The bankruptcy of Orange County, Calif., too some wind out of the sails of money market mutual funds in the week ended Dec. 14

The Investment Company Institute reported that assets of tax-exempt money funds dropped $2.7 billion, to $117.5 billion, a 2.3% decline. In contrast, taxable money funds gained $1 billion, to end the week at $514.7 billion. Money fund balances have been rising steadily this year, though slight week-to-week fluctuations are common.

Orange County's default on its municipal obligations appears to explain the unusually sharp decline on the tax-exempt side, said Walter Frank, chief economist of Money Fund Report, a publication of IBC/Donoghue, Ashland, Mass.

Typically, Mr. Frank said, tax-exempt money fund balances swell in early December, then decline modestly for the rest of the year. While some of the runoff reflects this seasonal trend, "I would think that at least half the outflow was attributable to Orange County," he said.

All together, money market mutual funds held $632.18 billion at Dec. 14, a 0.2% decline for the week.

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