Short term municipal bond yields reached record low levels as the Fed has signaled that it plans to keep the Fed Funds rate at 0% for some time. Federal Funds futures show that the chance the Fed will raise its benchmark rate by April 2010 are half of what they were a month ago. That has driven yields on short-term muni debt down.
"Yields in the current municipal market are at or near historic lows,” Gary Gildersleeve, a partner and portfolio manager at New York-based Evercore Wealth Management, which manages more than $1.4 billion, said in an e-mail. “Tax-exempt and taxable money-market funds both yield less than 0.10 percent, and individual investors are looking for ways to improve the yields that they are receiving.”
Investors have pulled more than $90 billion in tax-free money funds this year, according to data compiled by iMoneyNet. The Westborough, Massachusetts-based firm said yesterday that the average yield on the funds, which invest in municipal debt, returned to a record low of 0.04 percent first reached Nov. 9."
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