As 2008 begins to wind down, holiday-minded investors withdrew $2.94 billion from tax-free money market funds for the week ending Dec. 15, according to the Money Fund, a service of iMoneyNet.com of Westborough, Mass.

As a result, the 514 funds in the report this week ended with total assets of $491.98 billion, compared with $494.92 billion last week, when the funds experienced inflows of $1.34 billion.

The average seven-day yield for the tax-exempt funds dropped to 0.58% from 0.62%, while the average maturity increased by one day to 31 days. The yield dropped one day prior to the Federal Open Market Committee's decision on Tuesday to cut the federal funds rate target at least 75 basis points to a range of zero to 0.25% from its previous 1.00%.

Meanwhile, the 1,238 taxable money funds in the report also suffered outflows to the tune of $13.01 billion after several weeks of sizable inflows. The funds ended the week of Dec. 16 with $3.206 trillion - slightly below the all-time high of $3.219 trillion last week, when the funds gained inflows of $56.13 billion for the week ending Dec. 9.

The combined assets of the 1,752 money funds in the report totaled $3.698 trillion this week as a result of incurring outflows of $15.95 billion. That compared to inflows of $57.5 billion they generated the prior week, which caused total assets to rise to a record high of $3.714 trillion for the week ending Dec. 9.

In other segments of the short-term market, the yield on daily general market VRDOs ended at 1.29% on Thursday, compared to 1.18% on Wednesday, and 1.12% on Tuesday, according to Municipal Market Data. That compares with a yield of 0.85% a week ago on Dec. 11.

Meanwhile, weekly general market VRDOs decreased slightly to 1.56% on Thursday from 1.58% on Wednesday, a noticeable increase from its low of 0.99% on Tuesday. Last week, weeklies were yielding 1.39% on Dec. 11, according to MMD.

The Securities Industry and Financial Markets Association's weekly swap index, meanwhile, remained unchanged on Dec. 10, yielding 0.85% - the same yield it posted on Dec. 3 the prior week, according to MMD.

The index has been steadily decreasing throughout most of the fourth quarter since it reached a plateau of 7.96% back on Sept. 24 at the height of the nation's banking crisis and overall financial turmoil.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.