Comments on: Taxable MMF now a better deal than muni MMF

By: indexfundfan @ indextown » Blog Archive » Update on tax exempt MMF yields

Wed, 27 Feb 2008 22:43:20 +0000

[...] two weeks ago, I noted that taxable MMFs have better after-tax yields than the tax-exempt versions, even for investors in the highest tax brackets. Today, a post on the Bogleheads forum seems to [...]

By: indexfundfan

indexfundfan — Tue, 26 Feb 2008 18:07:44 +0000

Here's an article related to the above issue:

By: thom

thom — Wed, 13 Feb 2008 06:47:13 +0000

I just put in my sell order for VCTXX over the phone. It does seem odd that they would allow sell’s but not buy’s. Either they are allowing the fund to drain or, as indexfundfan was hypothesizing, they are getting a ton of purchases from investors running from muni bond resets. I guess VCTXX is the next-closest alternative to a muni bond reset.

Wells Fargo’s customer service btw is freaking awesome. At least for PMA accounts!

By: Simon

Simon — Wed, 13 Feb 2008 04:06:40 +0000

This is what i got in an email from WellsFargo re VCTXX. redemptions are ok, but not buys, its quite odd, given the big drop in yeild I’m thinking of switching to VG’s prime MMF.

VANGUARD PURCHASE RESTRICTIONS

At this time, Vanguard is no longer accepting any purchase orders for VCTXX from Wells Fargo Investments. This purchase restriction applies to initial and subsequent purchases. Vanguard is currently only permitting sell orders in this specific fund.

We have been made aware that due to the volatility of the municipal bond marketplace, Vanguard Funds has elected to take certain steps to restrict the purchases of certain Tax Free Money Market Funds.

We have no estimated timeframe as to when this situation may change. To the best of our knowledge, this action on the part of Vanguard was completed without any prior communication to our firm.

We hope this information is helpful.

By: TFB

TFB — Wed, 13 Feb 2008 03:27:49 +0000

I noticed the same yield shift too. I exchanged into FSLXX – Fidelity Select Money Market last week.

By: indexfundfan

indexfundfan — Wed, 13 Feb 2008 01:43:54 +0000

Perhaps this and the ARS auction failures are related… my hypothesis is that CA’s TE MMF might have experienced huge inflows from money flowing out of muni ARS, and thus the lock down. Anyone think if this is the reason?

By: thom

thom — Wed, 13 Feb 2008 00:27:00 +0000

The guy on the phone said it was likely due to the current bond market volatility. I’d be curious to know if direct Vanguard customers are experiencing the same problem.

I’m no bond expert, but I’m kind of surprised at the turn of events for VCTXX especially viz-a-viz VCAIX, the intermediate-term CA tax-exempt bond fund, which is still offering a fine yield:

For VCTXX we’ve seen:
- yield falls dramatically
- amid greater bond market turmoil
- redemptions must have been greater than vanguard likes
- vanguard turns off redemptions

It surprises me that VCTXX, holding short-term bonds would experience greater trouble than VCAIX, holding intermediate-term bonds. VCAIX’s price and yield have held up fine through all this.

By: indexfundfan

indexfundfan — Wed, 13 Feb 2008 00:15:53 +0000

thom, Simon reported the same in the other POST. What the hack is going on??

By: thom

thom — Wed, 13 Feb 2008 00:07:09 +0000

My wells fargo PMA account won’t allow me to make any transactions (buy or sell) with VCTXX (vanguard CA tax-exempt MMF).

I called them a few days ago and they said Vanguard had put a hold on those funds for the time being.

I have no idea when they will release the hold. I’m planning on transferring BACK to Etrade. (oh the perils of rate-chasing)