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Money Market Deposit Accounts Have Quietly Lost Their Luster

October 03, 1994|From Associated Press

NEW YORK — As the financial world has changed in the 1990s, one popular money-management vehicle has failed woefully to keep up with the times.

The item in question is the bank money market account, which holds an aggregate pool of some $363 billion, according to the latest data from the Federal Reserve.

Money market deposit accounts, or MMDAs, were created in the early 1980s by lawmakers overhauling financial regulations to allow banks to compete with the upstart money market mutual funds.

In the past few years, however, as many banks and other deposit-taking institutions have stopped competing aggressively for money from the small depositor, the typical MMDA has become less and less attractive.

As of mid-September, according to Bank Rate Monitor, the average yield on MMDAs stood at 2.45%, having barely budged from its level a year ago of 2.39%.

Over the same span, by contrast, yields on money market mutual funds climbed from 2.64% to 4.14%, as tallied by IBC-Donoghue's Money Fund Report in Ashland, Mass.

If these trends go much further, money funds will be paying double what you can get on the typical MMDA.

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