and a 10% state/city rate for NY.

It's interesting that, on average over the past year, muni yields have been relatively flat, in the sense that the highs and lows are similar to the other highs and lows. By contrast, prime rates have steadily increased.

This rate-watching is not quite as fun a sport as watching a basketball game, but at least it's more action than baseball! :D

Btw, Kevin is going to have to update his code in a few months, to allow us to easily see more than one year of data at a time. :wink:


Image

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Electron
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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by Electron » Thu Aug 23, 2018 12:38 pm

neurosphere wrote:
Tue Aug 21, 2018 2:34 pm
It's interesting that, on average over the past year, muni yields have been relatively flat, in the sense that the highs and lows are similar to the other highs and lows. By contrast, prime rates have steadily increased.
Try adding a moving average to the chart which smooths the upward trend. I tried a few different averages and 100 values might be a reasonable number.

It's interesting that both taxable and tax-exempt money market fund yields are continuing to inch upwards. I wonder if that is related to the average maturities which range from 32 to 58 days, or whether the money markets are anticipating a September rate hike.
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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by Ricchan » Wed Aug 29, 2018 8:39 pm

Not sure if it's indicative of anything, but Prime Money Market has been pretty flat the past 30 or so days.

Code: Select all

VMMXX           PRICE   YIELD
------------------------------
07/30/2018	$1.00	2.06%
07/31/2018	$1.00	2.06%
08/01/2018	$1.00	2.06%
08/02/2018	$1.00	2.06%
08/03/2018	$1.00	2.06%
08/06/2018	$1.00	2.05%
08/07/2018	$1.00	2.05%
08/08/2018	$1.00	2.05%
08/09/2018	$1.00	2.05%
08/10/2018	$1.00	2.05%
08/13/2018	$1.00	2.06%
08/14/2018	$1.00	2.06%
08/15/2018	$1.00	2.06%
08/16/2018	$1.00	2.06%
08/17/2018	$1.00	2.06%
08/20/2018	$1.00	2.07%
08/21/2018	$1.00	2.07%
08/22/2018	$1.00	2.07%
08/23/2018	$1.00	2.07%
08/24/2018	$1.00	2.07%
08/27/2018	$1.00	2.07%
08/28/2018	$1.00	2.06%
08/29/2018	$1.00	2.07%
Also, 08/06/2018 was the first time I've seen the SEC yield for VMMXX go down (from 2.06% to 2.05%) in recent history.

Municipal Money Market has also started to flatten out, but only in the past 7 days, and that could just be due to being at the peak of its quasi-quarterly cycle.

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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by Kevin M » Sat Sep 01, 2018 3:22 pm

Electron wrote:
Thu Aug 23, 2018 12:38 pm
It's interesting that both taxable and tax-exempt money market fund yields are continuing to inch upwards. I wonder if that is related to the average maturities which range from 32 to 58 days, or whether the money markets are anticipating a September rate hike.
Due to the large swings in the muni MM yields, I won't show those, but here's a chart of the effective federal funds rate (FFR), prime MM, and the 1-month and 3-month Treasury yields for the last two years.

Image

It appears that Prime MM and the 3-month Treasury are anticipating the next FFR increase, as they appear to have also for the last few increases.

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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by Kevin M » Sat Sep 01, 2018 4:32 pm

neurosphere wrote:
Tue Aug 21, 2018 2:34 pm
Btw, Kevin is going to have to update his code in a few months, to allow us to easily see more than one year of data at a time. :wink:
I updated it to include two years. Here's the latest chart based on my TEYs:

Image

CA Muni MM TEY is just a couple of basis points shy of Prime MM, but it does look like it might be at or close to its peak for this cycle. Treasury MM has continued to increase, while Prime MM has kind of stalled, so Treasury MM still is the best choice for me in terms of MM funds.

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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by Electron » Sun Sep 02, 2018 4:40 pm

The online profile for each Vanguard Money Market fund provides some interesting information that I had not noticed before. The table showing daily and weekly liquidity also shows daily net cash flow. One interesting observation is that VMSXX has many days with negative cash flow. That does not seem to be the case with Prime Money Market.

The April data does not appear to show a pattern that might be related to tax payments although there is a large net withdrawal of $331M on April 3. June, however, does show many consecutive days with negative cash flow. There may be some correlation between this data and the yield spikes that we have been seeing.

The data can be viewed online or downloaded into a spreadsheet. Here is the June data.

Code: Select all

6/29/18   $70,125,606.36 
6/28/18	  $1,437,030.70 
6/27/18	  $8,637,888.39 
6/26/18	  $2,446,551.90 
6/25/18	  $3,392,056.72 
6/22/18	  $8,427,826.73 
6/21/18	 ($16,386,440.43)
6/20/18	 ($23,205,127.14)
6/19/18	 ($28,198,692.30)
6/18/18	 ($16,992,012.57)
6/15/18	 ($41,892,813.49)
6/14/18	 ($27,311,812.86)
6/13/18	 ($56,690,868.27)
6/12/18	 ($54,674,663.64)
6/11/18	 ($51,430,208.69)
6/08/18	 ($42,341,000.15)
6/07/18	 ($51,534,012.00)
6/06/18	 ($48,199,666.09)
6/05/18	  $3,190,511.29 
6/04/18	 ($14,287,098.47)
6/01/18	  $9,413,027.22
https://investor.vanguard.com/mutual-fu ... olio/vmsxx
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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by neurosphere » Sat Sep 29, 2018 2:34 pm

Electron wrote:
Sun Sep 02, 2018 4:40 pm
There may be some correlation between this data and the yield spikes that we have been seeing.
I always find it interesting to look at cash flow into and out of funds. For these MM funds, if I had more time/interest I would plot cash flow vs yield and see if there was an interesting pattern.

Anyway here is an updated yield chart, with arbitrary 28% federal and 10% state rate, with the NY muni fund as my preferred state-specific muni...

Image

The most recent weeks have certainly shown a break in the pattern. I assume this is due to a combination of the normal cyclic variation and non-cyclic economic forces (e.g. rate hikes, etc), with the non-cyclic economic forces currently predominating.

Based on this graph, should one swap into Treasury/Prime MM, with the assumption that the upward trend of the muni funds will soon overtake their non-muni counterparts? I realize that the actual benefit of moving back and forth between funds is trivial, as a percentage of $$$ invested. But some people are ok making an extra $3 a month based on 5 minutes of clicking. That's about $36/hour of work (tax free). :)

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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by Bimmer » Sun Sep 30, 2018 11:02 pm

Can anyone post updated charts/data?
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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by neurosphere » Mon Oct 01, 2018 6:26 am

Bimmer wrote:
Sun Sep 30, 2018 11:02 pm
Can anyone post updated charts/data?
Sure. See the post just preceding yours. :wink:
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes".

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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by Kevin M » Mon Oct 01, 2018 12:57 pm

neurosphere wrote:
Mon Oct 01, 2018 6:26 am
Bimmer wrote:
Sun Sep 30, 2018 11:02 pm
Can anyone post updated charts/data?
Sure. See the post just preceding yours. :wink:
And here's mine, which is for Fed 27% and CA state 8% marginal rates:

Image

Treasury MM is the clear winner, at 2.26% TEY for me (2.01% SEC yield), with Prime MM the runner up at 2.13% TEY/SEC. Note that Treasury MM has been increasing it's lead over Prime MM.

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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by Leif » Mon Oct 01, 2018 2:24 pm

I also show the Vanguard Treasury MM fund ahead. Slightly behind it, by 1 bp of TEY, is the Vanguard Federal MM. Prime MM is in the dust.

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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by Electron » Thu Oct 11, 2018 1:21 pm

neurosphere wrote:
Sat Sep 29, 2018 2:34 pm
I always find it interesting to look at cash flow into and out of funds. For these MM funds, if I had more time/interest I would plot cash flow vs yield and see if there was an interesting pattern.
That chart would be very interesting to see but I think we need the combined cash flows from all the tax-exempt money market funds.

The other key part of the puzzle would be the new issue calendar. The yield variations in these funds is undoubtedly a function of both supply and demand both of which seem to vary quite a bit.

Money market fund yields continue to inch upwards following the latest Fed hike. I assume yields will level off after most of the lower yielding fixed rate securities are replaced. Floating rate securities would probably have adjusted their rates soon after the Fed rate hike.
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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by UnclePennybags » Wed Nov 14, 2018 5:11 pm

Can anyone tell me what the distribution schedule is for this fund? If it is on their website, I've not been able to locate it.

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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by UnclePennybags » Wed Nov 14, 2018 5:27 pm

UnclePennybags wrote:
Wed Nov 14, 2018 5:11 pm
Can anyone tell me what the distribution schedule is for this fund? If it is on their website, I've not been able to locate it.
Sorry, I'm using Merril Edge to chase the $900 bonus and I can't find anything. I did eventually determine that it pays interest monthly (while calculating it daily, of course).

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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by Kevin M » Wed Nov 14, 2018 8:48 pm

UnclePennybags wrote:
Wed Nov 14, 2018 5:11 pm
Can anyone tell me what the distribution schedule is for this fund? If it is on their website, I've not been able to locate it.
All Vanguard MM funds accrue interest daily, and distribute it monthly on the last day of the month. You can see the distributions for any fund by looking at the Distributions web page for the fund. Here is is for VMSXX: https://investor.vanguard.com/mutual-fu ... ions/vmsxx.

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Re: Vanguard Municipal Money Market VMSXX 1.39%

Post by neurosphere » Sun Dec 02, 2018 12:00 pm

It's been a while since we've looked at a graph of various rates. It seems the wild swings of the muni funds are a thing of the past? The past few month's data is more what one would expect. Perhaps 2018 will be an anomaly in terms of the wild swings in muni rates (perhaps due to new tax law?) and we'll get make to the relatively minor fluctuations we've seen "way back". These are arbitrary tax-equivalent yields (state=10.5% rate, fed=32%).

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