Now that the average seven-day yields on tax-exempt money funds are dropping, some money is finding a home elsewhere, according to Connie Bugbee, managing editor of the Money Fund Report, a service of iMoneyNet.com of Westborough, Mass.
This week, the 527 tax-exempt and municipal funds in the report saw the average seven-day yield drop to 0.89% from 1.04%.
said some of the outflows are a result of taxable money fleeing the category after temporarily parking in tax-free funds when the yields hit 5.02% back on Sept. 29.
The average seven-day yield dropped to an all-time low of 0.31% back on July 14, 2003, when assets totaled $302.55 billion, according to Bugbee
Yields are also falling in other areas of the short-term market.
The Securities Industry
and Financial Markets Association's
weekly swap index fell to 1.14% last Wednesday, down from 1.26%, 1.82%, and 2.28% in the three prior weeks and a high of 7.96% on Sept. 24, according to Municipal Market Data.
In addition, the yield on daily variable-rate demand obligations fell slightly to a 1.11% yesterday from a 1.17% last Thursday, according to MMD.