Money Fund Yields Rise After Fed’s Rate Hike

Investors in money market mutual funds saw higher yields last week as the Federal Reserve pushed its benchmark lending rate to 1.25%, up from a four-decade low of 1%.

The average annualized taxable fund yield rose to 0.68%, the highest since June 10, 2003, and up from 0.59% the previous week, Money Fund Report said Wednesday. In August, the average yield was at a record low 0.50%.

The average tax-free fund yield declined to 0.51% last week from 0.52% a week earlier.

Taxable money fund yields rise or fall in tandem with Fed rate moves. Analysts expect that the full quarter-point increase by the Fed last week will be reflected in money fund yields within about six weeks.