For those money market mutual funds that lived through the one percent Federal funds rate environment of mid-2003 through mid-2004, the possibility of zero or negative yields on money funds was very real. While today's environment still leaves plenty of breathing room, even for the highest-expense funds, some Treasury funds are already feeling a squeeze due to temporarily razor-thin repo rates. A precipitous drop in Bear Stearns repo positions and moves by other broker-dealers to decrease reliance on repo have squeezed supply.

We hear that some repo is trading at around 0.3%, a situation which leaves some higher expense repo-heavy Treasury fund yields potentially in the red. Though managers expect new Treasury supply to remedy this situation within a couple of weeks, some are scrambling to examine alternatives for waiving expenses and sharing these waivers with intermediaries on higher expense "service", "B" or "C" shares.

Back in 2003-2004, only a handful of B or C shares, those with expenses over 1%, began waiving expenses to establish a minimum yield of, for example, 0.05%. No fund yields went negative, and we don't expect any to allow this currently, but the situation did raise some thorny accounting and regulatory issues. We'll be examining this today, so let us know if you have any thoughts.

A look at our Money Fund Intelligence Daily numbers, which track only the largest money funds, show Treasury funds with yields still comfortably above 1%. On the Individual side, Vanguard Treasury MMF (VMPXX) is the highest-yielding at 2.47% (as of 3/17) while JPMorgan 100%% US Trs MM Res (RJTXX) is the lowest-yielding at 1.63%. Among Treasury Institutional funds, Vanguard Admiral Treasury MM (VUSXX) is the highest yielding at 2.70% and Goldman Sachs FS Trs Ins Ins (FTIXX) is the lowest-yielding at 1.75%.

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