Tax Free Money Market Rates

I just looked at the seven day yield on tax free money markets and was in for a shocker.  The 7 day yield for the Vanguard Tax Free Money Market, where I have Tyler's trust money, has risen to 5.67%.  The Vanguard U.S. Treasury money fund was at 1.55% and the prime fund was at 2.28.  This is just amazing.  Tax free money market funds are yielding almost 4 times the taxable Treasury money fund.   It shows how much trouble the municipal governments must be having now to raise cash.   The last months yield on the trust's statement was over 3% tax free.  Better to have it in that fund now than anywhere else.

I knew that the yields had spiked up in late September.  The WSJ ran a story on 9/27/08 that the government had included tax free money market funds in the insurance program as of the prior Sunday.  I thought that this would relieve the heavy withdrawals from these funds but evidently this has not yet occurred. WSJ.com  The Journal reported the market in the short term maturity variable rate demand notes had frozen up.  This insurance is temporary and is now scheduled to last only 3 months.  Kiplinger.com  The Vanguard money funds are participating in this program.