Money market mutual fund yields, currently averaging 3.14% (as measured by our Crane 100 Money Fund Index, the average 7-day yield of the 100 largest taxable money funds), have declined from a level of 4.50% at the start of the year, and have declined almost two full percentage points since the liquidity squeeze began last August. For those wishing to plot the descent, the Crane 100 was 5.04% on Aug. 31, 2007, 4.95% on Sept. 30, 4.79% on Oct. 31, 4.56% on Nov. 30, 4.5% on Dec. 31, 2007, 3.85% on Jan. 31, 2008, and 3.27% on Feb. 29, 2008.

As Peter Crane told Barron's in this week's "Where to Stash the Cash" piece, "Money-market mutual funds, money-market bank accounts, -- anything in cash has seen yields fall through the floor recently, and the outlook is for more of the same. (Welcome Barron's visitors!)

With expectations running high for another big cut, probably 75 basis points, in the Federal Reserve's Fed funds target rate this Tuesday, savers should brace for more pain. Money fund yields follow the Fed with a lag of about a month, so yields should slide over the coming weeks to between 2.25% to 2.5%. (The Fed funds target is currently 3.0%, but should drop to either 2.5% or 2.25% on Tuesday following the Fed meeting.) The top-yielding money funds, already below 4.0%, should move towards and perhaps even below 3.0%.

High net worth savers may find some temporary solace in abnormally high tax-exempt money fund yields, but these undoubtedly will be fleeting. Most will have to resign themselves to the fact that 5% yields are gone, and that 2-3% is now the highest one can expect to earn on a true "safe harbor" investment. If savers have learned anything during the recent credit crisis, it's that you take what the Fed gives you. Don't get greedy!

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