Wells Fargo Money Market Funds' latest "Overview, strategy, and outlook" comments on the "Municipal sector," "It took some time but the municipal money market eventually responded with higher benchmark yields following the Fed's interest-rate policy move on March 15. Although the taxable markets already had begun to gradually price in a rate hike in advance of the FOMC meeting, the tax-exempt markets followed its usual wait-and-see path. The net result was that tax-exempt yields began to underperform relative to taxable equivalents, particularly in the overnight and weekly variable-rate demand note (VRDN) and tender option bond (TOB) sectors. Following the Fed move, the tax-exempt space was forced to play catch-up and responded quickly with rapidly rising interest rates on the short end of the curve. The Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Index, which had lingered at a year-to-date low of 0.62% prior to the FOMC meeting, quickly began to ratchet higher through the remainder of the month. The index ultimately would rise to a multiyear high of 0.91% at month-end, firmly reestablishing itself at an attractive 95% ratio to one-week LIBOR in order to attract the support of marginal crossover buyers." Regarding what's "On the horizon," they add, "Without the prospect of impending reform, we anticipate April should be a fairly quiet month for the money markets -- unlike last year. About the only notable event on the horizon is tax day on April 18. If this year is like normal years, we should expect some volatility in the markets around that date as balances in MMFs build prior to the deadline and then decline shortly after the deadline as corporations and individuals make their payments. Ultimately, the sum total of money market assets at the end of April is likely to be lower than at the beginning of April, which may help push the overall level of interest rates marginally higher. But all this should be the result of supply and demand dynamics and not due to regulatory or legislative actions -- a welcome change, indeed."

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