Dreyfus Senior Portfolio Manager Colleen Meehan, who presented last week at our Money Fund University issued her "Tax-Exempt Money Market Commentary," writing, "While Dreyfus expressly did not support a "combined approach," or a VNAV (variable net asset value) solution in any form, we are pleased that the Commission recognized the transformational nature of these reform measures and provided a two-year implementation period as well as used its best efforts to provide for tax and accounting relief that potentially, to some degree, will support the transition to a VNAV structure.... The tax-exempt note market continues to experience strong demand for securities issued by municipalities. Issuance continues to decline as the need for short-term financing has decreased as tax-receipts continue to remain strong and have supported better financial conditions for many municipalities. The yield on newly issued, money-market-eligible securities continues to post historical low levels. The one-year note index is 0.14%. Robust investor demand and continued decreasing supply have kept yields on variable-rate demand notes (VRDNs) at historical lows. The SIFMA index, a weekly high-grade market index comprised of seven-day tax-exempt VRDNs produced by Municipal Market Data Group, showed an average yield for 2014 of 0.05%. We continue to maintain high levels of liquidity and weighted average maturities within the industry averages. In general, municipal credit quality has continued to improve as most states and many local governments have recovered slowly from the recession." Dreyfus Senior Portfolio Manager Patricia Larkin also writes in her January "Taxable Money Market Commentary," "Federal Reserve policymakers have wound down the open market purchases of Treasury and mortgage-backed securities that had been in place for several years as their confidence in the recovery strengthened. With the Fed's quantitative easing program complete, the markets have turned their focus to estimating what level of economic activity will allow the Fed to begin to normalize interest rates by raising the overnight federal funds rate. Starting the year, the significant weakness and potential instability in the Eurozone is the most obvious source of concern. The European Central Bank (ECB) is expected to make the leap into direct bond purchases, further depressing the euro with no guarantee that the plan will actually work. Russia, China and the continuing malaise in Japan are also factors that will enter into the Fed's calculations.... During the upcoming months we intend to follow our long-held conservative credit policy while seeking to maintain appropriate levels of liquidity."

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