Rate cuts pummel money market funds

0 Comments | USA TODAY, March, 2008 | by John Waggoner

Low interest rates and high fees have driven yields on two small broker-sold money market funds below 1% -- and more funds will follow if the Federal Reserve cuts rates again.

Some funds now collect more money in expenses than they pay investors. That hasn't happened since 2001.

One of the funds whose yield has fallen below 1%, BB&T U.S. Treasury money market fund, charges 1.43% in expenses and pays a seven-day simple yield of just 0.88%, according to iMoney.net, which tracks the funds.

The other, Merrill Lynch WCMA Treasury fund (class 1), charges 1.5% and yields 0.95%, according to iMoney.net.

Right now, the average taxable money fund yields 2.78%. (The average money fund yield dipped to an all-time low of 0.5% on April 27, 2004.) ...