Vanguard Money Market Funds - Differences in Returns?

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Kevin M
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by Kevin M »

Looks like the tax-exempt funds are nearing the peak of this cycle, so they probably will level off soon then decline again.
If I make a calculation error, #Cruncher probably will let me know.
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by bikeeagle1 »

I know this is a dumb question, but what is the difference between a "Treasury" fund and a "Federal" fund?
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Electron
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by Electron »

Kevin M wrote: Thu Aug 18, 2022 11:13 am Looks like the tax-exempt funds are nearing the peak of this cycle, so they probably will level off soon then decline again.
The Tax-Exempt Money Market Funds did peak last Wednesday. Great call.

The SIFMA Swap Index has declined only modestly in the last two weeks.

Here is my latest chart updated through today.

The yield on VUSXX continues to move up. It's also interesting that the yield on this fund has been increasing more on Fridays.

The yield on VMRXX has been higher than VMFXX recently. It has also been maintaining a higher percentage in U.S. Government obligations.

Image
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by mouth »

Newest rates have TEY of VUFXX and VFMXX near parity; at least here in VA at 5.75% and a 38.8% federal :)

VMSXX is still lagging a touch but that's also assuming something like 73% USGO which might be aspirational.

Sticking Muni's a little longer to see how things play out.
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by Kevin M »

Update for MM TEYs for my marginal tax rates of 22% and 9.3%:

Image

The muni MM yields continue on the downward slope of their seasonal cycle. Fed and Cash reserves have been fairly flat, and VUSXX (Treasury MM) has caught up to them.

Kevin
If I make a calculation error, #Cruncher probably will let me know.
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by CletusCaddy »

Kevin M wrote: Sat Sep 03, 2022 1:10 pm Update for MM TEYs for my marginal tax rates of 22% and 9.3%:

Image

The muni MM yields continue on the downward slope of their seasonal cycle. Fed and Cash reserves have been fairly flat, and VUSXX (Treasury MM) has caught up to them.

Kevin
What do you mean by muni “seasonal cycle”?
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by Kevin M »

CletusCaddy wrote: Sat Sep 03, 2022 5:34 pm
Kevin M wrote: Sat Sep 03, 2022 1:10 pm Update for MM TEYs for my marginal tax rates of 22% and 9.3%:

Image

The muni MM yields continue on the downward slope of their seasonal cycle. Fed and Cash reserves have been fairly flat, and VUSXX (Treasury MM) has caught up to them.

Kevin
What do you mean by muni “seasonal cycle”?
Muni money market fund yields show a cyclical pattern, rising and falling independently of what's happening with yields in general. There are several threads in which we discuss this in great detail. Maybe someone else can provide a link.

If I extend the time period for the chart, you can see it:

Image

Kevin
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by Electron »

Muni money market fund yields show a cyclical pattern, rising and falling independently of what's happening with yields in general. There are several threads in which we discuss this in great detail. Maybe someone else can provide a link.
I believe this is the thread.

viewtopic.php?t=246263

The holdings in the tax-exempt money market funds are less liquid than the securities held in taxable money market funds. The prices and yields vary quite a bit with changes in supply and demand.

Most of the securities held are VRDOs which are derivative securities with short maturities based on long term municipal bonds.
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by CletusCaddy »

Kevin M wrote: Sat Sep 03, 2022 8:16 pm
CletusCaddy wrote: Sat Sep 03, 2022 5:34 pm
Kevin M wrote: Sat Sep 03, 2022 1:10 pm Update for MM TEYs for my marginal tax rates of 22% and 9.3%:

Image

The muni MM yields continue on the downward slope of their seasonal cycle. Fed and Cash reserves have been fairly flat, and VUSXX (Treasury MM) has caught up to them.

Kevin
What do you mean by muni “seasonal cycle”?
Muni money market fund yields show a cyclical pattern, rising and falling independently of what's happening with yields in general. There are several threads in which we discuss this in great detail. Maybe someone else can provide a link.

If I extend the time period for the chart, you can see it:

Image

Kevin
In that case might it make more sense to run TEY calculations on the experienced YTD return instead?

VMRXX: 0.49%
VUSXX: 0.46%
VMSXX: 0.35%
VCTXX: 0.31%
VMFXX: 0.49%
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by billaster »

bikeeagle1 wrote: Fri Aug 19, 2022 12:20 pm I know this is a dumb question, but what is the difference between a "Treasury" fund and a "Federal" fund?
A Treasury Fund is just that. It consists of at least 80% Treasury bills with an average maturity of 30 days or so.

A Federal Fund will have some Treasury bills but also other government obligations like overnight repos and government sponsored entities like Fannie Mae and FHA. It has a much shorter average maturity, and a large portion of 1 day repos.

The difference in maturities explains the difference in the curves in the graph above. Note that federal funds VMRXX and VMFXX step up immediately when the Federal Reserve changes its Federal Funds rate. This is because they consist of more than 50% overnight repos whose interest rate increase literally overnight.

On the other hand VUSXX consists of Treasury bills with an average maturity of 30 days, so when interest rates increase, the rate of the fund only increases gradually as some of the Treasury bills mature each day and are rolled over into higher yield bills over the next month. So you see are relatively smooth rising line.

You would see the opposite effect if or when the Federal Reserve lowers its Federal Funds rate. In that case you would see the federal funds decrease their yields in a quick step but the treasury fund would only gradually decrease.

But over the period of about a month after a Fed rate change, the treasury and federal funds rates will converge because the Treasury bill rates are close to the Federal Funds rate and overnight repos. So you can conclude that federal funds response quickly to rate changes and treasury funds respond with some lag but end up in the same place.

Edited to add: The Treasury fund will qualify for tax exemptions in some states while the Federal Funds generally will not, because of the percentages of Treasury bills.
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by Electron »

CletusCaddy wrote: Mon Sep 05, 2022 12:03 pm In that case might it make more sense to run TEY calculations on the experienced YTD return instead?
That's an interesting question on whether you can determine the money market fund with the highest after-tax return for the period ahead based on recent average returns.

This would be for an individual who wants to remain invested in a single fund. If you are willing to make a few exchanges per year, it is often possible to enhance returns.

The yield on the tax-exempt money market funds has varied quite a bit as mentioned earlier in this thread. Here is a chart for two of the Vanguard tax-exempt money market funds going back to 2015.

If an individual has the time, it is probably best to keep an eye on the after-tax yields. It may be difficult to determine the best choice based on recent average returns.

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Re: Vanguard Money Market Funds - Differences in Returns?

Post by anon_investor »

Very interesting that VUSXX (2.14%) has now caught up to VMFXX (2.14%). For folks with any state income tax, VUSXX is now the better fund. But based on the last few Fed rate hikes, VMFXX will jump up higher the day after the Fed raises rates. It did take VUSXX over a month to catch up after the last rate hike.
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by mouth »

... and now exceeded it at VUSXX 2.21% vs VMFXX 2.15%. Which also puts it besting VMSXX 1.27% even with 38.8% fed / 5.75% state. Looks like I might be switching on Monday.
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by Electron »

Here is my latest chart. The yield on VUSXX has continued to rise as expected.

The next Fed rate hike announcement is expected on 9-21-22.

The yields on the tax-exempt money market funds are lower than what I would have expected. There must be a lot of demand from those in the 37% Federal bracket.

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Re: Vanguard Money Market Funds - Differences in Returns?

Post by anon_investor »

Electron wrote: Sat Sep 10, 2022 2:20 pm Here is my latest chart. The yield on VUSXX has continued to rise as expected.

The next Fed rate hike announcement is expected on 9-21-22.

The yields on the tax-exempt money market funds are lower than what I would have expected. There must be a lot of demand from those in the 37% Federal bracket.

Image
Is it worth switching from VMFXX to VUSXX (especially with the full state income tax exemption) right now or will VMFXX make a bigger leap on 9/21/2022?
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by Electron »

anon_investor wrote: Sat Sep 10, 2022 5:23 pmIs it worth switching from VMFXX to VUSXX (especially with the full state income tax exemption) right now or will VMFXX make a bigger leap on 9/21/2022?
The expected increase in yield with VMFXX will depend on whether the Fed increases rates by 50 bps or 75 bps. The pattern shown in the chart should be repeated but it is hard to know exactly how things will look this time.

The yield on VUSXX may continue to increase between now and the September Fed meeting.

I have stayed with VUSXX because of the uncertainty on the state tax exemption with VMFXX and VMRXX.
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by anon_investor »

Electron wrote: Sun Sep 11, 2022 3:25 pm
anon_investor wrote: Sat Sep 10, 2022 5:23 pmIs it worth switching from VMFXX to VUSXX (especially with the full state income tax exemption) right now or will VMFXX make a bigger leap on 9/21/2022?
The expected increase in yield with VMFXX will depend on whether the Fed increases rates by 50 bps or 75 bps. The pattern shown in the chart should be repeated but it is hard to know exactly how things will look this time.

The yield on VUSXX may continue to increase between now and the September Fed meeting.

I have stayed with VUSXX because of the uncertainty on the state tax exemption with VMFXX and VMRXX.
Probably makes sense to just switch from VMFXX to VUSXX tomorrow.
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by mouth »

Electron wrote: Sat Sep 10, 2022 2:20 pm The yields on the tax-exempt money market funds are lower than what I would have expected. There must be a lot of demand from those in the 37% Federal bracket.
Image
Not just the 37% bracket, but the 35% as well because odds are strong "they" are subject to the additional 3.8% NIIT making their marginal fed rate 38.8%. Which also means those in the 37% are really 40.8%. That's why the muni MM VMSXX is so attractive vs a 5.75% state rate. But as of Friday VUSXX's TEY is better so I plan on switching on Monday.
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by Kevin M »

mouth wrote: Sun Sep 11, 2022 3:39 pm
Electron wrote: Sat Sep 10, 2022 2:20 pm The yields on the tax-exempt money market funds are lower than what I would have expected. There must be a lot of demand from those in the 37% Federal bracket.
<snip>
Not just the 37% bracket, but the 35% as well because odds are strong "they" are subject to the additional 3.8% NIIT making their marginal fed rate 38.8%. Which also means those in the 37% are really 40.8%. That's why the muni MM VMSXX is so attractive vs a 5.75% state rate. But as of Friday VUSXX's TEY is better so I plan on switching on Monday.
Here is TEY history for last 60 days at 38.8% and 5.75%:

Image

Code: Select all

Ticker	SEC	TEY
VUSXX	2.21%	2.44%
VMSXX	1.27%	2.16%
For VMRXX and VMFXX I'm assuming 73% in USGO, but as we've discussed, this is suspect for 2022, so I'm not counting on any state tax exemption from these funds.

Kevin
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by mouth »

Kevin M wrote: Sun Sep 11, 2022 3:51 pm
Here is TEY history for last 60 days at 38.8% and 5.75%:

Kevin
You're very kind Kevin M. Thank you. Always good to know my math is checked :)
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by anon_investor »

Kevin M wrote: Sun Sep 11, 2022 3:51 pm
mouth wrote: Sun Sep 11, 2022 3:39 pm
Electron wrote: Sat Sep 10, 2022 2:20 pm The yields on the tax-exempt money market funds are lower than what I would have expected. There must be a lot of demand from those in the 37% Federal bracket.
<snip>
Not just the 37% bracket, but the 35% as well because odds are strong "they" are subject to the additional 3.8% NIIT making their marginal fed rate 38.8%. Which also means those in the 37% are really 40.8%. That's why the muni MM VMSXX is so attractive vs a 5.75% state rate. But as of Friday VUSXX's TEY is better so I plan on switching on Monday.
Here is TEY history for last 60 days at 38.8% and 5.75%:

Image

Code: Select all

Ticker	SEC	TEY
VUSXX	2.21%	2.44%
VMSXX	1.27%	2.16%
For VMRXX and VMFXX I'm assuming 73% in USGO, but as we've discussed, this is suspect for 2022, so I'm not counting on any state tax exemption from these funds.

Kevin
The recent jump by VUSXX just makes it better than VMRXX and VMFXX right now before and after tax.
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by water2357 »

Thanks agains for updating the graphs and information on the MMs.

Now that Vanguard is "encouragling" everyone to move entirely to the brokerage platform, can anyone tell me the easiest way to check the yields on these funds?

On the mutual fund account platform, you could just click on the mutual fund in your list of investments on the holdings page and you could see all the information on that fund, including the current yield.

On the brokerage fund account platform, if you click on the settlement fund, which is the Federal MM fund, you no longer see the current yield, at least i don't see it.

Is it there somewhere and I'm missing it, or do I now have to go the general fund list for anyone who is researching funds to find the Federal MM fund yield?

Any idea why Vanguard can't provide it with your actual fund holding as they did for the mutual fund account?

EDITED: I found the settlement fund 7 day SEC yield, it is in a table at the bottom right side of the webpage after you click on the fund. So, at least it does appear with your holding information. However, it does appear that the settlement Fed MM fund page does not contain all of the same information as is shown for the nonsettlement Vanguard Mutual Funds in a brokerage account (which look the same as they did in the Mutual Fund Account).

So, I guess my question is: any idea why Vanguard presents a different set of information for the Fed MM Fund settlement fund, than for all the other Vanguard Mutual Funds in the brokerage account, particularly compared to any other Vanguard money market funds, like. e.g. Treas MM, in the brokerage account?


Thanks.
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by Electron »

water2357 wrote: Mon Sep 12, 2022 4:34 am Now that Vanguard is "encouragling" everyone to move entirely to the brokerage platform, can anyone tell me the easiest way to check the yields on these funds?
I do not log into my account to check prices or yields. You can use the first link below (click the Performance tab) or just bookmark each of the individual funds as shown below.

https://investor.vanguard.com/investmen ... ney_market

Individual fund links

https://investor.vanguard.com/investmen ... file/vmfxx
https://investor.vanguard.com/investmen ... file/vusxx
https://investor.vanguard.com/investmen ... file/vmrxx

Vanguard also has a Price History Search Tool which can provide historical data. This is the tool I use to produce the charts posted earlier.

https://personal.vanguard.com/us/funds/ ... torysearch

Mutual fund accounts and brokerage accounts do have different features and it is often necessary to find alternate ways of doing things.
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by indexfundfan »

According to Vanguard’s website, VMFXX has around 65% invested in repurchase agreements. The SOFR is expected to jump from 2.25% to 3.0% starting from tonight. This will boost VMFXX’s yield by 65% * 75 bps = 49 bps.

VMFXX’s 7-day SEC yield yesterday was 2.17%.

If Vanguard publishes the 1-day SEC yield, it should be 2.17 + 0.49 = 2.66% for today.

The 7-day SEC yield however would only show an increase of around 49/7 = 7 bps. This suggests that the 7-day SEC yield today would be 2.24%. But even though it shows 2.24%, you would be earning at the 2.66% rate for today.
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