The tax-exempt money market is more complex than the taxable money market. That’s largely because of a supply-and-demand imbalance for very short-term municipal securities. There’s a high level of demand for these issues—much of it coming from individuals who want to minimize their tax bill by placing their cash in a tax-exempt money market mutual fund. But supply is limited. States and municipalities generally prefer to issue longer- term securities, since the money raised is normally used to support long- lived projects such as roads or buildings or ongoing obligations, including the salaries of public employees. To provide a bridge between lenders and borrowers, a large derivatives market that.
