In the midst of a buck-breaking, a mini run on assets, redemption freezes and the battle over government insurance coverage, a surge in tax-exempt money market fund yields has gone almost unnoticed. But Friday, the 1-day yield on our MFI Daily Crane Tax-Exempt Money Fund Index skyrocketed to 4.10%, 175 basis points above the 1-day annualized yield on our Crane 100 Money Fund Index. The Crane Tax-Exempt Index 7-day yield rose 92 basis points Friday to 2.96% and has risen 156 bps over the past week.
Below, we list the Top 10-Yielding Tax-Exempt money market funds tracked by Money Fund Intelligence Daily as of Friday, Sept. 19. (MFI Daily tracks only the 500 largest funds, those with assets over $1 billion.) We list fund name, assets ($mils), and 7-day yield (simple, annualized in percent). They are: 1) Lehman Brothers Tax-Fr MF Re ($1,014, 4.54%); 2) JPMorgan Tax Free MM Instit ($15,847, 3.84%); 3) JPMorgan Tax Free MM Agency ($1,340, 3.78%); 4) Columbia Municipal Res Capital ($2,571, 3.68%); 5) Merrill Lynch Instit Tax Exempt ($17,281, 3.64%); 6) Northern Institutional Muni MM Sh ($4,205, 3.58%); 7) Citi Inst Tax-Free Reserves A ($2,409, 3.56%); 8) DWS Tax-Exempt Cash Instit ($1,776, 3.56%); 9) Western Asset Inst Muni MM A ($2,610, 3.56%); and, 10) Schwab Municipal MF Inst ($4,252, 3.53%).
In other news, Moody's "downgraded and left on review for further downgrade three offshore money market funds managed by Lehman Brothers Asset Management Europe Limited." The funds impacted are: Lehman Brothers Euro Liquidity Fund (from Aaa/MR1+ to B/MR1+), Lehman Brothers Sterling Liquidity Fund (from Aaa/MR1+ to B/MR1+), and Lehman Brothers US Dollar Liquidity Fund (from Aaa/MR1+ to B/MR1+).
Moody's release says, "Today's downgrade actions follow LBAM's decision Friday 19 September 2008 to suspend redemptions in the Funds. The decision was taken by the Funds' Board of directors to preserve the E1.00, GBP1.00 and $1.00 net asset value per share and provide equal treatment to all shareholders of the Funds. The decision was made in the face of significant redemptions and serious market-wide constraints on liquidity in money market instruments. Moody's considers the decision to suspend cash redemptions a material deviation from the funds' stated objectives to protect principal and provide daily liquidity."
