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Brian Reid, Chief Economist, of the Investment Company Institute is the first Comment letter to appear on the SEC's site on the Staff's "mini" studies. ICI's Reid writes, "The Investment Company Institute appreciates the opportunity to respond to the staff of the Division of Economic and Risk Analysis of the Securities and Exchange Commission regarding its analyses of certain data and academic literature related to money market fund reform. As required by law, the analyses demonstrate that the SEC continues to consider available data in its decision making process. Our comments are limited to the staff's analysis of "Municipal Money Market Funds Exposure to Parents of Guarantors" and its analysis of the "Demand and Supply of Safe Assets in the Economy".... Money market funds generally must limit their exposure to any one provider of guarantees or conditional demand features ("credit support provider") for portfolio securities to 10 percent of total assets; however, 25 percent of a fund's total assets may exceed the 10 percent limit under certain circumstances ("25 percent basket"). Under the SEC proposal, the 25 percent basket would be eliminated and the fund would be prohibited from acquiring any security that would result in its exposure to a credit support provider exceeding 10 percent of the fund's total assets. The SEC explained that the proposal is designed to limit the extent to which a money market fund becomes exposed to a single guarantee or demand feature provider. Based on this analysis, the staff found that although funds are exposed to guarantors above the 10 percent threshold on a regular basis, they are far less likely to be exposed to guarantors above the 15 or 20 percent thresholds. The staff concluded therefore that few funds make full use of the 25 percent basket. The analysis, however, does not appear to combine the holdings of guarantors in any one fund. Indeed, as a technical point, the 25 percent basket can be used for exposure to more than one entity.... The staff also reviewed recent evidence on the availability of domestic government securities and global "safe assets" to assist the SEC in the development of final rules regarding money market fund reform that could possibly increase the demand for these assets. Citing data from the International Monetary Fund, the staff noted that the global market for safe assets is estimated to be $74 trillion. It then concluded that given the size of the global safe assets market, the staff does not anticipate a supply problem if the SEC's final rules regarding money market funds causes an increase in demand for government securities. The global market for safe assets, however, does not represent the universe of eligible safe assets for U.S. money market funds. Rather, U.S. money market funds are generally limited to high quality U.S. dollar denominated securities of short duration (e.g., with a remaining maturity of less than 397 calendar days).... The amount of the global market for safe assets therefore is not relevant to the question of whether the supply of U.S. government securities will satisfy the demand should the SEC's final money market fund rules cause an increase in demand for these securities. A better measure of the supply of assets available to meet any increased demand for government securities would be the amount of U.S. Treasury and agency securities with maturities of less than one year and repurchase agreements backed by government securities. As of March 2014, there was about $4 trillion of outstanding U.S. Treasury and agency securities with maturities of less than one year and another $1.2 trillion in triparty repo backed by Treasury, agency, and agency mortgage backed securities."

Today is the deadline for Comments on the SEC's 4 "Mini" Studies ("Staff Analysis of Data and Academic Literature Related to Money Market Fund Reform"). As a reminder, the SEC's March 24 release said, "The staff of the Securities and Exchange Commission today made available certain analyses of data and academic literature related to money market fund reform. The analyses, which were conducted by the staff of the SEC's Division of Economic and Risk Analysis, are available for review and comment on the Commission’s website as part of the comment file for rule amendments proposed by the SEC in June 2013 regarding money market fund reform. The analyses examine: The spread between same-day buy and sell transaction prices for certain corporate bonds from Jan. 2, 2008 to Jan. 31, 2009. The extent of government money market fund exposure to non-government securities. Academic literature reviewing recent evidence on the availability of "safe assets" in the U.S. and global economies. The extent various types of money market funds are holding in their portfolios guarantees and demand features from a single institution. The SEC staff believes that the analyses have the potential to be informative for evaluating final rule amendments for the regulation of money market funds. These analyses may supplement other information considered in connection with those final rule amendments, and the SEC staff is making these analyses available to allow the public to consider and comment on this supplemental information. Comments on this supplemental information may be submitted to the comment file for rule amendments the SEC proposed in June 2013 regarding money market fund reform (File No. S7-03-13) and should be received by April 23, 2014." (Comments may be made from the SEC's "Money Market Funds" page; there are currently no comments showing on the studies to date.)

The Wall Street Journal editorializes in "A False Money-Fund 'Choice'". It comments, "Washington lobbyists can get pretty aggressive when trying to hold on to taxpayer subsidies. But this year's prize for chutzpah goes to Federated Investors, the big Pittsburgh-based mutual fund operator. It's arguing that large financial institutions should be able to stay on the federal gravy train as a matter of consumer "choice." The issue involves money-market mutual funds, financial products that were created by regulation and were rescued from a catastrophic run in 2008 by taxpayers. Thanks to Securities and Exchange Commission regulation, money funds have been allowed to report to customers a stable $1 per share value, even when the underlying assets are worth slightly less. This has allowed the funds to present themselves to investors as safe accounts akin to insured bank deposits. When this fiction was exposed in autumn 2008, and institutional customers began to flee, taxpayers were forced to provide a guarantee to the whole industry.... Federated's defense of the status quo has unfortunately beguiled rookie SEC Commissioner Michael Piwowar. The confused Republican has lately styled himself a consumer advocate for upholding the right of institutional investors to dine at the Beltway trough. Fortunately for taxpayers, a bipartisan SEC majority seems poised to ignore him."

The band Busker, which features Deutsche Asset Management's Paul Dubanowitz and Kevin Bannerton, has recorded a Boston Marathon Tribute, entitled, "We Run". The YouTube video is "Dedicated to all the runners of this year's Boston Marathon and honoring all those affected by last year's tragic events. We are Boston... We Run. Written and recorded by local recording artists, Busker." See also, The Wall Street Journal's "China's Yu'e Bao Fund Posts Strong Growth in First Quarter". It says, "A Chinese money-market fund affiliated with Internet giant Alibaba Group Holding Ltd. nearly tripled in size during the first quarter, even as a slide in Chinese interest rates suggested it could struggle to maintain such growth in the future. Funds invested in Yu'e Bao -- which means "leftover treasure" in Chinese -- totaled 541.28 billion yuan ($87 billion) at the end of the first quarter, compared with 185.34 billion yuan at the end of last year. Details of the fund's performance were disclosed on Friday by Tianhong Asset Management, which manages the fund on behalf of Alibaba's electronic-payment affiliate, Alipay."

Crane Data has posted the preliminary agenda and is now accepting registrations for its 2nd Annual European Money Fund Symposium (, which will be held Sept. 22-23, 2014, at The London Tower Bridge Hilton in London, England. Crane Data's first European event, held last September in Dublin, attracted over 100 attendees, sponsors and speakers, and we expect our London event to be even bigger and better, and to remain the largest money fund conference in Europe. European Money Fund Symposium offers "offshore" money market portfolio managers, investors, issuers, dealers and service providers a concentrated and affordable educational experience, as well as an excellent and informal networking venue. Our mission is to deliver the best possible conference content at an affordable price to money market fund professionals. Attendee registration for our 2014 Crane's European Money Fund Symposium is $1,500 (or 900 GBP). Thanks for your support, and we hope to see you in London! Finally, also visit to learn more about our big U.S. show, Crane's Money Fund Symposium which will be held June 23-25, 2014, in Boston, and to learn more about our "basic training" event, Crane's Money Fund University, which will take place January 22-23, 2015, in Stamford, Conn.

Federated Investors' Senior PM Sue Hill wrote last week in "In short: The downside of qualitative," "What is good for the Federal Reserve is not always good for the market. Markets don't like subtlety and certainly not uncertainty, but that is what the Fed now thinks is the best strategy for policy decisions in an economy that is recovering at such a slow pace. By switching from quantitative to qualitative forward-rate guidance at the latest Federal Open Market Committee meeting, it was understandable that Fed policymakers would be concerned about how their message would be perceived by the markets. And rightly so, since its projection chart -- the so-called dots chart -- and Chair Janet Yellen's press conference "around six months" comment afterward showed that some members were expecting higher rates earlier than previously thought. By pulling back from a concrete figure of 6.5% unemployment as a threshold for increasing rates to guidance that takes a broader look at the economy, the Fed has put the market in a position of prediction more than reaction. The volatility of the last few weeks and past few days shows how market-watchers don't handle this well. And that is even after a subsequent speech by Yellen and the minutes from its mid-March meeting, released this week, that were not just dovish, but generally in keeping with policymakers' expressed view on rates since late last year. The content of the minutes was actually not particularly surprising, and the market reaction -- or overreaction -- reflects more a difficulty in understanding what the Fed was trying to say than anything else. With an increased emphasis on the importance of Fed communications going forward, we expect the market's attempts to interpret these messages to be a continued source of volatility."

The Wall Street Journal wrote last week, "J.P. Morgan's Dimon Would Like Corporate Cash to Find a New Home". It said, "Deposits are the lifeblood of banks, so turning them away would be folly. Or so it would seem. J.P. Morgan Chase chief James Dimon suggests that may soon happen, at least when it comes to the business of holding idle corporate cash or nonoperational deposits. In his annual letter to shareholders, Mr. Dimon noted these are "hugely unprofitable," especially given new rules governing the amount of liquid assets banks must hold. As a result, Mr. Dimon wrote, "banks probably will minimize this type of deposit, and clients will seek other alternatives, probably in the money markets."" The piece continues, "So while executives might like to stop holding so much corporate cash, that service will likely stay in place as a loss leader. And, in the longer run, such deposits at banks will come down -- albeit for reasons other than that they have become a burden. A shift is likely to be driven by an eventual turn in short-term interest rates, prompting corporate customers to move money to capture yield. Many expected such an outflow would begin once the government ended unlimited insurance on noninterest-bearing deposits at the end of 2012. But by the end of 2013, such deposits at U.S. commercial banks had grown to $2.61 trillion, up 3% from the prior year and more than 50% over four years. This could be a testament to the continued belief the largest banks still are too big to fail -- so that even though the deposits are no longer explicitly guaranteed, depositors enjoy implicit government support. And with interest rates still at superlow levels, there just isn't enough compensation for corporate clients to take on the additional risk of moving money elsewhere."

SIFMA, formerly the Bond Market Association, will host its annual Asset Management Account (AMA) Roundtable and its Operations Conference April 28-30 in Boca Raton, Fla. This year's event will include a panel on "Money Market Reform," which will be moderated by Joan Ohlbaum Swirsky of Stradley Ronon Stevens & Young and which will feature Pete Crane of Crane Data, John Hammalian of BNY Mellon/Dreyfus, Craig Collier of Thomson Reuters, and Mark Heckert of Interactive Data. SIFMA's AMA Roundtable includes presentations and networking for brokerage and "cash" account product managers. The group is seeking more attendees (registration is $375) -- e-mail Theresa Andino at for a meeting registration form. The description for the MMF Reform panel says, "Money market fund reform is coming! It has been top-of-mind for regulators and market participants alike over the past year, but a final rule is expected around Q2 2014. This panel will explore the current landscape of the money market fund industry, explore the floating NAV and "gates" regulatory proposals under consideration at the SEC, and help you understand what changes may be necessary in operations, customer relations, and across your firm to implement these reforms."

GTNews Offers a "Guide to Investing Operating Cash", underwritten by State Street Global Investors (SSgA). The description says, "This guide is written to support treasury practitioners whose responsibility is to invest short-term surplus cash. While most companies are likely to have varying cash balances over the course of a year, it is appropriate for treasurers to try to consider cash as falling into three separate categories for investment purposes: operating cash, short-term strategic cash and longer-term cash. The focus in this guide is on investing the operating cash used to finance working capital. We consider a number of key questions to help treasury practitioners to review any existing policy and processes, as well as to design new ones. The guide also includes a document highlighting the key elements to include in a standalone short-term investment policy, and the points to cover when developing investment management procedures." In other news, the ICI released its latest "Money Market Fund Assets", which says, "Total money market fund assets decreased by $17.70 billion to $2.61 trillion for the week ended Wednesday, April 9, the Investment Company Institute reported today. Among taxable money market funds, treasury funds (including agency and repo) decreased by $12.04 billion and prime funds decreased by $3.37 billion. Tax-exempt money market funds decreased by $2.29 billion."

Fitch writes in a "South African Money Market Funds Sector Review", "Fitch Ratings has completed a sector review of South African money market funds (MMFs), which resulted in the affirmation of the National Fund Credit Ratings (NFCRs) and National Fund Volatility Ratings (NFVRs) of the following six MMFs at 'AA+(zaf)'/'V1(zaf)' -- Absa Money Market Fund, Investec Corporate Money Market Fund, Investec Money Market Fund, Nedgroup Investments Corporate Money Market Fund, Nedgroup Investments Money Market Fund, and STANLIB Corporate Money Market Fund.... As of end-February 2014 the funds' combined assets under management (AUM) was approximately ZAR133bn, equivalent to just over half of the total domestic AUM in the MMF sector in South Africa as of end-December 2013, according to statistics from the Association for Savings and South Africa (ASISA). Total domestic AUM in the South African fund management industry continues to rise, reaching ZAR1.4trn in December 2013. MMFs account for around 20% of that total -- a declining proportion of the total in relative terms, but broadly stable in cash terms. The MMF sector is evenly split between institutional and retail investment. As in other jurisdictions, corporate treasurers are major users of MMFs, as part of their cash management strategy.... Fitch monitors the rated funds continuously, based on a monthly review of portfolio holdings as well as summary statistics on the portfolio and investment activities. The MMFs are constant net asset value (NAV) funds, therefore: The funds are regulated by South Africa's Financial Services Board under the Collective Investment Schemes Control Act of 2002 (CISCA, specifically Notice 80 of 2012). Changes have been proposed to CISCA, including the introduction of a monthly mark-to-market process. The new regulations also pave the way for variable net asset value MMFs. All of the Fitch-rated MMFs in South Africa have a constant net asset value. Therefore the NFVRs are driven by the market risk exposure of the underlying portfolios, which may not necessarily be reflected in the funds' NAVs. The new regulatory proposals also envisage that all MMFs hold at least 4% of the portfolio in assets in liquid form. This falls below the level proposed by regulators in Europe (10%) and the requirement in Fitch's Global Money Market Fund Rating Criteria (published 13 January 2014) of 10%."

Wells Fargo's latest "Portfolio Manager Commentary" says, "At its current pace, the Fed's asset purchases will end sometime in the fourth quarter of 2014, and if "considerable time" really means six months, as we have been told, then we are looking at our first rate hike in the April–June 2015 time frame. So, how does that square with the committee's forecast for a 1% federal funds rate at the end of 2015? In the past, others have noted a disconnect between the FOMC's economic and federal funds forecasts, so this could just be a similar situation. Alternatively, it could also mean that since the policy of optimal control not only calls for rates to be lower for a longer period of time than other models might call for, there could also be a more rapid rise in rates once policy shifts. Market participants who are expecting a gradual tightening on the order of 25 basis points (bps; 100 bps equals 1.00%) every other meeting or so may be surprised at the magnitude of rate hikes when they do occur, and portfolios positioned for a gradual increase may find themselves terribly out of sync with market conditions. But who can really blame them? For a group that has promoted transparency in an effort to provide clearer forward guidance for investors about its monetary policy, the Fed left the waters very muddied after this meeting. Is there a surprise rate spike in store? While interest-rate movements are not solely dependent on central bank intentions -- at least not yet -- and market forces still determine the path of interest rates, those forces are not exclusively influenced by the invisible hand. Regulatory activities can create incentives that alter the behavior of market participants and affect activity and pricing, sometimes wildly. One market that is ripe for such a disruption is the federal funds market."

Federated Investors wrote last week "The end of low-rate frustration is almost in sight", They said, "From a rate perspective, the frustration is ending. We haven't seen the light at the end of the tunnel yet, but we can at least imagine seeing it. The Federal Open Market Committee (FOMC) meeting last month furthered this optimism when new chair Janet Yellen announced the continuation of its monthly tapering of asset purchases, lowering the amount of Treasuries and agencies being purchased to $55 billion from $65 billion per month. The Fed also moved away from the quantitative approach to forward guidance that had been in place. It is not that the Fed was saying that unemployment and inflationary statistics are no longer important, but rather that they felt a broader, less-quantitative approach was merited. The FOMC statement indicated that the current target range would be in place for a considerable period of time after QE ends, which, if the Fed keeps on the current pace of reduction, could be in late 2014. Or will it? In her question-and-answer press conference after the FOMC announcement, Yellen went on to describe "considerable" as around six months. Many analysts felt Yellen misspoke, perhaps flustered by the peppering of reporters' questions, but FOMC members didn't race to soften her comments. Maybe more telling was the summary of economic projections released at the time of the announcement; here, the majority of FOMC members thought that tightening would commence in 2015, with an average projection for the fed funds target at year-end 2015 in excess of 1%. With that outlook, in the second half of 2014 we would expect to see a slight steepening of a yield curve that is quite flat now. The bond market seems to bear this out by the fact that few are buying March bonds. With an expectation that rates might actually be increasing, the portfolio strategy is not to buy the longest thing out there at this point in time. Instead, investors are keeping weighted-average-maturities relatively steady, buying more floating-rate positions and shortening the barbell."

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