Investors last week withdrew the most cash from municipal bond money-market funds since April as minuscule returns continued to chase unparalleled sums of money out of the industry.
Tax-exempt money funds shed $5.15 billion during the week ending July 14, according to iMoneyNet. It was the fourth-heaviest outflow this year.
Investors have withdrawn $37.02 billion from tax-exempt money funds in 2009, and $73.57 billion since the industry reached record assets in August.
A bloodletting of cash from money market funds this year coincides with a historic embrace of longer-term municipal bond mutual funds.
While mutual funds continue to bore into record territory for assets under management, tax-exempt money market funds have lost 14% of their assets in less than a year.
Late last year and early this year, many investors said people could only tolerate such bare-boned yields on money funds for so long before assuming greater risk in search of better returns.
When tax-exempt money funds reached record assets of $528.36 billion in August, funds offered an average seven-day yield of 1.21%.
Last week, the yield squeezed to 0.11%. That is the lowest yield ever, according to iMoneyNet, plowing through last week’s record low of 0.13%.
Although comparisons are tenuous because of the tax exemption, a 12-month certificate of deposit at a bank yields an average of 1.93%, according to Bankrate.com. A 12-month investment in a tax-exempt money market fund yields an average of 0.98%, according to iMoneyNet.
The record-low yields on money funds coupled with a heartier appetite for risk have forced an unrivaled sum of cash from tax-exempt money funds this year.
As of July 8, tax-exempt money funds had bled $38.37 billion in the past six months, according to AMG Data Services, whose data differs slightly from iMoneyNet.
Not only is that more than twice as big as any sum lost over a 26-week period prior to last year, it is more than twice as big as any sum lost over a 52-week period prior to last year.
Tax-exempt money market funds have reported heavier outflow’s than last week’s only 28 times since 1992.
