Cash has been king this year. And yields on money markets are tempting but be aware that the current spike in municipal money market yields is likely to prove fleeting.

Municipal Money Market’s (VMSXX) yield has more than doubled in December—rising from 1.72% to 3.60% (as of Wednesday). Meanwhile the yield on Cash Reserves Federal Money Market (VMRXX) only increased from 3.72% to 4.19%.

Data source: Vanguard

How do we explain that massive move higher in the municipal money market fund’s yield?

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