No Respite in Muni Money Market Rout Seen as Key Rate Surges
- Tax-exempt money funds have seen $110 billion exodus this year
- Reform intended to prevent panic selling during market turmoil
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A corner of the municipal-bond market that has quietly enjoyed near-zero borrowing costs for more than six years has seen interest rates spike by nearly 7,000 percent since February as investors flee tax-exempt-money-market funds.
And it may soon get worse with investors starting to price in higher benchmark rates in recent weeks. While the Federal Reserve isn’t seen tightening at this week’s policy meeting, U.S. central bankers may still boost rates as soon as December, futures contracts indicate.