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 »

At current yields, I am using VUSXX in taxable, since we don't know what the state tax exemption will be for VMFXX or VMRXX, or if they will qualify for any exemption in CA, CT and NY. At my expected marginal tax rates of 22% and 9.3%, these are the TEYs for MM funds of interest to me:

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VUSXX TEY for me is 3.84%.

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Re: Vanguard Money Market Funds - Differences in Returns?

Post by mouth »

Hoping to contribute and save Kevin M a little effort:

For anyone interested in what this looks like in the 35% bracket plus 3.8 NIIT and 5.75% VA State

Very interesting the shape of this cycle's Muni yield. I went ahead and put in an order to shift all over to Treasuries today for Monday. We'll see how long it takes to turn the corner again. I've left off Cash-Re and Federal MM because I don't consider those worth considering and of course a non-CA resident probably won't care about CA Muni MM

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Re: Vanguard Money Market Funds - Differences in Returns?

Post by mouth »

WOW huge jump this week
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by Electron »

mouth wrote: Sat Dec 17, 2022 7:43 am WOW huge jump this week
The SIFMA Municipal Swap Index had a large increase this week and is currently at 3.73%. The Tax-Exempt Money Market funds should trend higher.

In looking at past years, the Tax-Exempt yields have often peaked in early January.

Here is an update on my chart.

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Re: Vanguard Money Market Funds - Differences in Returns?

Post by MMD »

Thanks for updating those charts! I'm new at this. Based on my interpretation, it looks like VMSXX, the muni fund, currently at 3.61%, is (much?) better than VMFXX, currently at 4.2%, for someone in a 'high' tax bracket like your example, correct? Thanks. I appreciate any input.
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by Electron »

MMD wrote: Fri Dec 23, 2022 1:42 pm Based on my interpretation, it looks like VMSXX, the muni fund, currently at 3.61%, is (much?) better than VMFXX, currently at 4.2%, for someone in a 'high' tax bracket like your example, correct?
That is correct. It should be relatively easy to compare the after-tax yields and determine which fund provides the highest return at the present time. Take into account both Federal and any state income taxes.

I would continue to monitor the yields as they are changing all the time. The yields on the Municipal Money Market funds may peak out and start declining relatively soon if past history repeats.
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by Electron »

Here is an update on my chart. The SEC yield on VMFXX has been moving sideways for the last few days. VUSXX should continue to narrow the difference in yields. The next Fed meeting is scheduled for January 31 through February 1.

I just looked at my 2023 taxes and had a surprise. The higher Money Market yields and the increase in Social Security are close to triggering the next higher tax bracket.

The tax-exempt Money Market funds continue their cyclical pattern. I've read that new Municipal paper issued in December is one reason for the spike in yield.

I'm looking forward to seeing the 2022 USGO percentages reported by Vanguard for VMFXX and VMRXX. I wonder if we will see any surprises in the data.

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Re: Vanguard Money Market Funds - Differences in Returns?

Post by water2357 »

Thanks for the update! Have you looked at the Vanguard Cash Reserve Federal MM Fund at all? The last few times I checked it seemed to be just slightly higher than the other MMs. Did not have a chance to look at the timing and duration on the holdings, I'm guessing that explains some of the difference.
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by fingoals »

water2357 wrote: Mon Jan 02, 2023 6:44 pm Thanks for the update! Have you looked at the Vanguard Cash Reserve Federal MM Fund at all? The last few times I checked it seemed to be just slightly higher than the other MMs. Did not have a chance to look at the timing and duration on the holdings, I'm guessing that explains some of the difference.
I would suggest you to try using a customized copy of Alan Gebele's very nice spreadsheet: https://www.gebele.com/charts-and-graphs/mm-yields. Just save your own copy, adjust A1 and A2 cells with your tax rates and see what options are better in your situation (don't forget to refresh the browser tab to use up-to-date rates). Voila! IMHO, the only issue with this spreadsheet is that it uses relevant MM funds' rates as of previous business day or so. I plan to use this tool to determine the optimal time to switch between VMSXX and VUSXX.
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by mouth »

Electron wrote: Mon Jan 02, 2023 5:29 pmThe tax-exempt Money Market funds continue their cyclical pattern. I've read that new Municipal paper issued in December is one reason for the spike in yield.
Electron, any theory as to why the pattern seemed to break in Nov with Muni's typical moving up along with VMFXX, other than a weird little blip? Was that in anticipation of the Dec issue you mention; was there some sort of pause in the machinations that create the usual cyclical pattern?
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by Electron »

water2357 wrote: Mon Jan 02, 2023 6:44 pm Thanks for the update! Have you looked at the Vanguard Cash Reserve Federal MM Fund at all? The last few times I checked it seemed to be just slightly higher than the other MMs. Did not have a chance to look at the timing and duration on the holdings, I'm guessing that explains some of the difference.
My charts don't include Cash Reserves Federal Money Market (VMRXX) because it tracks VMFXX very closely. One trace would be on top of the other.

VMRXX would generally be my choice over VMFXX. Expenses are slightly lower and the percentage in U.S. Government obligations appears to have been higher in 2022. I don't believe VMRXX offers check writing if that is needed. The yield has been higher than VMFXX recently as you mentioned.
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by Electron »

mouth wrote: Mon Jan 02, 2023 7:49 pmElectron, any theory as to why the pattern seemed to break in Nov with Muni's typical moving up along with VMFXX, other than a weird little blip? Was that in anticipation of the Dec issue you mention; was there some sort of pause in the machinations that create the usual cyclical pattern?
I don't have any real explanation for the different pattern in November. The tax-exempt money market is quite a bit less liquid than the taxable money markets. Changes in supply and demand have a noticeable effect on yield. The funds hold VRDOs which are derivative securities. Rates are set by remarketing agents.

Here a thread and post that you might find very interesting. Take note of the SIFMA document that is referenced which contains a lot of very interesting information. You might also want to review the entire thread.

viewtopic.php?p=4013168#p4013168

"VRDOs are debt securities with nominal long-term maturities (often 20 to 30 years) in which the interest rate is reset by a remarketing agent on a periodic basis (e.g., daily, weekly, monthly, annually or commercial paper periods up to 270 days). For each interest reset, subject to any maximum interest rate stated in the VRDOs, the remarketing agent is required to set the interest rate at the rate necessary, in its judgment, as the lowest rate that permits the sale of the VRDOs at 100% of their principal amount (par) on the interest reset date."
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by TechBogler »

Electron wrote: Mon Jan 02, 2023 10:06 pm
water2357 wrote: Mon Jan 02, 2023 6:44 pm Thanks for the update! Have you looked at the Vanguard Cash Reserve Federal MM Fund at all? The last few times I checked it seemed to be just slightly higher than the other MMs. Did not have a chance to look at the timing and duration on the holdings, I'm guessing that explains some of the difference.
My charts don't include Cash Reserves Federal Money Market (VMRXX) because it tracks VMFXX very closely. One trace would be on top of the other.

VMRXX would generally be my choice over VMFXX. Expenses are slightly lower and the percentage in U.S. Government obligations appears to have been higher in 2022. I don't believe VMRXX offers check writing if that is needed. The yield has been higher than VMFXX recently as you mentioned.
My quick Google search shows the below. Doesn't this imply it's investing a good bit into non treasury instruments? And is that worth the 2-3bp difference to VMFXX settlement fund?

"This fund is similar to VMFXX, but with one important difference. VMRXX invests more than 25% of its assets in securities issued by companies in the financial services industry, which includes securities issued by certain government-sponsored enterprises. The fund therefore takes marginally more risk than VMFXX."
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by Electron »

TechBogler wrote: Tue Jan 03, 2023 12:05 am My quick Google search shows the below. Doesn't this imply it's investing a good bit into non treasury instruments? And is that worth the 2-3bp difference to VMFXX settlement fund?

"This fund is similar to VMFXX, but with one important difference. VMRXX invests more than 25% of its assets in securities issued by companies in the financial services industry, which includes securities issued by certain government-sponsored enterprises. The fund therefore takes marginally more risk than VMFXX."
Take a look at the Vanguard Fund Profile for each of the two funds.

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

VMFXX

Repurchase Agreements 58.70%
U.S. Govt. Obligations 33.20%
U.S. Treasury Bills 8.10%

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

VMRXX

Repurchase Agreements 51.00%
U.S. Govt. Obligations 39.40%
U.S. Treasury Bills 9.50%

The information you posted may go back to VMRXX prior to the Money Market Reform at Vanguard. The fund was previously the Admiral Shares of Vanguard Prime Money Market fund and it held a lot of commercial paper. The fund was reorganized into a Government Money Market fund. Vanguard no longer has any Money Market funds holding commercial paper.

https://investor.vanguard.com/investor- ... ket-reform

https://corporate.vanguard.com/content/ ... 82720.html
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by Electron »

I took another look at Vanguard Cash Reserves Federal Money Market and TechBogler was correct that the fund has a concentrated position in the financial services industry. Here is a statement from the Vanguard Money Market Funds Prospectus which covers VUSXX, VMFXX, and VMRXX.

"The Fund invests more than 25% of its assets in securities issued by companies in the financial services industry, which includes, without limitation, securities issued by certain government-sponsored enterprises."

I downloaded the latest holdings provided for VMRXX and VMFXX from the Vanguard website. The surprise was that the Government Agency holdings in both funds include securities from just three different issuers. The issuers are Federal Home Loan Banks, Federal Home Loan Bank Discount Notes, and Federal Farm Credit Banks Funding Corp.

The data shows the holdings worth $31 B in VMRXX which is 33.4% of fund assets ($92.9 B). In the case of VMFXX, the data shows the holdings worth $65 B which is 30% of fund assets ($216.2 B).

Here are some additional statements from the Vanguard Money Market Funds Prospectus.

"In relative terms, the Treasury Money Market Fund, which invests in securities backed by the full faith and credit of the U.S. government, offers the lowest credit risk — and generally the lowest yield — of the three Funds."

"Because some of the securities included in the Cash Reserves Federal Money Market Fund and the Federal Money Market Fund are not backed by the full faith and credit of the U.S. government, the potential credit risk and yield for the Funds are somewhat higher than for the Treasury Money Market Fund."

"Under certain circumstances, the exposure to a single issuer could cause the Cash Reserves Federal Market Fund or the Federal Money Market Fund to fail to maintain a share price of $1."
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by TechBogler »

That is quite interesting! Given the 33% vs. 30% is not a huge delta and your last quote about exposure may cause break of the $1, is that something we're not considering here? I think we all assume it's $1 because money markets usually are $1 / "it's the US government" (are we correctly differentiating between US Treasuries vs. US Govt Obligations?)

VMFXX is the settlement fund so I would assume vanguard is not holding people's idle cash in something that could potentially break $1 peg?

Do we know the credit worthiness of those three government sponsored entities (are they at least A rated by S&P etc.)? What is the sparknotes of each of Federal Home Loan Banks, Federal Home Loan Bank Discount Notes, and Federal Farm Credit Banks Funding Corp.

I see VUSXX at 6.6% "US govt obligations", VMFXX 33.2% and VMRXX 39.40% just based on the weighted exposures section of the main fund pages.
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by Electron »

TechBogler wrote: Thu Jan 05, 2023 6:05 pm That is quite interesting! Given the 33% vs. 30% is not a huge delta and your last quote about exposure may cause break of the $1, is that something we're not considering here? I think we all assume it's $1 because money markets usually are $1 / "it's the US government" (are we correctly differentiating between US Treasuries vs. US Govt Obligations?)
The statements from the prospectus that I quoted are probably necessary disclosures. I feel very comfortable with Vanguard Money Market funds and Market Market Reform has undoubtedly made them safer. The information below from the prospectus states that even Government Money Market funds may implement liquidity fees and redemption gates if necessary. That would likely be done before dropping the NAV below $1.00.

"Vanguard has designated Vanguard Cash Reserves Federal Money Market Fund, Vanguard Federal Money Market Fund, and Vanguard Treasury Money Market Fund as government money market funds."

"Government money market funds are required to invest at least 99.5% of their total assets in cash, U.S. government securities, and/or repurchase agreements that are collateralized solely by U.S. government securities or cash (collectively, government securities). Each Fund generally invests 100% of its assets in government securities and therefore will satisfy the 99.5% requirement for designation as a government money market fund."

"Government money market funds can also maintain a stable $1.00 NAV through the use of amortized cost accounting and may, but are not required to, implement liquidity fees and redemption gates. Each Fund will continue to use amortized cost to transact at a stable $1.00 NAV."

"The Funds do not currently intend to voluntarily implement liquidity fees or redemption gates."

I believe only one or two Money Market funds ever traded below $1.00 NAV and that was following the collapse of Lehman Brothers in 2008.

Here is some credit rating information I found for Federal Home Loan Bank and Federal Farm Credit Banks Funding Corp.

https://www.fhlb-of.com/ofweb_userWeb/p ... ratings-31

https://www.farmcreditfunding.com/ffcb_live/faq.html
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by water2357 »

Thanks to all for the additional insight on the Vanguard Money Market Funds. Interesting to know that the Cash Reserve Fed MM has been tracking the Federal MM that closely.
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by MMD »

Thanks to all the smart people on this forum that helps us, I appreciate it!
VG lists the 7 day SEC yield, should I use that in my calculation of which fund to use? VMSXX (muni) is at 2.92% and VMFXX is at 4.23%. I think the muni is still better for anyone in the highest tax bracket, right? Does anyone know of a web calculator out there that would compare the yields of a muni and taxable MM so I can easily compare and perhaps switch if I wanted to?
Thanks!
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by TechBogler »

Damn VMSXX dropped like a rock to 2.83%...
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by mouth »

You mean 2.47% (4.20% TEY for me); time to switch to VUSXX 4.15% (4.58 TEY)

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Re: Vanguard Money Market Funds - Differences in Returns?

Post by TechBogler »

I see 2.83%, is a daily rate published somewhere else?
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by mouth »

TechBogler wrote: Fri Jan 13, 2023 6:02 pm I see 2.83%, is a daily rate published somewhere else?
My spreadsheet is pulling it from vanguards price history page which seems to update the most recent day's price rather quickly. 2.83% was yesterday.

https://personal.vanguard.com/us/funds/ ... es#res#res

ETA: quickly as compared to the main fund page which is still showing yesterday's rate.
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by Kevin M »

mouth wrote: Fri Jan 13, 2023 6:16 pm
TechBogler wrote: Fri Jan 13, 2023 6:02 pm I see 2.83%, is a daily rate published somewhere else?
My spreadsheet is pulling it from vanguards price history page which seems to update the most recent day's price rather quickly. 2.83% was yesterday.

https://personal.vanguard.com/us/funds/ ... es#res#res

ETA: quickly as compared to the main fund page which is still showing yesterday's rate.
Right. It's easier to see the big drop today if we only look at the last month:

Image

TEYs are for my marginal tax rates of 22% fed and 9.3% state.
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 Lyrrad »

I think the seven day yields will continue to drop over the next several days. Fidelity's California Muni MM fund, FSPXX, has dropped to 1.94% 1-day yield, down from a peak of over 3% late last month. The 1-day yields many of on Fidelity's Muni funds are about 40 basis points lower than the 7 day yields as of today.


I wonder how much quarterly taxes due dates cause some of the yield bumps in the charts in this thread. For most of the country Q4 2022 estimated taxes are due next week. However, this week the IRS and California delayed the deadline for these payments until May in much of the state, including major population centers.

Perhaps comparing NY and CA muni yields over the next few months would give us a better idea.
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by TechBogler »

Do you lose any days of accrued interest if you decide to exchange funds between say VMSXX and VUSXX? Just wondering if the settlement (how long do mutual funds take to settle) or end of the day execution etc. may cause that
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by Electron »

Here is a link from the Vanguard Tax Center showing the expected dates for the various tax documents.

The 2022 USGO document is expected early next week. It will be very interesting to finally see the USGO percentages for VMFXX and VMRXX. :happy

https://advisors.vanguard.com/tax-cente ... rrent-year

The large drop in Tax-Exempt Money Market fund yields has been surprising.

The Municipal Swap Index yield is now down to 2.50% and that tends to be an upper limit for the Tax-Exempt Money Market funds.

https://www.bloomberg.com/quote/MUNIPSA:IND

We could be seeing the effect of new paper issued in December followed by increased investor demand for the Tax-Exempt Money Market funds.
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by mouth »

TechBogler wrote: Sat Jan 14, 2023 1:06 pm Do you lose any days of accrued interest if you decide to exchange funds between say VMSXX and VUSXX? Just wondering if the settlement (how long do mutual funds take to settle) or end of the day execution etc. may cause that
Short answer: no. (note the lack of capitalized "n" ... that's my hedge for someone like Electron or KevinM to correct me!)

Longer answer: MMs accrue dividends daily but pay out monthly (or when closed). You can see your accrued dividend on the VG site if you're looking at your balances page and select the "Show:" dropdown near the top and select Balances by Date. You'll see a new column called [drum roll] accrued dividends. Cheers!

My Hedge: As for settlement and gaps, doing an exchange is seamless as best I can tell with the transaction happening at the end of the next trading day. And being a $1 NAV you shouldn't be losing any bid/ask spread or anything like that. So in theory you sell at end of the day and accrue that days dividend and buy before the next day and so should get that next day's full dividend
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by TechBogler »

mouth wrote: Sat Jan 14, 2023 2:44 pm
TechBogler wrote: Sat Jan 14, 2023 1:06 pm Do you lose any days of accrued interest if you decide to exchange funds between say VMSXX and VUSXX? Just wondering if the settlement (how long do mutual funds take to settle) or end of the day execution etc. may cause that
Short answer: no. (note the lack of capitalized "n" ... that's my hedge for someone like Electron or KevinM to correct me!)

Longer answer: MMs accrue dividends daily but pay out monthly (or when closed). You can see your accrued dividend on the VG site if you're looking at your balances page and select the "Show:" dropdown near the top and select Balances by Date. You'll see a new column called [drum roll] accrued dividends. Cheers!

My Hedge: As for settlement and gaps, doing an exchange is seamless as best I can tell with the transaction happening at the end of the next trading day. And being a $1 NAV you shouldn't be losing any bid/ask spread or anything like that. So in theory you sell at end of the day and accrue that days dividend and buy before the next day and so should get that next day's full dividend
Fantastic - had no idea about this page! You're awesome!!
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by mouth »

TechBogler wrote: Sat Jan 14, 2023 3:01 pm Fantastic - had no idea about this page! You're awesome!!
You're very kind. But I'm just standing on the shoulders of giants here at BH and trying to give a little back where I can.
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by Electron »

The Vanguard Money Market Funds Prospectus has a separate section on Earning Dividends for Purchases and Redemptions.

"Purchasing Shares"

"You generally begin earning dividends on the business day following your trade date. When buying money market fund shares through a federal funds wire on a business day, however, you generally can begin earning dividends immediately by making a purchase request by telephone to Vanguard before 10:45 a.m., Eastern time (2 p.m., Eastern time, for Vanguard Cash Reserves Federal Money Market Fund; 12:30 p.m., Eastern time, for Vanguard Federal Money Market Fund)."

"Redeeming Shares"

"You generally will continue earning dividends until the first business day following your trade date. Generally, there are two exceptions to this rule: (1) If you redeem shares by writing a check against your account, the shares will stop earning dividends on the day that your check posts to your account; and (2) For money market funds, if you redeem shares with a same-day wire request before 10:45 a.m., Eastern time, on a business day (2 p.m., Eastern time, for Vanguard Cash Reserves Federal Money Market Fund; 12:30 p.m., Eastern time, for Vanguard Federal Money Market Fund), the shares will stop earning dividends that same day."
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by luffy »

Vanguard U.S. government obligations information for 2022 is out: https://advisors.vanguard.com/iwe/pdf/FASUSGO.pdf

Cash Reserves Federal Money Market Fund 53.08%
Federal Money Market Fund 37.79%
Treasury Money Market Fund 100.00%
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by mouth »

luffy wrote: Tue Jan 17, 2023 6:58 pm Vanguard U.S. government obligations information for 2022 is out: https://advisors.vanguard.com/iwe/pdf/FASUSGO.pdf

Cash Reserves Federal Money Market Fund 53.08%
Federal Money Market Fund 37.79%
Treasury Money Market Fund 100.00%
Nice! Thank you for posting.
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by Kevin M »

luffy wrote: Tue Jan 17, 2023 6:58 pm Vanguard U.S. government obligations information for 2022 is out: https://advisors.vanguard.com/iwe/pdf/FASUSGO.pdf

Cash Reserves Federal Money Market Fund 53.08%
Federal Money Market Fund 37.79%
Treasury Money Market Fund 100.00%
Thanks.

Neither Cash Reserves nor Fed MM meets the requirement for state tax exemption in CA, NY and CT. VUSXX of course does.

It was prudent for us living in these states not to have assumed VMFXX or VMRXX would be exempt from state and local income taxes.
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 bluejacket »

mouth wrote: Fri Jan 13, 2023 5:47 pm You mean 2.47% (4.20% TEY for me); time to switch to VUSXX 4.15% (4.58 TEY)

Image
With the cyclical nature of VMSXX and VUSXX would it make sense for someone who didn't want to track the changing rates to put half in each of short term reserves? Hedge between the two?
35% bracket + 3.8 NIIT and 4% State
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by mouth »

bluejacket wrote: Tue Jan 17, 2023 8:26 pm
mouth wrote: Fri Jan 13, 2023 5:47 pm You mean 2.47% (4.20% TEY for me); time to switch to VUSXX 4.15% (4.58 TEY)

Image
With the cyclical nature of VMSXX and VUSXX would it make sense for someone who didn't want to track the changing rates to put half in each of short term reserves? Hedge between the two?
35% bracket + 3.8 NIIT and 4% State
Short answer, at your rates, no.

Longer Answer, at your rates,

For the last 365, 270, 180, and 90 days, you'd still be better off just being at 100% VMSXX if you wanted set and forget; for at least a little while. But no matter what you'll have to check occasionally, like if the fed starts making noises about stopping rate increases or decreasing them, because the pattern may break and then all bets are off.

For reference if you had started flip flopping back in March when things really started to take off, you'd have made 6% more than VMSXX alone at your rates. It would be almost 7% more at my higher state rate.

For 50/50 to be a best-compromise, at the current pattern and 4% state, you'd have to be at 32% fed.

#IDidTheMath but I'm not in the mood to show it because the formatting and set-up for it to look pretty is annoying.

Usual Caveat: this is all based on the past and no one knows what's coming.
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by TechBogler »

Kevin M wrote: Tue Jan 17, 2023 7:28 pm
luffy wrote: Tue Jan 17, 2023 6:58 pm Vanguard U.S. government obligations information for 2022 is out: https://advisors.vanguard.com/iwe/pdf/FASUSGO.pdf

Cash Reserves Federal Money Market Fund 53.08%
Federal Money Market Fund 37.79%
Treasury Money Market Fund 100.00%
Thanks.

Neither Cash Reserves nor Fed MM meets the requirement for state tax exemption in CA, NY and CT. VUSXX of course does.

It was prudent for us living in these states not to have assumed VMFXX or VMRXX would be exempt from state and local income taxes.
What is the rules around this, is that specific to CA/NY/CT that even if 38% of the income is derived from USGO’s, its still taxable by state?
whoMe
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by whoMe »

TechBogler wrote: Wed Jan 18, 2023 2:31 am
Kevin M wrote: Tue Jan 17, 2023 7:28 pm
luffy wrote: Tue Jan 17, 2023 6:58 pm Vanguard U.S. government obligations information for 2022 is out: https://advisors.vanguard.com/iwe/pdf/FASUSGO.pdf

Cash Reserves Federal Money Market Fund 53.08%
Federal Money Market Fund 37.79%
Treasury Money Market Fund 100.00%
Thanks.

Neither Cash Reserves nor Fed MM meets the requirement for state tax exemption in CA, NY and CT. VUSXX of course does.

It was prudent for us living in these states not to have assumed VMFXX or VMRXX would be exempt from state and local income taxes.
What is the rules around this, is that specific to CA/NY/CT that even if 38% of the income is derived from USGO’s, its still taxable by state?
For NY, a fund must have at least 50% from government obligations to qualify.

https://www.tax.ny.gov/pdf/memos/income/m95_4i.pdf
rkhusky
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by rkhusky »

TechBogler wrote: Wed Jan 18, 2023 2:31 am What is the rules around this, is that specific to CA/NY/CT that even if 38% of the income is derived from USGO’s, its still taxable by state?
Every state has their own rules. It appears that these three require USGO assets be more than 50% every quarter. So, even though Cash Reserves Federal Money Market Fund has 53.08% of income from USGO, it must not have met the asset test every quarter.
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Electron
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by Electron »

MMD wrote: Thu Jan 12, 2023 9:46 am Does anyone know of a web calculator out there that would compare the yields of a muni and taxable MM so I can easily compare and perhaps switch if I wanted to?
Here is a post that may be of interest with reference to another site.

viewtopic.php?p=6885461#p6885461

Instructions for the Vanguard Money Market Yield Analysis site are provided on the first tab.
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bluejacket
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by bluejacket »

mouth wrote: Tue Jan 17, 2023 9:32 pm
For reference if you had started flip flopping back in March when things really started to take off, you'd have made 6% more than VMSXX alone at your rates. It would be almost 7% more at my higher state rate.

Usual Caveat: this is all based on the past and no one knows what's coming.
Thank you, really appreciate the feedback. Looks like I need to do the work of figuring out a rate monitoring routine/check-in. Cheers!
TechBogler
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by TechBogler »

does anyone know the underlying reason that VMSXX / muni money markets have sinusoidal yield behavior?
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Electron
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by Electron »

TechBogler wrote: Sun Jan 22, 2023 2:22 pm Does anyone know the underlying reason that VMSXX / muni money markets have sinusoidal yield behavior?
The Municipal Money Market is smaller and less liquid than the Taxable Money Markets. Changes in supply and demand have a noticeable effect on yield.

Yields may be driven up temporarily when new paper is issued or when checks are cashed around key tax dates. At other times additional investor demand may drive yields back down.

Most of the securities held are VRDOs which are derivative securities with short maturities based on long term municipal bonds.

Here is a thread and post that you might find very interesting. Take note of the SIFMA document that is referenced which contains a lot of very interesting information. You may also want to review the entire thread.

viewtopic.php?p=4013168#p4013168

https://www.sifma.org/wp-content/upload ... 8-2012.pdf

"VRDOs are debt securities with nominal long-term maturities (often 20 to 30 years) in which the interest rate is reset by a remarketing agent on a periodic basis (e.g., daily, weekly, monthly, annually or commercial paper periods up to 270 days). For each interest reset, subject to any maximum interest rate stated in the VRDOs, the remarketing agent is required to set the interest rate at the rate necessary, in its judgment, as the lowest rate that permits the sale of the VRDOs at 100% of their principal amount (par) on the interest reset date."
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by mouth »

And there we have it. Even at 38.8/5.75 rates, Muni MMF is yielding less right now than it did at the last trough. 2.84% vs 2.87

That's a BIG drop compared to what we've seen in the last year's worth of cycles. Very interesting indeed.

It's also interesting that the slope of VUSXX has clearly flattened since the 1st week of December.

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

Post by HootingSloth »

mouth wrote: Thu Jan 26, 2023 7:15 pm And there we have it. Even at 38.8/5.75 rates, Muni MMF is yielding less right now than it did at the last trough. 2.84% vs 2.87

That's a BIG drop compared to what we've seen in the last year's worth of cycles. Very interesting indeed.

It's also interesting that the slope of VUSXX has clearly flattened since the 1st week of December.

Image
What kind of results would you get for a District of Columbia resident? My federal marginal rate is 38.8%. My DC marginal rate is 8.75%. In DC, all municipal bonds (regardless of the location of the issuer) are exempt from DC income tax. I think DC is the only jurisdiction with an income tax where this is the case so that a high marginal rate DC taxpayer has just about the largest possible incentive to hold munis.
Global Market Portfolio + modest tilt towards volatility (80/20->60/40 as approach FI) + modest tilt away from exchange rate risk (80% global+20% U.S. stocks; currency-hedge bonds) + tax optimization
mouth
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by mouth »

HootingSloth wrote: Thu Jan 26, 2023 7:21 pm
mouth wrote: Thu Jan 26, 2023 7:15 pm And there we have it. Even at 38.8/5.75 rates, Muni MMF is yielding less right now than it did at the last trough. 2.84% vs 2.87

That's a BIG drop compared to what we've seen in the last year's worth of cycles. Very interesting indeed.

It's also interesting that the slope of VUSXX has clearly flattened since the 1st week of December.

Image
What kind of results would you get for a District of Columbia resident? My federal marginal rate is 38.8%. My DC marginal rate is 8.75%. In DC, all municipal bonds (regardless of the location of the issuer) are exempt from DC income tax. I think DC is the only jurisdiction with an income tax where this is the case so that a high marginal rate DC taxpayer has just about the largest possible incentive to hold munis.
While I don't have the formulas for your situation, at 8.75 it still won't change who's winning the race right now.
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by billaster »

mouth wrote: Thu Jan 26, 2023 7:15 pm It's also interesting that the slope of VUSXX has clearly flattened since the 1st week of December.
That's because the Fed slacked off on rate hikes in December, going from 0.75% to 0.50%. If the Fed does a 0.25% hike next week, expect the slope to flatten some more.

Here are the rate hikes for 2022:

Mar 0.25
May 0.50
Jun 0.75
Jul 0.75
Sep 0.75
Nov 0.75
Dec 0.50

You can see the slope gradually ramp up from March to June, maintain the same slope through November, and then begin to flatten in December. It will probably flatten a lot more in February if the rate hike is only 0.25.
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Electron
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by Electron »

Schwab has an article on Municipal Money Market Yields that they update periodically. I had meant to pass this on earlier.

Take note of the section on Seasonality.

https://www.schwabassetmanagement.com/c ... ket-yields

There must be a lot of demand for these funds at the present time. I wonder what percentage of investors check the yields in comparison with the taxable alternatives.
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by OldSport »

Kevin M wrote: Fri Jan 13, 2023 6:25 pm
mouth wrote: Fri Jan 13, 2023 6:16 pm
TechBogler wrote: Fri Jan 13, 2023 6:02 pm I see 2.83%, is a daily rate published somewhere else?
My spreadsheet is pulling it from vanguards price history page which seems to update the most recent day's price rather quickly. 2.83% was yesterday.

https://personal.vanguard.com/us/funds/ ... es#res#res

ETA: quickly as compared to the main fund page which is still showing yesterday's rate.
Right. It's easier to see the big drop today if we only look at the last month:

Image

TEYs are for my marginal tax rates of 22% fed and 9.3% state.
What is causing the municipal MM interest rate to be relatively much more volatile than the non TE federal/treasury MM?
TechBogler
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by TechBogler »

Electron answered that question a few posts up:

Mon Jan 23, 2023 2:42 pm
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