This Weekend Wall Street Journal writes "Money-Market Funds: How Low Can They Go?". It says, "The price of safety keeps going up. Nearly three years after a large money-market mutual fund 'broke the buck,' triggering a wave of panic selling, the funds' yields are near all-time lows. Average yields on money funds are currently 0.06%, compared with 2.76% in March 2008, according to research firm Crane Data LLC. Blame it in part on the Federal Reserve's rate cuts in 2007 and 2008, along with recent regulations mandated by the Securities and Exchange Commission to bolster the safety of money funds. In the latest blow, yields on a key investment source for the funds—the repurchase, or 'repo,' market -- dropped unexpectedly this past week when a change in deposit-insurance fees, combined with a sudden shortage of Treasurys, roiled the short-term-rate markets." The Journal adds, "Meanwhile, further regulations now under consideration could add another layer of costs for investors." The piece quotes Pete Crane of Crane Data, "The overall 'safety sacrifice' in money-fund yields could grow to 0.25% as rates return to normal levels." ICI President Paul Schott Stevens comments, "On the trinity of values that fund investors see in money funds, the stability and convenience trumps the yields." The article adds, "The silver lining for savers is that once rates start rising, money funds will reflect those higher rates more quickly."
