Switching money market funds at Fidelity to Fidelity Money Market fund (SPRXX)

I just moved the bulk of my cash at Fidelity from the Fidelity Select Money Market fund (FSLXX) to the Fidelity Money Market fund (SPRXX) to go from a 2.88% 7-day yield to a 3.16% 7-day yield, an improvement of 0.28%. These yields are jumping around on a daily basis and usually I do not bother since the difference is fairly small, but more than a quarter-point is too much to pass up. I expect to stay in SPRXX for at least two weeks and then see how the money market landscape has evolved. In particular, the new Federal Reserve Commercial Paper Funding Facility kicks in on Monday, October 17, 2008, which could cause money market fund yields to start to decline. Or at least that is the theory.

NOTE: By moving this cash from the fund it was in on 9/19, I lose the Treasury money market fund guarantee insurance. Poof! Gone. In the new fund my money now has no Treasury insurance. That is the bad news, but it does not bother me since I have a huge amount of faith in Fidelity. The good news is that I can always switch the money back to where it was on 9/19 (FSLXX) and then presto I regain the full Treasury insurance guarantee. So, if you are thinking of a similar move, beware of the consequences. I suspect that this is one of the reasons that such as large yield gap has opened up without investors quickly arbitraging it away.

-- Jack Krupansky