Interested in any thoughts you may have.
Right now, the average annualized 7-day dividend on Vanguard's New York Municipal Money Market Fund is 4.03%.
As a point of comparison, the similar figure for their Corporate Prime Money Market Fund is 1.29%.
Assuming for illustrative purposes that someone had a New York marginal triple tax rate of 40%, then:
Prime MMA (1.29%) * (1 - .40) = .77% (the after tax yield on the corporate money market.
All else being equal, if the markets were in more or less equilibrium, the NY Money Market rate should be hovering around .77%. But it's 300+ basis points over that (4.03% v .77%)!
Any thoughts, insights, much appreciated, Thanks in advance!
Also, keep in mind that muni money market fund yields are cyclical with a spike at quarter end due to rich people withdrawing money to pay taxes. Here is a chart of the after tax yield of the vanguard ny muni and prime money market funds over the past year where I used your estimate of 40% tax rate.
Also, keep in mind that muni money market fund yields are cyclical with a spike at quarter end due to rich people withdrawing money to pay taxes. Here is a chart of the after tax yield of the vanguard ny muni and prime money market funds over the past year where I used your estimate of 40% tax rate.
DanFromNY -- you da' best, thanks so much for your insights! And thanks as well for that great chart you created which illustrates quite nicely how the two markets had been hovering in equilibrium until just now!
...your chart definitely illustrates the spikes you were referring to at the end of each quarter. Thanks!
Good advice! In the back of my mind, I was wondering if any of the muni money market funds out there may have to drop below the sacred $1.00 per share price point?
Thanks again -- very insightful!