[Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
Now I’m wondering about the relative safety of Stable Value Funds?
Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
Today I took advantage of changing from Investor shares to Admiral shares, as my PMMF investment is less than $5 mil and I like reducing my ER from 0.16% to 0.10%. I'm OK with no checking writing provision.
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Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
I was informed today by Vanguard Investment Services that Prime shares transferred to your Vanguard Brokerage a/c are SIPC insured up to $500,000. Also surprised that FDIC does NOT insure VMMXX shares held in older mutual fund accounts. Got that transferred lickety split to Federal MM a/c along with check writing.
Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
How would we replicate the existing Prime Money fund asset allocation using the renamed Vanguard Cash Reserves Federal Money Market Fund?
Is there another Vanguard fund which has the removed elements?
Is there another Vanguard fund which has the removed elements?
Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
That's because Brokerage accounts "need" SIPC insurance. There are several threads on this topic.frankie7447 wrote: ↑Thu Aug 27, 2020 4:41 pm I was informed today by Vanguard Investment Services that Prime shares transferred to your Vanguard Brokerage a/c are SIPC insured up to $500,000. Also surprised that FDIC does NOT insure VMMXX shares held in older mutual fund accounts. Got that transferred lickety split to Federal MM a/c along with check writing.
Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
Per a reply on page 1, quoted below, it seems that Vanguard will not be offering "prime funds" after this transition is complete. So it does not appear that there will be any way to get access to commercial paper via a money market fund at Vanguard.
Kevinpalanzo wrote: ↑Thu Aug 27, 2020 3:24 pm Looks like Vanguard is concerned with the risks of commercial paper.
https://www.cnbc.com/2020/08/27/vanguar ... ments.html“Vanguard investors prioritize capital preservation for their money market investments, and we believe that the rewards of even the most conservatively managed prime funds are no longer worth the risk,” said Greg Davis, Vanguard chief investment officer, in a statement.

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Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
It appears the distinction between Federal and Cash Reserves will be percentage of treasury obligations in the portfolio-- 65% for Federal, perhaps 50% for Cash Reserves. And Cash Reserves will have an ER that is 1bp/yr lower than Federal.
Risk is not a guarantor of return.
Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
What will be interesting is what they do to my Roth - there was 7 cents in interest in Prime MM (the old sweep) from a past transaction. When they went with the Federal MM they just added the Prime as a new fund in my IRA with $0.07 in it. I wonder if they will just move it to the current sweep or convert to the new fund....
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Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
Expecting a more prominent repo allocation to differentiate from Federal and Treasury MM. Competitors have similar established funds (at subsidized & higher cost). For example, Fidelity Government Cash Reserves (FDRXX), or Schwab Government Money Fund (SNVXX).Northern Flicker wrote: ↑Thu Aug 27, 2020 5:21 pm It appears the distinction between Federal and Cash Reserves will be percentage of treasury obligations in the portfolio-- 65% for Federal, perhaps 50% for Cash Reserves. And Cash Reserves will have an ER that is 1bp/yr lower than Federal.
Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
And this could result in no state income tax exemption for CA, CT and NY residents, as was the case for FDRXX for 2019 (although it did qualify for 2018), even though 50.47% of income was from USGO: https://www.fidelity.com/bin-public/060 ... -funds.pdf.Wind_Reaver wrote: ↑Thu Aug 27, 2020 6:29 pmExpecting a more prominent repo allocation to differentiate from Federal and Treasury MM. Competitors have similar established funds (at subsidized & higher cost). For example, Fidelity Government Cash Reserves (FDRXX), or Schwab Government Money Fund (SNVXX).Northern Flicker wrote: ↑Thu Aug 27, 2020 5:21 pm It appears the distinction between Federal and Cash Reserves will be percentage of treasury obligations in the portfolio-- 65% for Federal, perhaps 50% for Cash Reserves. And Cash Reserves will have an ER that is 1bp/yr lower than Federal.
Kevin

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Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
As you point out, repos hurt state tax exemptions, but do they provide any goose to the actual returns? I am not sure why an investor would prefer them. Do they help with liquidity?Kevin M wrote: ↑Thu Aug 27, 2020 7:13 pmAnd this could result in no state income tax exemption for CA, CT and NY residents, as was the case for FDRXX for 2019 (although it did qualify for 2018), even though 50.47% of income was from USGO: https://www.fidelity.com/bin-public/060 ... -funds.pdf.Wind_Reaver wrote: ↑Thu Aug 27, 2020 6:29 pmExpecting a more prominent repo allocation to differentiate from Federal and Treasury MM. Competitors have similar established funds (at subsidized & higher cost). For example, Fidelity Government Cash Reserves (FDRXX), or Schwab Government Money Fund (SNVXX).Northern Flicker wrote: ↑Thu Aug 27, 2020 5:21 pm It appears the distinction between Federal and Cash Reserves will be percentage of treasury obligations in the portfolio-- 65% for Federal, perhaps 50% for Cash Reserves. And Cash Reserves will have an ER that is 1bp/yr lower than Federal.
Kevin
Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
Translation: Vanguard thinks a liquidity crisis is coming soon and wants to protect investors.
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Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
As I look at the VMMXX portfolio tab today, I only see 1.3% in "commercial paper." So either they've been quietly getting rid of it for a while, or they never had much to begin with....the fund will invest almost exclusively in cash, U.S. government securities, and/or repurchase agreements that are collateralized solely by U.S. government securities or cash...
On the other hand, I see over 20% in "Yankee/Foreign." I read their statement, and I interpret the new name ("Vanguard Federal Money Market Fund") to mean US investments only. (Their existing "Vanguard Federal Money Market Fund," VMFXX, has 0% Yankee/Foreign).
So it seems to me that the big change is not expunging commercial paper. The big change is in going US-only. Having a smidge of home bias, I'm happy enough with that, but I'd be curious to know their reason.

Last edited by nisiprius on Thu Aug 27, 2020 8:05 pm, edited 4 times in total.
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Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
Amazing. Now I get a choice of three different 0% accounts to put my money in. I love having choices
Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
Interesting. Look how much in Yankee/Foreign shortly before the March madness:nisiprius wrote: ↑Thu Aug 27, 2020 7:40 pmAs I look at the VMMXX portfolio tab today, I only see 1.3% in "commercial paper." So either they've been getting rid of it for a while, or they just haven't had much....the fund will invest almost exclusively in cash, U.S. government securities, and/or repurchase agreements that are collateralized solely by U.S. government securities or cash...
On the other hand, I see over 20% in "Yankee/Foreign." I read their statement as saying US-only. Also, the new name is "Vanguard Cash Reserves Federal Money Market Fund," and their existing "Vanguard Federal Money Market Fund," VMFXX, has 0% Yankee/Foreign.
So it seems to me that the big change is not expunging commercial paper. The big change is in going US-only.
I'd love to know why they're doing that.
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According to Wikipedia:
So they look closer to commercial paper than to USGO backed by the US government; i.e., higher risk.A Yankee Bond is a bond issued by a foreign entity, such as a bank or company, but is issued and traded in the United States and denominated in U.S. dollars.[
Kevin

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
Based on the comments in this thread, it seems like I'm the only one who doesn't care about checkwriting for a money market fund.
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Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
I looked into this last year and again in Feb while I was trying to figure out what the small additional risk I was taking on for Vanguard Prime Money Market's small yield premium. What I found and what you can see in their 2019 Annual Report here is that about 25% was USD commercial paper issued by foreign banks, 5% was USD commercial paper issued by foreign quasi-governmental entities (like the Canadian Pension Plan Investment Board i.e. CPPIB) and 28% Yankee (USD) Certificates of Deposit issued by the U.S. branches of foreign banks. I moved myself and everyone in my family from Prime to Federal.Kevin M wrote: ↑Thu Aug 27, 2020 8:06 pmInteresting. Look how much in Yankee/Foreign shortly before the March madness:nisiprius wrote: ↑Thu Aug 27, 2020 7:40 pmAs I look at the VMMXX portfolio tab today, I only see 1.3% in "commercial paper." So either they've been getting rid of it for a while, or they just haven't had much....the fund will invest almost exclusively in cash, U.S. government securities, and/or repurchase agreements that are collateralized solely by U.S. government securities or cash...
On the other hand, I see over 20% in "Yankee/Foreign." I read their statement as saying US-only. Also, the new name is "Vanguard Cash Reserves Federal Money Market Fund," and their existing "Vanguard Federal Money Market Fund," VMFXX, has 0% Yankee/Foreign.
So it seems to me that the big change is not expunging commercial paper. The big change is in going US-only.
I'd love to know why they're doing that.
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According to Wikipedia:So they look closer to commercial paper than to USGO backed by the US government; i.e., higher risk.A Yankee Bond is a bond issued by a foreign entity, such as a bank or company, but is issued and traded in the United States and denominated in U.S. dollars.[
Kevin
If forced to speculate that this was indeed due to a risk of foreign bank liquidity that Vanguard does not think is worthwhile any more. It's also possible that there may not be enough float in these securities anymore due to the Fed buying them.
Last edited by VaR on Thu Aug 27, 2020 11:50 pm, edited 1 time in total.
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Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
The 'Prime' MM fund isn't very 'Prime' for lack of opportunity as nisiprius illustrated above, and Vanguard hinted in the anouncement. In current circumstances, it seems reasonable the general concept of the retail Prime MM fund (post Money Market Reform) is defunct, taking almost four years to realize. The changes appear more an operational move addressing the constraints of MMR and Zero Interest Rate Policy 2 than a reactive de-risking event.
Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
If true, why didn't Vanguard roll it into the existing Federal fund? It seems there will still be three separate funds. Or did I misread?Wind_Reaver wrote: ↑Thu Aug 27, 2020 11:30 pmThe 'Prime' MM fund isn't very 'Prime' for lack of opportunity as nisiprius illustrated above, and Vanguard hinted in the anouncement. In current circumstances, it seems reasonable the general concept of the retail Prime MM fund (post Money Market Reform) is defunct, taking almost four years to realize. The changes appear more an operational move addressing the constraints of MMR and Zero Interest Rate Policy 2 than a reactive de-risking event.
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Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
So what fund will Vanguard PAS use going forward?
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Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
Unless I'm misinterpreting, the announcement outlines the Prime MM fund converting from Prime (Prime category) to Federal (Government category) later this year. Vanguard won't have a Prime MM fund after the change, it will have two Federal MM funds with differing mandates and one Treasury MM fund.000 wrote: ↑Thu Aug 27, 2020 11:38 pmIf true, why didn't Vanguard roll it into the existing Federal fund? It seems there will still be three separate funds. Or did I misread?Wind_Reaver wrote: ↑Thu Aug 27, 2020 11:30 pmThe 'Prime' MM fund isn't very 'Prime' for lack of opportunity as nisiprius illustrated above, and Vanguard hinted in the anouncement. In current circumstances, it seems reasonable the general concept of the retail Prime MM fund (post Money Market Reform) is defunct, taking almost four years to realize. The changes appear more an operational move addressing the constraints of MMR and Zero Interest Rate Policy 2 than a reactive de-risking event.
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Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
Yep, I can get near 0% from an actual checking account and near 1% from a savings account. It has not made sense to have anything in any money market account for a while.
Someday if it does again, I'm not sure that this new federal money market is going to be worth bothering with over the existing one. I don't want or need check writing, I barely even need that on our checking account, so maybe if the ER difference grows to something more significant than 1 BP?
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VG prime MM getting nixed
[Thread merged into here, see below. --admin LadyGeek]
From VG
Vanguard Prime Money Market Fund (Investor Shares: VMMXX; Admiral™ Shares: VMRXX) will change its investment strategy and be renamed Vanguard Cash Reserves Federal Money Market Fund. When this change goes into effect in late September 2020, the fund will invest almost exclusively in cash, U.S. government securities, and/or repurchase agreements that are collateralized solely by U.S. government securities or cash. The fund has historically been managed more conservatively than its peer group. For example, Vanguard Prime Money Market Fund maintained a 33% allocation to government securities—in contrast to the industry average of less than 3%*—leading into the sharp volatility of March 2020. The change in investment strategy further lowers its risk.
Our decades of experience, deep investment expertise, and low costs have enabled Vanguard's taxable money market funds to deliver highly competitive yields without taking undue risks. This approach has allowed Vanguard Prime Money Market Fund Admiral Shares to outperform 97% of the competition over the past 2 decades.** However, Vanguard Prime Money Market Fund Investor Shares has only slightly outperformed Vanguard Federal Money Market Fund Investor Shares over the same time period (note that Admiral Shares aren't available for Vanguard Federal Money Market Fund).*** We've observed and navigated 2 market crises in 12 years. With that as a backdrop, we believe it's better to provide clients with a highly competitive yield by expanding access to lower expenses on a secure government portfolio rather than incurring risk in the prime market.
Vanguard's government money market funds have outperformed their peer-group averages and are ranked within the top decile of peers over the 1-, 3-, 5-, and 10-year periods ended June 30, 2020. Vanguard's government money market funds have also delivered strong returns relative to prime money market funds, and at lower levels of risk.† We seek to continue to deliver competitive yields through low costs, deep expertise in managing portfolios of government securities, and decades of experience across different market cycles.
From VG
Vanguard Prime Money Market Fund (Investor Shares: VMMXX; Admiral™ Shares: VMRXX) will change its investment strategy and be renamed Vanguard Cash Reserves Federal Money Market Fund. When this change goes into effect in late September 2020, the fund will invest almost exclusively in cash, U.S. government securities, and/or repurchase agreements that are collateralized solely by U.S. government securities or cash. The fund has historically been managed more conservatively than its peer group. For example, Vanguard Prime Money Market Fund maintained a 33% allocation to government securities—in contrast to the industry average of less than 3%*—leading into the sharp volatility of March 2020. The change in investment strategy further lowers its risk.
Our decades of experience, deep investment expertise, and low costs have enabled Vanguard's taxable money market funds to deliver highly competitive yields without taking undue risks. This approach has allowed Vanguard Prime Money Market Fund Admiral Shares to outperform 97% of the competition over the past 2 decades.** However, Vanguard Prime Money Market Fund Investor Shares has only slightly outperformed Vanguard Federal Money Market Fund Investor Shares over the same time period (note that Admiral Shares aren't available for Vanguard Federal Money Market Fund).*** We've observed and navigated 2 market crises in 12 years. With that as a backdrop, we believe it's better to provide clients with a highly competitive yield by expanding access to lower expenses on a secure government portfolio rather than incurring risk in the prime market.
Vanguard's government money market funds have outperformed their peer-group averages and are ranked within the top decile of peers over the 1-, 3-, 5-, and 10-year periods ended June 30, 2020. Vanguard's government money market funds have also delivered strong returns relative to prime money market funds, and at lower levels of risk.† We seek to continue to deliver competitive yields through low costs, deep expertise in managing portfolios of government securities, and decades of experience across different market cycles.
Re: VG prime MM getting nixed
Probably for the best, even under Vanguard's prudent management, taking any risk doesn't seem worth it under the current near zero interest rate environment. FDIC insured high yield savings (and reward checking accounts for those willing to jump through the hoops) seems to be the place to keep cash. I've also been using Series I U.S. Savings bonds, but series EE seems a bargain if you're certain to hold them 20 years to the doubling.
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Vanguard shifting prime money market fund to safer U.S.-backed investments
[Thread merged into here, see below. --admin LadyGeek]
Money MarketNext month, Vanguard will transition its $125.3 billion Prime Money Market Fund into a government money market fund and rename it the Vanguard Cash Reserves Federal Money Market Fund.
From Jack Brennan's "Straight Talk on Investing", page 23 "Living below your means is the ultimate financial strategy"
Re: Vanguard shifting prime money market fund to safer U.S.-backed investments
Unrelated to whether the change in fund holdings is good or bad, I have to say that changing the name to -
"Vanguard Cash Reserves Federal Money Market Fund"
when the settlement fund is already named - "Vanguard Federal Money Market fund"
Is a mistake, especially when they had the option of creating a new name. I wouldn't be surprised if the name of the settlement fund changes in the future.
When I first read the release I thought they may have figured out a way to circumvent the settlement rules and were able to combine both money market accounts. Instead it seems that they may have complicated the situation.
"Vanguard Cash Reserves Federal Money Market Fund"
when the settlement fund is already named - "Vanguard Federal Money Market fund"
Is a mistake, especially when they had the option of creating a new name. I wouldn't be surprised if the name of the settlement fund changes in the future.
When I first read the release I thought they may have figured out a way to circumvent the settlement rules and were able to combine both money market accounts. Instead it seems that they may have complicated the situation.
Re: Vanguard shifting prime money market fund to safer U.S.-backed investments
+1standard7 wrote: ↑Fri Aug 28, 2020 8:58 am Unrelated to whether the change in fund holdings is good or bad, I have to say that changing the name to -
"Vanguard Cash Reserves Federal Money Market Fund"
when the settlement fund is already named - "Vanguard Federal Money Market fund"
Is a mistake, especially when they had the option of creating a new name. I wouldn't be surprised if the name of the settlement fund changes in the future.
Why not Cash Reserves Fund or Federal Money Market II or just roll it into Federal Money Market?
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Re: Vanguard shifting prime money market fund to safer U.S.-backed investments
None of these would make a particularly good title for a Britney Spears song.rkhusky wrote: ↑Fri Aug 28, 2020 9:11 am+1standard7 wrote: ↑Fri Aug 28, 2020 8:58 am Unrelated to whether the change in fund holdings is good or bad, I have to say that changing the name to -
"Vanguard Cash Reserves Federal Money Market Fund"
when the settlement fund is already named - "Vanguard Federal Money Market fund"
Is a mistake, especially when they had the option of creating a new name. I wouldn't be surprised if the name of the settlement fund changes in the future.
Why not Cash Reserves Fund or Federal Money Market II or just roll it into Federal Money Market?
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Re: Vanguard shifting prime money market fund to safer U.S.-backed investments
You probably already know this, I'm just posting this because I didn't know the specifics the 2016 rules for settlement funds before this morning, just that something occurred to change up the MM funds - after a quick search this is what I found:just roll it into Federal Money Market?
https://investor.vanguard.com/mutual-fu ... et-reform/
Our Federal Money Market Fund**—which also seeks to maintain a stable $1 NAV—is now the only fund that can be used to settle brokerage trades. The fund isn't subject to the liquidity fee or redemption gate requirements.
Liquidity fees and gates are tools to help money market fund managers keep the funds stable during times of extreme market duress. Under the rules:
A fund may impose a fee of up to 2% on redemptions if a fund's weekly liquid assets fall below 30% of its total assets.
A fund must impose a 1% fee on redemptions (with the option of imposing a fee of up to 2%) if a fund's weekly liquid assets fall below 10% of its total assets—unless the fund's board determines a fee would not be in the fund's best interest.
A fund may impose a gate—that is, suspend redemptions—for up to 10 business days in a 90-day period.
Re: Vanguard shifting prime money market fund to safer U.S.-backed investments
Does anyone know if "Liquidity fees and gates" have been used with Money Market funds in the past by VG or other brokers?
Re: Vanguard shifting prime money market fund to safer U.S.-backed investments
Good question I would like to know as well. Also do the Liquidity fees and gates make the fund safer by giving VG tools during a crisis? So comparing the settlement fund to the new cash reserve fund that would be a difference that you pointed out above.
Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
I merged Dennisl's and BeachPerson's threads into the on-going discussion.
I also removed an off-topic post regarding money as an asset. As a reminder, see: Non-actionable (Trolling) Topics
I also removed an off-topic post regarding money as an asset. As a reminder, see: Non-actionable (Trolling) Topics
If readers can't do anything with the content of a topic other than argue about it, it does not belong here. Examples include:
- US or world economic, political, tax, health care and climate policies
- conspiracy theories of any type
- discussions of the crimes, shortcomings or stupidity of other people, whether they be political figures, celebrities, CEOs, Fed chairmen, subprime mortgage borrowers, lottery winners, federal "bailout" recipients, poor people, rich people, etc. Of course, you are welcome to talk about the stupid financial things you have done.
Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
So what will be the difference investment mandate wise between the new Cash Reserve Federal Money Market and the old Federal Money Market fund? When rates do perk back up one day, is the new Cash Reserve Federal Money Market considered the fund that will produce the higher yield over the existing Federal Money Market fund. That is why I selected Prime in first place - two extremely conservative funds for holding cash, yet with Prime giving historically higher yield. That seems to be going away?
Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
After reading through the entire thread I did not see anyone with my question. We don't use check writing in our prime account but we do have the ability to transfer money to our credit union via electronic process. When we are required to be switched from Prime to the new Admiral Share, will we lose that feature? Yes, I could call Vanguard to ask, but one post indicated that when someone called recently, they had not even heard of the change.
Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
No, you will not lose your EFT/ACH capability. External banks (or credit unions) are linked to one or more accounts. You can transfer to or from any fund in the account from or to the linked bank or CU. Both investor shares and admiral shares versions of Prime MM are just another fund in the account. You can do the same transfers from stock or bond funds in the account as well.
Kevin

Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
Thank you for your quick reply. Now we'll call the CU and see if there are any requirements for waiting periods on withdrawals from their MMKT funds. they are still paying .35% compared to Vanguards .01% in their new Prime Admiral shares. Years ago we moved our Roths from Vanguard to the CU, but then moved them back to Vang when the CU interest became substantially less than Vang. but now we have a fair amount of change in the Vanguard Prime and are quickly tiring of making nothing on it. I can see why the stock market is booming. Fed is putting savers like us in the position that we can't make any money in our money market funds and lose money to inflation, literally trying to force people into the stock market.Kevin M wrote: ↑Fri Aug 28, 2020 11:25 amNo, you will not lose your EFT/ACH capability. External banks (or credit unions) are linked to one or more accounts. You can transfer to or from any fund in the account from or to the linked bank or CU. Both investor shares and admiral shares versions of Prime MM are just another fund in the account. You can do the same transfers from stock or bond funds in the account as well.
Kevin
Re: VG prime MM getting nixed
Why did the 33% allocation to government securities lead to the sharp volatility of March 2020?Dennisl wrote: ↑Fri Aug 28, 2020 8:25 am [Thread merged into here, see below. --admin LadyGeek]
From VG
Vanguard Prime Money Market Fund (Investor Shares: VMMXX; Admiral™ Shares: VMRXX) will change its investment strategy and be renamed Vanguard Cash Reserves Federal Money Market Fund. When this change goes into effect in late September 2020, the fund will invest almost exclusively in cash, U.S. government securities, and/or repurchase agreements that are collateralized solely by U.S. government securities or cash. The fund has historically been managed more conservatively than its peer group. For example, Vanguard Prime Money Market Fund maintained a 33% allocation to government securities—in contrast to the industry average of less than 3%*—leading into the sharp volatility of March 2020. The change in investment strategy further lowers its risk.
Our decades of experience, deep investment expertise, and low costs have enabled Vanguard's taxable money market funds to deliver highly competitive yields without taking undue risks. This approach has allowed Vanguard Prime Money Market Fund Admiral Shares to outperform 97% of the competition over the past 2 decades.** However, Vanguard Prime Money Market Fund Investor Shares has only slightly outperformed Vanguard Federal Money Market Fund Investor Shares over the same time period (note that Admiral Shares aren't available for Vanguard Federal Money Market Fund).*** We've observed and navigated 2 market crises in 12 years. With that as a backdrop, we believe it's better to provide clients with a highly competitive yield by expanding access to lower expenses on a secure government portfolio rather than incurring risk in the prime market.
Vanguard's government money market funds have outperformed their peer-group averages and are ranked within the top decile of peers over the 1-, 3-, 5-, and 10-year periods ended June 30, 2020. Vanguard's government money market funds have also delivered strong returns relative to prime money market funds, and at lower levels of risk.† We seek to continue to deliver competitive yields through low costs, deep expertise in managing portfolios of government securities, and decades of experience across different market cycles.
Re: VG prime MM getting nixed
I think that what they meant was that "leading into March 2020," i.e., at the time the volatility started, the fund held 33% government securities which was a more conservative (higher) allocation than their competitor prime funds.
Is it possible that, behind the scenes, the CDs, Yankee/Foreign, and other non-government components of Prime MM were more problematic than it seemed back in March? i.e., something came too close for comfort in the opinion of the fund managers?
Where do the companies that were borrowing from Prime MM go now, when Prime MM basically says we won't buy your bonds/CDs anymore? Is this just not a big problem because Prime MM is still a very small % of the total market for those things? Anyone have insight?
Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
I confess I don't relate to the differences in the three MM account based upon types of holdings. For large amounts of cash in our tax deferred accounts it seems a no brainer to go switch to the Prime MM Admiral VMRXX since we do not write checks from those accounts. Any downsides besides check writing?
Since Treasury MM VUSXX is reopened is there any/enough reason to at least put a placeholder amount in that fund? At today's Vanguard posted SEC yields (0.08 for VUSXX v. 0.10 for VMRXX) the dividend amounts are trivial on an annual basis. Is there enough difference in holdings makeup to hold both? Safety? Other?
Since Treasury MM VUSXX is reopened is there any/enough reason to at least put a placeholder amount in that fund? At today's Vanguard posted SEC yields (0.08 for VUSXX v. 0.10 for VMRXX) the dividend amounts are trivial on an annual basis. Is there enough difference in holdings makeup to hold both? Safety? Other?
Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
I processed the Admiral Conversion yesterday and the online confirmation indicated that checkwriting was carried over to the new fund. That was apparently incorrect.
Today the account options for the new Admiral fund account show N/A for checkwriting. I plan to safely dispose of the checkbook for the Investor class fund.
In recent weeks Prime Money Market has been yielding less than the Federal and Treasury Money Market funds. That is generally not the case.
The higher yields may be the result of the two year Treasury Floating Rate Notes (FRNs) held in the Federal and Treasury Money Market funds. Treasury Floating Rate Notes pay a rate determined by the most recent 13 week T-Bill discount rate plus a fixed spread determined at the time of the FRN auction.
The Treasury fund recently held six FRNs with spreads of 0.300%, 0.220%, 0.154%, 0.139%, 0.115%, and 0.114%. Those spreads are quite attractive at present with 13 week T-Bills at 0.101%.
The two year FRNs should add incremental yield as long as they remain in the fund.
Today the account options for the new Admiral fund account show N/A for checkwriting. I plan to safely dispose of the checkbook for the Investor class fund.
In recent weeks Prime Money Market has been yielding less than the Federal and Treasury Money Market funds. That is generally not the case.
The higher yields may be the result of the two year Treasury Floating Rate Notes (FRNs) held in the Federal and Treasury Money Market funds. Treasury Floating Rate Notes pay a rate determined by the most recent 13 week T-Bill discount rate plus a fixed spread determined at the time of the FRN auction.
The Treasury fund recently held six FRNs with spreads of 0.300%, 0.220%, 0.154%, 0.139%, 0.115%, and 0.114%. Those spreads are quite attractive at present with 13 week T-Bills at 0.101%.
The two year FRNs should add incremental yield as long as they remain in the fund.
Electron
Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
Can someone confirm that the lazy/amateur move here for anyone with more than $3K in VMMXX is a straight transfer to VMRXX? Or am I missing something?
Re: VG prime MM getting nixed
Your interpretation is probably correct. It's very poorly written.Makefile wrote: ↑Fri Aug 28, 2020 12:47 pmI think that what they meant was that "leading into March 2020," i.e., at the time the volatility started, the fund held 33% government securities which was a more conservative (higher) allocation than their competitor prime funds.
Is it possible that, behind the scenes, the CDs, Yankee/Foreign, and other non-government components of Prime MM were more problematic than it seemed back in March? i.e., something came too close for comfort in the opinion of the fund managers?
Where do the companies that were borrowing from Prime MM go now, when Prime MM basically says we won't buy your bonds/CDs anymore? Is this just not a big problem because Prime MM is still a very small % of the total market for those things? Anyone have insight?
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Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
Repos can be collateralized by treasuries or lower credit quality instruments.Wind_Reaver wrote: ↑Thu Aug 27, 2020 6:29 pmExpecting a more prominent repo allocation to differentiate from Federal and Treasury MM. Competitors have similar established funds (at subsidized & higher cost). For example, Fidelity Government Cash Reserves (FDRXX), or Schwab Government Money Fund (SNVXX).Northern Flicker wrote: ↑Thu Aug 27, 2020 5:21 pm It appears the distinction between Federal and Cash Reserves will be percentage of treasury obligations in the portfolio-- 65% for Federal, perhaps 50% for Cash Reserves. And Cash Reserves will have an ER that is 1bp/yr lower than Federal.
Risk is not a guarantor of return.
Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
Looking at the total net assets for the three MM accounts, shows most investors prefer the Federal. This is what's on VG's site as of today. Is there a way to see this over time, I would be curious to the amounts pre-March?
Federal (Settlement account): Fund total net assets $196.4 billion
Prime: Fund total net assets $125.3 billion
Treasury: Fund total net assets $38.9 billion
Federal (Settlement account): Fund total net assets $196.4 billion
Prime: Fund total net assets $125.3 billion
Treasury: Fund total net assets $38.9 billion
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Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
I did that because it seemed to be what the email from Vanguard was more-than-half suggesting. Without even thinking I just said "Admiral, sure. Click click do it."
And then the next day I got a notice saying that I had messed up my automatic RMD service by doing that and that I would need to set it up again.
Given that ERs for VMMXX and VMRXX are 0.16% and 0.10% respectively, and that the SEC yields showing on my screen right now are 0.04% and 0.10% respectively, and that it messed up my RMD service, and messed up somebody's checkwriting... I think there might be something said for leaving well enough alone. Or getting the money the heck out of there and putting it into a bank account where it could be earning a princely 0.65%.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
It looks like investors will be converted automatically late 2020 through 2021. They don't state whether the Investor class fund will be closed or remain open.
"What you need to do"
"Existing Investor share owners (VMMXX): You have the option to immediately convert to Admiral Shares to begin taking advantage of the lower expense ratio. You can find simple step-by-step instructions here. If you don’t initiate a conversion, you’ll be automatically converted sometime between late 2020 through 2021. Note: Our checkwriting service isn’t available for the fund’s Admiral share class. Checkwriting is available for Vanguard Federal Money Market Fund and other Vanguard money market funds."
https://investornews.vanguard/changes-t ... nd-lineup/
Electron
Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
That was my read too. So it seems Vanguard still thinks it's worth the trouble to have another Federal fund that reaches for yield a bit, but doesn't want to expose the risk of commercial and yankee paper.Wind_Reaver wrote: ↑Thu Aug 27, 2020 11:56 pm Unless I'm misinterpreting, the announcement outlines the Prime MM fund converting from Prime (Prime category) to Federal (Government category) later this year. Vanguard won't have a Prime MM fund after the change, it will have two Federal MM funds with differing mandates and one Treasury MM fund.
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Re: [Vanguard Prime Money Market changes, gets new name. Treasury Money Market reopened]
I spoke with Vanguard about it, and it sounds like the plan is that Cash Reserves will have a longer average maturity than Federal MM, but not significantly different credit quality. Federal MM needs to meet the liquidity requirements of a settlement fund, but Cash Reserves will not need to. Cash Reserves will still be a cash fund managed for a stable share price.
Vanguard offers the Ultrashort bond fund if you want credit exposure, but minimal term exposure.
Vanguard offers the Ultrashort bond fund if you want credit exposure, but minimal term exposure.
Risk is not a guarantor of return.