Why does the yield on VMSXX flucutate so much

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Buffetologist
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Joined: Sun Aug 22, 2010 8:58 am

Why does the yield on VMSXX flucutate so much

Post by Buffetologist »

I just checked today and noticed that 7 day yield on VMSXX is 3.85%. Not two weeks ago it was a full 2 points lower, at which point I transferred the whole balance to VUSXX. The 7-day yield on VUSXX is much more stable.

I'm the the highest tax bracket and one would think that VMSXX should yield more than VUSXX after tax.

Is there any explanation for the wild fluctuations. Could it be because the 7-day yield varies depending on the time of the month because of when the underlying muni bonds actually pay out?

Maybe this has been discussed before, but I haven't seen it specifically addressed.
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Kevin M
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Re: Why does the yield on VMSXX flucutate so much

Post by Kevin M »

Just answered this in another thread. Muni MM yields are cyclical:

Image

There are discussions about why in other threads, with links to various references. You probably can find these threads with a forum search.
If I make a calculation error, #Cruncher probably will let me know.
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Hacksawdave
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Re: Why does the yield on VMSXX flucutate so much

Post by Hacksawdave »

Buffetologist wrote: Tue Mar 28, 2023 12:42 pm I just checked today and noticed that 7 day yield on VMSXX is 3.85%. Not two weeks ago it was a full 2 points lower, at which point I transferred the whole balance to VUSXX. The 7-day yield on VUSXX is much more stable.

I'm the the highest tax bracket and one would think that VMSXX should yield more than VUSXX after tax.

Is there any explanation for the wild fluctuations. Could it be because the 7-day yield varies depending on the time of the month because of when the underlying muni bonds actually pay out?

Maybe this has been discussed before, but I haven't seen it specifically addressed.
Variable Rate Demand Obligations (VRDOs) create fluctuations when interest rate changes occur. The SIFMA index published weekly on Wednesday can give a hint at the yield direction.

Based upon a half million Dollar balance in each fund and the top tax rate (plus NIIT), you would have lost $145 dollars being in the taxable VUSXX fund due to the $686 additional federal tax bill generated using last months per share distribution.
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