Tax-exempt money market funds began recovering some of the nearly $30 billion of outflows they suffered in the past seven days, but market participants say there's still a feeling of queasiness among traders and investors in the midst of a disconnect between municipal and Treasury securities as the government bailout program unfolds.

"Confidence is not completely back in the money market fund sector until the bailout package gets approved and there's more clarity about whether the money funds are going to be insured and what the package will do for the security of money funds," said one New York short-term trader.

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