The March issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Thursday morning, features the articles: "WisdomTree, XD Attempt Digital, Blockchain MMFs," which covers new money funds using blockchain technology; "FSB Reviews Global Money Fund Reforms; FHI's 10-K," which quotes from the regulatory discussion outside the U.S.; and, "Examining the Shift in Fed Repo to T-Bills, Other Repo," which reviews the dramatic shift in MMF portfolios. We also sent out our MFI XLS spreadsheet Thursday a.m., and we've updated our Money Fund Wisdom database with 2/29/24 data. Our March Money Fund Portfolio Holdings are scheduled to ship on Monday, March 11, and our March Bond Fund Intelligence is scheduled to go out on Thursday, March 14. (Note: Register ASAP for our Bond Fund Symposium, which is March 25-26 in Philadelphia. We hope to see you in Philly!)
MFI's "WisdomTree, XD" article says, "A pair of money market mutual fund attempting to use blockchain technology have launched recently. WisdomTree Government Money Market Digital Fund and XD Treasury Money Market Fund join Franklin OnChain US Govt Money Fund, which launched in 2019, in what appear to be experiments attempting to take advantage of the buzz surrounding digital assets and currencies."
"WisdomTree says on its website, "Why WTGXX? Provide investors a high level of current income consistent with the preservation of capital and liquidity and the maintenance of a stable net asset value through investments in short-term government securities. It has a 0.25% expense ratio and only a $1 minimum to invest. Shares will be secondarily recorded using on-chain recordkeeping on the Stellar or Ethereum blockchain. The Fund will not directly or indirectly invest in any assets that rely on blockchain technology, such as cryptocurrencies. The Fund uses blockchain technology to maintain a secondary record of its shares. The Fund will be available exclusively through the WisdomTree Prime financial app."
We write in our FSB Reviews article, "A press release titled, 'FSB review finds uneven implementation of money market fund reforms,' tells us, 'The Financial Stability Board (FSB) ... published its 'Thematic Review on Money Market Fund (MMF) Reforms.' The review takes stock of the measures adopted or planned by FSB member jurisdictions in response to the 2021 FSB report, Policy Proposals to Enhance MMF Resilience. The review does not assess the effectiveness of those policy measures in addressing risks to financial stability, as this will be the focus of separate follow-up work by the FSB in 2026.'"
It tells us, "Their release claims, 'The main MMF vulnerability identified by jurisdictions is the mismatch between the liquidity of fund asset holdings and the redemption terms offered to investors, which makes MMFs susceptible to runs from sudden and disruptive redemptions. To address vulnerabilities, the 2021 FSB report provided a menu of policy options including: imposing on redeeming investors the cost of their redemptions; enhancing the ability to absorb credit losses; addressing regulatory thresholds that may give rise to cliff effects; and reducing liquidity transformation.'"
Our "Examining the Shift" piece states, "Looking back over the past 12 months, the shift in money market fund holdings from Fed repo into T-bills has been massive. On Jan. 31, 2023, taxable money funds held $1.974 trillion in repo with the Fed, which rose to over $2.211 trillion in March 2023, but has since declined to $582.6 billion on 1/31/24. Treasury holdings rose from $1.051 trillion a year earlier to $2.357 trillion over this time."
It continues, "The Wall Street Journal writes that, 'Treasury Markets Are Losing Their Shock Absorber.' They explain, 'Participation is dwindling in a Federal Reserve program that has helped the U. S. government limit its borrowing costs, a development that many investors say presages higher interest rates and larger swings in the $26 trillion Treasury market. The overnight reverse repurchase facility, known on Wall Street as reverse repo, enables large financial firms such as money-market funds to briefly swap extra cash for high-quality securities on the central bank's balance sheet and pocket some interest. The Fed program has been used heavily in recent years, at one point hitting $2.5 trillion of daily balances, but that number has shrunk steadily and recently fell below $500 billion.'"
MFI also includes the News brief, "MMF Assets Hit Record $6.459 Tril." It states, "Money market mutual fund assets rose another $50.0 billion in February to a record $6.471 trillion. Over the past 12 months, money funds have risen a massive $1.203 trillion, or 22.8%, with Retail MMFs rising by $568.2 billion (32.5%) and Inst MMFs rising by $628.5 billion (18.58%). ICI's separate (and smaller) weekly series shows assets rising $49.9 billion last week to a record $6.059 trillion."
Another News brief, "JPM Looks at Corporate Cash, MMFs," quotes J.P. Morgan's latest 'Short- Term Market Outlook and Strategy,' which features a brief titled, 'Corporates are keeping more cash in their portfolios.' It says, "JPM's update shows the cash investment portfolios of the `5 largest tech companies -- AAPL, META, AMZN, MSFT and GOOG -- with $80.6 billion in money market funds."
A third News brief, "Feb. Portfolio Holdings: Plunge in Repo, Jump in Treasury. Our latest Money Fund Portfolio Holdings statistics show that Repo holdings plummeted while Treasuries, Time Deposits and Agencies jumped. Repo continued its steep slide, dropping $163.2 billion, after a brief rebound the month prior; it remains the largest portfolio segment. Treasuries increased by $104.7 billion, still ranking in the No. 2 spot, but barely. Agencies were the third largest segment, CP remained fourth, ahead of CDs, Other/Time Deposits and VRDNs."
A sidebar, "Bloomberg on Wall of Cash," says, "Bloomberg writes, '`A $6 Trillion Wall of Cash Is Holding Firm as Fed Delays Cuts.' It says, 'Investors are plowing billions into money-market funds by the day .... For an asset class that many market prognosticators all but left for dead to start the year, there’s still plenty of life left in cash. Investors have added $128 billion to US money-market funds since the start of the year, ICI data show.... It's a stark contrast to just a couple of months ago, when one of the hottest questions on Wall Street was where investors would redeploy all their cash holdings once the Federal Reserve started cutting rates.'"
Our March MFI XLS, with February 29 data, shows total assets increased $50.0 billion to a record $6.459 trillion, after increasing $87.0 billion in January, $24.5 billion in December and $219.8 billion in November. Assets decreased $39.3 billion in October, but increased $77.8 billion in September, $104.2 billion in August, $21.0 billion in July, $20.3 billion in June, $152.7 billion in May, $56.5 billion in April and $345.1 billion in March."
Our broad Crane Money Fund Average 7-Day Yield was down 2 bps to 5.04%, and our Crane 100 Money Fund Index (the 100 largest taxable funds) was down 2 bps to 5.15% in February. On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA and the Crane 100 both averaged 5.41%. Charged Expenses averaged 0.37% and 0.26% for the Crane MFA and the Crane 100. (We'll revise expenses on Friday once we upload the SEC's Form N-MFP data for 2/29/24.) The average WAM (weighted average maturity) for the Crane MFA was 38 days (unchanged from previous month) and the Crane 100 WAM was up 1 bp at 39 days. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
