Vanguard tax-exempt MM

[cyclone6]

Has anyone noticed that Vanguard's tax-exempt MM yield has blown out to a yield of 5.3%? I see 90%+ of the holdings are rated MIG-1, the best short-term rating possible.

Is this just a result of the current credit crunch? Anything to be concerned about parking money here for awhile?

I never thought I'd see their tax-free muni bond MM paying 3% more than the Prime MM fund...

[LOL!]

Lots of people have noticed ... even Vanguard itself. This is a temporary blip. See Bogleheads :: View topic - VMMXX (prime) MM vs VMSXX (tax exempt) MM

[2B]

I'd start worrying about some municipal bonds and short term debt. As the financial issues worsen, states and cities with high levels of financial industries (New York, New Jersey, California, amongst others) are seeing a reduction in tax revenues. New York is going to have a special legislative session to adjust to major revenue losses from the recent bankruptcies. Their bonds will be at risk in a protracted credit crunch. Politicians will be reluctant to cut spending to cover bond holders until it actually collapses and maybe not even then. Historically, municipal bond defaults get real ugly real fast. You can't count on the "insurance" that has faulty credit standing either.

Hey, aren't you one of the people that think we don't need a "bailout?" Then it will be good that market forces work their magic.

[LOL!]

Bogleheads :: View topic - An explanation on the muni markets disarray is another link with interesting news/facts.

[socca]

Latest update: VG Tax-Exempt Money Market is down to 4.56% from a peak of 5.5% a few days ago. I hope that the downward trend continues.

[2B]

Quote:

Originally Posted by socca Latest update: VG Tax-Exempt Money Market is down to 4.56% from a peak of 5.5% a few days ago. I hope that the downward trend continues.

I'm with you on this. The high interest rate shows how constipated the municipal money market is. If it drops to a "normal" level of under 3%, that's a good sign on the credit markets unfreezing.

The people jumping into these great interest rates will hopefully only see them for a few weeks. Then we can start having posts complaining how they're now being screwed.

[cute fuzzy bunny]

Theres going to be some real complaining if a few cities and towns default on their short term obligations because they cant get any cash flow.