The Bond Buyer writes "Tax-Free Money Funds See a Boost". It says, "The sovereign debt crisis in Europe is coupling with the general malaise in financial markets to make life easier for tax-free money market funds by boosting key short-term interest rates. The higher rates have given taxable money funds a more attractive variety of paper to buy to deliver better yields to clients. Why should better yields on taxable money funds make any difference for tax-free money funds? For much of the past year, rates on everything from commercial paper to Treasury bills were so puny that taxable funds were looking for unorthodox places to pick up extra yield. That lured many of them to tax-exempt variable-rate demand notes and some of the other products that are traditionally the exclusive domain of tax-free funds. The new competition from taxable funds helped drag down short-term tax-exempt rates and create a drastic scarcity of paper eligible for purchase by tax-free money funds." The piece adds, "European banks' funding troubles helped taxable money funds both indirectly -- by punching Libor higher -- and directly. According to a Crane Data estimate, money funds hold about $400 billion in commercial paper and certificates of deposit from European institution, many of which now carry higher yields. In its monthly commentary, Crane Data said the slight improvement in yields has apparently allowed some fund families to reduce their fee waivers."

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