Mutual Funds Quarterly Review: Money Funds' Slide Expected to Continue
Investors waiting for an upturn in yields on money market mutual funds are going to have to wait awhile longer.</br></br>The slide that began three years ago slowed in the second quarter, but there's no sign of a reversal soon. Indeed, following yesterday's Federal Reserve moves to bring down short-term interest rates, some fund managers expect yields to decline as much as a quarter of a percentage point over the next few months.</br></br>"It won't be until next year that we'll see any changes," and even then, increases will be gradual, predicts Walter Frank, chief economist for the Donoghue Organization, an Ashland, Mass., firm that tracks money funds.</br></br>Yields have been falling steadily for three years, late last year reaching the lowest levels since Donoghue began keeping data 15 years ago and then dropping even further. The average seven-day compound yield, which assumes reinvestment of dividends, ended this year's second quarter at 3.50% for all taxable funds, compared with 3.80% three months earlier and 4.61% at the end of last year.</br></br>The average yield for funds open to individual investors was 3.48% in the second quarter, down from 3.84% in the first quarter.