ICI's latest "Money Market Mutual Fund Assets" shows MMF assets increasing for the third week in a row, a $46.6 billion gain since Nov. 20. The release says, "Total money market mutual fund assets increased by $7.45 billion to $2.710 trillion for week ending Wednesday, December 11, the Investment Company Institute reported today. Taxable government funds decreased by $1.40 billion, taxable non-government funds increased by $8.29 billion, and tax-exempt funds increased by $560 million.... Assets of retail money market funds increased by $2.17 billion to $921.66 billion. Taxable government money market fund assets in the retail category increased by $560 million to $198.98 billion, taxable non-government money market fund assets increased by $1.51 billion to $529.92 billion, and tax-exempt fund assets increased by $100 million to $192.76 billion.... Assets of institutional money market funds increased by $5.28 billion to $1.788 trillion. Among institutional funds, taxable government money market fund assets decreased by $1.95 billion to $740.75 billion, taxable non-government money market fund assets increased by $6.79 billion to $973.11 billion, and tax-exempt fund assets increased by $450 million to $74.12 billion." Year-to-date, money fund assets have increased by $45 billion, or 1.7%. Retail assets are down YTD by $8 billion while Institutional assets are up by $52 billion.
Bloomberg writes "Fed Weighs Reserve-Rate Cut After Repo Fix to Show Easing". The article says, "Federal Reserve officials are renewing a debate over cutting interest paid to banks on excess reserves, a move aimed at convincing investors that tapering its bond-buying isn't the same as tightening its monetary policy. Lowering the rate, now 0.25 percent, is among "ideas that are still in play" as the central bank seeks to improve the way it communicates the outlook for interest rates, Atlanta Fed President Dennis Lockhart said on Dec. 5. The debate was revived as the Fed successfully tests a new policy involving so-called reverse repurchase transactions that would give it greater control over short-term borrowing costs. That may ease concern that cutting the interest rate on excess reserves could wreak havoc by pushing rates to zero or lower in money markets."
We ran an advertisement in the latest MFI (page 3) entitled, "SSgA Seeks Intermediate Cash Sales Rep," and mentioned this in our "People" News below. But we thought we'd mention more of the listing on our website, and we also learned that Wells Fargo is seeking a Money Market Wholesaler. To see the SSgA listing, go to: http://www.statestreet.com/careers and search for job #83005. To see the Wells Fargo listing, go to: https://www.wellsfargo.com/careers/ <i:https://www.wellsfargo.com/careers/>`_ and search for job #3816767. The SSgA ad says, "State Street Global Advisors (SSgA) is currently looking for an Internal Sales Cash Representative in our direct sales channel. This is an opportunity to work with SSgA and the global cash management product line. SSgA currently manages approximately $2 trillion in assets and is a leading cash management provider with approximately $412 billion in cash assets. We are seeking a driven, self-motivated and team oriented Internal Sales Cash Representative to help build and grow relationships with corporate treasurers and their staff. Key Responsibilities will include: Working directly with a Senior Sales Cash Representative to coordinate all aspects of territory management, including arranging client meetings and calls, identifying prospects, responding to website inquiries, and executing on prospecting initiatives.... Critical Success Factors: Financial services industry experience with money market mutual funds and/or other investment products.... Licenses / Education: Required: Series 7 and Series 63. Bachelor's Degree." The Wells listing says, "This internal sales role is responsible for providing effective sales coverage within a wide Eastern geographic footprint to internal and external distribution partners. This contact base represents multiple business lines that cover institutional clients in need of investment solutions. The Wholesaler Associate 2 is expected to work closely with the Field Wholesaler and assist our channel partners in both identifying and closing new business opportunities."
Entries to the SEC's "Comments on Proposed Rule: Money Market Fund Reform; Amendments to Form PF" website continue to trickle in. The latest, labeled "Senator Jeanne Shaheen, et al., Congress of the United States," comes from the New Hampshire Congressional delegation (signed by Senators `Jeanne Shaheen and Kelly Ayotte, and Congresswomen Carol Shea-Porter and Anne McLane Kuster). It says, "We write as representatives of the State of New Hampshire to express our concern over the current proposal put forth by the Securities and Exchange Commission (SEC) to impose new regulations on money market mutual funds, particularly municipal funds that are critical to state and local governments. We believe strongly in the SEC's mission to protect investors and ensure that our capital markets are fair and efficient for all Americans. We recognize the SEC has been committed to money market fund reform since the financial crisis, and we appreciate its diligence in pursuing reforms to make the product more transparent and resilient. However, we have serious concerns that the proposal will unnecessarily harm municipal money market funds. The proposal appropriately excludes Treasury and Government money market funds, which remained stable during the period following the bankruptcy of Lehman Brothers in 2008. Similarly, municipal money market funds did not experience large redemptions during the crisis and should also be excluded from the proposal. Applying either a floating net asset value (NAV) or investor redemption restriction to municipal funds is not appropriate and would dramatically reduce investment in these funds, thereby increasing borrowing costs for the already-strapped state and local governments that depend on money market funds to meet important financing needs. Like Treasury and Government money market funds, municipal funds do not invest in the same types of corporate debt securities in which prime funds invest. As you know, during the financial crisis, prime money market funds held by large institutional investors were the only funds that experienced significant and rapid investor withdrawals."
The Institutional Money Market Funds Association (IMMFA) posted a link on its "Money Market Funds in the News page to a Recording of the European Parliament ECON Committee Meeting from last Monday (Dec. 2). The Committee on Economic Affairs video contains a discussion of 5.0 Money Market Funds (ECON/7/13748) starting around 15:30 on the recording. (See the European Union's "New rules for Money Market Funds proposed – Frequently Asked Questions".) Participants of the committee meeting say the "shadow" banking sector has grown to $71 trillion and is 1/4 of global financial assets. Rapporteur Said El Khadraoui of Belgium comments, "There have been calls for regulation.... The Commission made a proposal on money market funds in September last, and that was very much a part of that call for greater regulation.... As a first exchange of views, I think the EC's proposal is a good basis for further work.... While money market funds can be useful ... there's no questions of getting rid of these investments." The speaker then comments that he'd prefer a "buffer" to be implemented immediately and to eliminate "CNAV" (constant NAV funds) in 5 years time. He also added that he wasn't crazy about the proposed ban on money fund ratings. They added that next week [this week] is the deadline for amendments, that there would be a vote in February, and that [the Committee] should be able to finish before the end of Parliamentary time (May 2014). However, many observers doubt that action will be taken before there are new elections for Members of the European Parliament (MEPs) in May.
ICI's latest weekly "Money Market Mutual Fund Assets" shows totals breaking above $2.7 trillion for the first time since Jan. 9, 2013. The release says, "Total money market mutual fund assets increased by $24.16 billion to $2.702 trillion for the eight-day period ended Wednesday, December 4, the Investment Company Institute reported today. Taxable government funds increased by $12.18 billion, taxable non-government funds increased by $8.80 billion, and tax-exempt funds increased by $3.19 billion.... Assets of retail money market funds increased by $2.25 billion to $919.46 billion. Taxable government money market fund assets in the retail category increased by $370 million to $198.42 billion, taxable non-government money market fund assets increased by $120 million to $528.38 billion, and tax-exempt fund assets increased by $1.76 billion to $192.66 billion.... Assets of institutional money market funds increased by $21.92 billion to $1.783 trillion. Among institutional funds, taxable government money market fund assets increased by $11.81 billion to $742.70 billion, taxable non-government money market fund assets increased by $8.68 billion to $966.33 billion, and tax-exempt fund assets increased by $1.42 billion to $73.67 billion." Money market fund assets are poised to have their second flat (up slightly) year in a row for 2013. YTD, they're up by $37 billion, or 1.4%.
The U.K.-based Euromoney writes "Corporate treasurers seek alternatives to money-market funds". The article comments, "Corporate treasurers are diversifying away from using money-market funds (MMFs) to manage short-term liquidity in response to low rates and proposed regulatory changes that are threatening to impair the MMF industry.... Corporate treasurers have long viewed MMFs as one of the most effective means of managing short-term intra-day liquidity and diversifying counterparty risk, but they are now being forced to adjust this strategy and seek alternatives." The piece quotes Andy Nash, senior vice-president and group treasurer of Netherlands-based retail group Ahold, "Money-market funds have traditionally been attractive to corporates because they are liquid, have a credit rating, give diversity of investment -- we are effectively outsourcing our credit research -- and most importantly they were attractive for capital preservation.... We have already made key changes in managing our investments: our counterparty policy has been updated and the total amount of counterparty risk for financial institutions increased to cope with the possibility that we come out of MMFs. We are using alternatives from the treasurer's investment instrument toolbox, such as repos/sticky deposits and other funds offering security; with more use of good old-fashioned term deposits again." The article adds, "Nash says Ahold has changed the way in which it uses MMFs, due to the low-rate environment as well as questions relating to capital preservation.... A similar shift in strategy could be expected among other companies, but changing investment policy can be a laborious process, and one often requiring board-level approval."
U.K. Treasury publication GTNews features two articles on "repos" or repurchase agreements. The first "Repo and the Repo Market," by Richard Comotto of the ICMA Centre, University of Reading, says, "The repo market has seen increasing interest from corporates in recent years, particularly from those looking to reduce their exposure to the banking sector. But new regulations threaten to stall the market, or worse." The second, "Repo for Treasurers," by Tak Eng of RBS Greenwich Capital, explains, "Corporate treasurers may wish to consider making more use of the repo markets as an alternative investment vehicle. They can offer a low-cost, low-risk, flexible and efficient way for corporates to invest spare cash for short periods." GTNews' first piece adds, "Over the past few decades, repo has become the key short-term funding instrument of banks and a growing home for the liquid assets of non-bank financial and corporate investors. Repo also performs a variety of other functions essential to the efficiency of the financial markets. Also, because of its collateralised nature, regulators have promoted repo as a means of mitigating risk." The second piece adds, "Repo markets are extremely important. They are large and highly liquid. In the US, for example, the daily average outstanding amount is some US$4.5 trillion , while in Europe, the total value of repos is over E6 trillion. This high liquidity reflects the vital role repo plays as a lubricant for the financial system. It is used by central banks to manage liquidity, by brokers and dealers to provide short-term financing for their everyday operations, and by investors and corporates to manage cash."
Federated Investors' latest "Month in Cash", written by Deborah Cunningham, says, "One of the challenges of doing these monthly updates the past few years is the underlying narrative hasn't really changed all that much. Ever since the Federal Reserve unleashed ultra-accommodation five years ago this month, we've been dealing with a cash yield curve that shifted rapidly and sharply downward. Periodic eruptions in Europe and Washington have added the occasional drama and subsequent bump up in yields -- and we could get another round of such the next few months as yet another potential showdown over a continuing budget resolution and debt ceiling looms. But the struggle for those who deal with the money markets has been and continues to be how to find value in an extremely low-rate environment. If we look beyond this reality, however, there are signs this paradigm may be beginning to shift. We got a taste of this in the minutes from late October's Federal Reserve policymakers meeting. They contained a more optimistic discussion than many expected, raising the possibility that quantitative-easing's bond purchases could begin to slow as early as December.... To be sure, outgoing Fed Chairman Ben Bernanke and other Fed governors were quick to differentiate between tapering, which impacts the longer end of the yield curve, and tightening, which is largely on the cash portion. Even as the Fed tapers and eventually ends QE, it made clear tightening via increases in the target funds rate isn't automatically up next. Labor market and inflation data would have to justify a hike and neither is anywhere close to such now.... Secondly, it appears the overnight reverse repo program the Fed is testing in all likelihood will be extended beyond its January deadline, with the possibility that agency securities will be added to the mix. The reverse repo rates, which started at 1 basis point on Treasuries when the Fed first began offering them in September and now are at the maximum 5 basis points, have acted to set a floor in the marketplace by forcing banks and other overnight repo dealers to raise their rates to attract buyers (as we’ve noted before, why would a buyer pay 5 basis points for a low-risk bank repo if it can get the same rate from the risk-free Fed)."
Bloomberg radio features "Arthur Levitt Says SEC Is Failing on Money Market Funds". They write, "Arthur Levitt, former Securities and Exchange Commission chairman, says an S.E.C. proposal on money market funds "would only make matters worse." Levitt talks with Bloomberg's Tom Keene on Bloomberg Radio's "Bloomberg Surveillance"." Levitt comments, "I think that the SEC, under tremendous pressure that started with Mary Shapiro with rebellious commissioners, has come out with a series of alternatives that really don't answer the problem and will make it a lot worse.... Their proposal ... would apply only to institutional prime funds and what I think is more serious is that they would allow fund directors to charge for redeeming. If anything is going to cause a panic in the money market fund world, it is the threat that investors are going to be charged or held back from redeeming. The redemption fees or what they call gates actually make runs more contagious. If one funds announces a fee or gate, that sends a signal that all its directors are worried about a run. These ideas are just terrible." Levitt also erroneously answers, "Many times," when asked how many times money funds have broken the buck. (Only two money funds have ever "broken the buck." This answer is shocking given Levitt's former position as Chair of the SEC.) Levitt adds, "The only way to deal with this, in my judgment, is to count those funds, mark them to the market, and if they're selling for a buck, if they're selling for 98 cents, mark them at 98 cents." (This statement too is baffling since money funds must already round down if the value breaks below 99.5 cents.)
Boston Fed President Eric Rosengren writes "Flirting With Money-Market Madness" in today's Wall Street Journal. He says, "SEC proposals that would increase instability are worse than no reform at all.... Five years after the financial crisis, we know what caused much of the chaos. Many aspects of the financial system have been strengthened, reducing the likelihood of future problems. And yet for money-market mutual funds, fundamental reform has not been enacted. Unfortunately, some reforms proposed by the Securities and Exchange Commission might actually work against financial stability, instead of enhancing it.... Unfortunately, the SEC's proposal would only apply to institutional prime funds and not to the more widespread retail prime funds. This overlooks the fact that more than 30 of the retail prime funds received support from their sponsors during the financial crisis, and many retail prime funds sought liquidity from the emergency liquidity facility. While only institutional prime funds experienced significant investor runs in 2008, without the extensive support provided, retail funds may have suffered the same. The more problematic SEC proposal would allow fund directors to charge an investor for redeeming from a prime money-market fund, and in some cases allow a director to temporarily suspend an investor's access to their funds for up to 30 days. While the proposal aims to manage run-like outflows, "discretionary liquidity fees" and "temporary redemption gates," as they are called, would only increase instability -- which is worse than no reform at all. The liquidity fee would force an investor to take a haircut that might not correlate with any decrease in the underlying asset value. Temporary redemption gates could block investors' access to their funds during a financial crisis -- exactly the time they need liquidity most."
Goldman Sachs filed to launch Goldman Sachs Prime Plus Fund, we learned from ignites.com. The filing says of the new fund's objective, "The Goldman Sachs Prime Plus Fund (the "Fund") seeks to generate current income while maintaining an emphasis on preservation of capital and liquidity.... The Fund pursues its investment objective by investing in a broad range of high quality, U.S. dollar-denominated money market and other fixed income instruments, including obligations issued or guaranteed by the U.S. Government, its agencies ... obligations of U.S. banks, corporate notes, commercial paper and other short-term obligations of U.S. companies, states, municipalities and other entities, fixed and floating rate asset-backed securities and repurchase agreements. The Fund may also invest in U.S. dollar-denominated obligations issued or guaranteed by foreign banks, companies and governments or their agencies, authorities, instrumentalities or sponsored enterprises. The Fund will not invest in mortgage-backed securities or derivatives.... The Fund will invest at least 85% of its total assets in securities (or the issuers of such securities) that are rated, at the time of purchase, in the highest short-term credit rating category by at least one nationally recognized statistical rating organization ("NRSRO") (A-1, P-1, or F1 by Standard & Poor’s Ratings Services ("Standard & Poor's"), Moody's Investors Service, Inc. ("Moody's") or Fitch Ratings, Inc. ("Fitch"), respectively), or, if such securities are unrated, determined by the Investment Adviser to be of comparable credit quality at the time of purchase. The remainder of the Fund's investments will carry a minimum short-term credit rating of A-2, P-2, or F2 by Standard & Poor's, Moody's or Fitch, respectively, at the time of purchase, or, if such securities are unrated, determined by the Investment Adviser to be of comparable credit quality at the time of purchase.... Except for floating rate and variable rate securities, the Fund will invest in securities that have remaining maturities of two years or less at the time of purchase, with limited exceptions where a security has maturity shortening features (e.g., demand features). Floating rate and variable rate securities must have remaining maturities of three years or less at the time of purchase, with limited exceptions where a security has maturity shortening features (e.g., demand features). The Fund will maintain a dollar-weighted average portfolio maturity ("WAM") that does not exceed 270 days and a dollar-weighted average portfolio life ("WAL") that does not exceed 365 days. The fund is not a money market fund and does not attempt to maintain a stable net asset value." Also, see the filing for WisdomTree Floating Rate Treasury Fund, which says, "The WisdomTree Floating Rate Treasury Fund (the "Fund") seeks to track the price and yield performance, before fees and expenses, of an index that measures the performance of the market for floating rate public obligations of the U.S. Treasury." Neither fund has listed expense ratios yet.Archives »