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Vanguard abruptly closed its $39.5 billion Treasury Money Market Fund to new investors after the end of trading on Thursday. Existing shareholders of the fund, however, can continue to purchase new shares without limits.

Vanguard said it made the move to protect existing shareholders from high levels of cash flow that could potentially accelerate declines in the fund’s yield. It explained that increasing new flows into the fund combined with extremely low Treasury yields could have the effect of reducing the fund’s yield.

The fund’s seven-day yield was 0.64% as of Wednesday’s market close, down from 1.51% a month earlier, just before the Federal Reserve slashed interest rates from 1.25% to near zero (a range of zero to 0.25%), according to Daniel Wiener, editor of The Independent Adviser for Vanguard Investors.

He noted that new flows to the Vanguard Treasury Money Market Fund (VUSXX) jumped from about $600 million in February to $7.4 billion in March.

Investors have been rushing into money market funds in a flight to safety as stocks plummeted and corporate bonds and munis experienced extremely choppy trading in March before the Fed aggressively intervened to support the bond market. 

Net flows into money market funds overall surged in March, totaling an estimated $685 billion, according to Morningstar, which saw net outflows in many asset categories though slight inflows into U.S. equity — primarily passive — and commodities funds. Vanguard’s Prime Money Market Fund, its highest yielding money market fund, saw net outflows of $2 billion in March, according to Wiener. 

The mutual fund giant experienced total net outflows of $37 billion in March, according to Morningstar. It was only the second time in 10 years that Vanguard’s long-term funds saw net monthly outflows, and the outflows in March were due mostly to bond fund redemptions in both active and passive taxable and muni bond funds, according to Morningstar. Active funds accounted for about 70% of the outflows.

Vanguard said it would continue to monitor the Treasury Money Market Fund and take additional action if needed. New investors will continue to have access to its other money market funds, including its Prime Money Market and Federal Money Market funds as well as its tax-exempt money market funds.

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