Fidelity Muni MM Fund Passes Vanguard to Become Largest Tax-Exempt. The $22.48 billion Fidelity Municipal Money Market Fund just surpassed the $22.46 billion Vanguard Tax-Exempt Money Market Fund to become the largest single tax-exempt money market mutual fund, according to our new Money Fund Intelligence Daily. The behemoths are trailed by the 3rd largest $18.2 billion Merrill Lynch Institutional Tax Exempt MF. The rest of the top 10 largest, holding from $11.9 billion down to $9.1 billion in assets, include: JPMorgan Tax Free MM Instit, Merrill Lynch CMA Tax Exempt, Federated Tax-Free Obligs IS, Fidelity Instit MM: Tax Exempt I, Western Asset Municipal MM, Goldman Sachs FSq T-F MMF Inst, and Morgan Stanley Active As Tax-Free. These top 10 account for 42.8% of all tax-exempt money fund assets.

As of Tuesday, Feb. 26, the highest-yielding (based on 7-day current yield) among the largest tax-exempt funds (over $2 billion) include: Dreyfus Tax-Ex Cash Mgmt Ins (2.75%), Federated Tax-Free Obligs IS (2.68%), Federated Municipal Obligs IS (2.68%), Evergreen Institutional Muni I (2.61%, this fund is profiled in the upcoming March issue of Money Fund Intelligence), Vanguard PA Tax Exempt MMF (2.59%), Vanguard Tax Exempt MMF (2.58%), Fidelity Instit MM: Tax Exempt I (2.56%), Vanguard NJ Tax Exempt MMF (2.47%), USAA Tax Exempt MMF (2.47%), and AIM TFIT Cash Reserve Inst (2.46%).

Tax-exempt money market funds have had yields plummet, then surge as funds transition their portfolios away from variable-rate demand notes, tender-option bonds and any securities with possible reliance on municipal bond insurers. Some funds briefly limited purchases during the height of the supply squeeze a week or two ago, and some may have even purchased taxable securities temporarily to fill the temporary void of top-rated paper.

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