Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics Tuesday, which track a shifting subset of our monthly Portfolio Holdings collection. The most recent cut (with data as of Aug. 16) includes Holdings information from 68 money funds (unchanged from two weeks ago), or $3.207 trillion (up from $3.162 trillion) of the $6.559 trillion in total money fund assets (or 48.9%) tracked by Crane Data. (Our Weekly MFPH are e-mail only and aren't available on the website. See our latest Monthly Money Fund Portfolio Holdings here and our Aug. 12 News, "August Money Fund Portfolio Holdings: TDs, Treasuries Up; Repo Slides.")
Our latest Weekly MFPH Composition summary shows Government assets dominating the holdings list with Treasuries totaling $1.428 trillion (up from $1.426 trillion two weeks ago), or 44.5%; Repurchase Agreements (Repo) totaling $1.239 trillion (up from $1.194 trillion two weeks ago), or 38.6%, and Government Agency securities totaling $257.3 billion (down from $261.5 billion), or 8.0%. Commercial Paper (CP) totaled $80.3 billion (down from two weeks ago at $95.0 billion), or 2.5%. Certificates of Deposit (CDs) totaled $61.4 billion (down from $67.2 billion two weeks ago), or 1.9%. The Other category accounted for $87.8 billion or 2.7%, while VRDNs accounted for $52.8 billion, or 1.6%.
The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $1.428 trillion (44.5% of total holdings), Fixed Income Clearing Corp with $331.6B (10.3%), the Federal Home Loan Bank with $189.1 billion (5.9%), JP Morgan with $101.4B (3.2%), the Federal Reserve Bank of New York with $96.3B (3.0%), Citi with $85.6B (2.7%), BNP Paribas with $78.4B (2.4%), Federal Farm Credit Bank with $61.6B (1.9%), RBC with $56.7B (1.8%) and Goldman Sachs with $54.0B (1.7%).
The Ten Largest Funds tracked in our latest Weekly include: JPMorgan US Govt MM ($255.2B), Goldman Sachs FS Govt ($240.1B), Fidelity Inv MM: Govt Port ($221.5B), JPMorgan 100% US Treas MMkt ($211.7B), BlackRock Lq FedFund ($164.5B), Morgan Stanley Inst Liq Govt ($134.9B), Fidelity Inv MM: MM Port ($133.8B), State Street Inst US Govt ($133.0B), BlackRock Lq Treas Tr ($124.8B) and Allspring Govt MM ($118.2B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary.)
In other news, Federated Hermes published a brief titled, "Short-term markets during rate cuts." Written by Senior Portfolio Manager and Head of Low Duration Nicholas Tripodes, it says, "Inflation and the labor market now appear to fit the Federal Reserve requirements for a rate cut. But with only three Federal Open Market Committee (FOMC) meetings left this year, it isn't a question of if policymakers will ease in 2024, but when and by how much. The markets are currently predicting a cut at each remaining meeting, some of the 50 basis-point variety. Our Short Term Investments Committee (STIC) is predicting the first cut to be a quarter-point cut arriving in September, though August data could adjust our opinion and sentiment is building for a 50 basis-point cut among some committee members."
The update tells us, "All predictions aside, it might be more helpful to talk about the impact this guessing game is having on short-term markets and what we expect whenever the easing begins. Treasury yields have already dropped substantially in anticipation of policy change. For example, the 2-year Treasury was over 5% in April -- just four months ago -- and is now near 4%. At this level, the market is projecting about 300 basis points of cuts over the next two years as, in theory, the 2-year Treasury yield is the average of the federal funds rate over the next two years plus a term premium."
It says, "[W]e carefully consider 'duration management' when making investment decisions because it can substantially impact relative performance compared to a benchmark, especially during periods of interest-rate volatility. As of late, we have seen attractive relative value in AAA-rated asset-backed securities, which are outyielding A-rated corporates and in some cases BBB-rated corporates. Mortgage-backed securities issued by Agencies such as Freddie Mac also can provide good relative value considering their attractive spreads above Treasuries."
Federated's Tripodes continues, "When the FOMC does cut the target range of the federal funds rate, we expect the Secured Overnight Financing Rate (SOFR) to decrease in lockstep. Floating-rate notes, which are primarily indexed to SOFR, will follow. What does this mean for investments across the short end? Well, distribution yields will likely dip. Liquidity yields should drop faster than short-term bond yields. Direct security yields will probably adjust the fastest due to their shorter nature. This mismatch in the change of rates could lead to a normalization where we eventually see bond yields above money markets, and potentially well above direct securities and bank deposits. How much rates are cut, i.e., 25 or 50 basis points at a time, will impact how quickly and dramatically the normalization comes into being."
He adds, "In that environment, we anticipate investors will transition out of direct securities and FDIC insured bank deposits into potentially higher yielding money market investments. Additionally, we could see those who can, move out further into short-duration investments to capture even higher potential yields. While this trend likely won't be seen broadly until the first cut occurs, I can't claim to know when and by how much we will see these changes either. I will say this, though, in the guessing game with the Fed, markets tend to move earlier. When the time comes, investors may wish that they too had proactively adjusted their investments to capture any additional benefits possible prior to official policy changes."
Finally, Morningstar wrote recently that, "This JPMorgan ETF Is a Great Extended Cash Choice." They state, "Launched in May 2017, JPMorgan Ultra-Short Income ETF (JPST) has grown to more than $24.5 billion, making it now the largest actively managed fixed-income exchange-traded fund. Higher short-term yields no doubt have helped fuel this ETF's popularity, but so too have the ETF's team, investment approach, and reliable performance pattern. Depth, stability, and solid decisions help this ETF's tenured team stand out from rivals."
They comment, "James McNerny has led this offering since its inception and leads this strategy day to day. He joined J.P. Morgan in 2000 and focuses exclusively on short-term strategies. McNerny collaborates with managers David Martucci, Cecilia Junker, and Kyongsoo Noh, who average more than 25 years of industry experience. The comanagers also draw on the vast resources of the firm's Global Fixed Income, Currency, and Commodities platform, which includes 21 investment-grade corporate-bond and eight securitized analysts who inform security selection. They are thus able to make effective and thoughtful decisions across traditional cash markets and bonds that mature beyond one year."
