Bloomberg writes "'T-Bill and Chill' Is a Hard Habit for Investors to Break," which is more about money market funds and cash investing than T-bills. They tell us, "It's been the ultimate no-brainer for more than a year: Park your money in super-safe Treasury bills, earn yields of more than 5%, rinse and repeat. Or as billionaire bond investor Jeffrey Gundlach put it last October, 'T-bill and chill.' Even now, with Federal Reserve officials poised to ease benchmark interest rates from a two-decade high -- a move that would instantly push down yields on bills and other short-term debt -- money-market funds are thriving. They raked in $106 billion this month alone and their balances, at $6.24 trillion, have never been higher." (Note: Crane Data's MFI Daily asset series broke $6.6 trillion for the first time ever on Monday, August 26, hitting a record $6.608 trillion.)
The piece continues, "Investors in cash equivalents appear to be perfectly happy to stay where they are for now, despite repeated advice to add exposure to longer-term bonds from the likes of Pimco and BlackRock Inc. -- admittedly bond managers themselves. But their point is that while cash returns have nowhere to go but down, debt with longer maturities stands to benefit from capital gains in an environment of deep rate cuts."
It says, "During this year's bouts of bond volatility, cash has been a good place to be. Money-market rates, which are keyed off of the Fed's current 5.25%-to-5.5% policy band, have held steady and offered no surprises.... Money markets may continue to appeal, it's the scope of rate cuts matters. Just 1 percentage point of reductions, for instance, would still leave bill rates in the range of 4%, an appealing return -- especially after years of near-zero rates before the most recent tightening cycle, and at a time when longer-term US bonds are yielding far less. This may explain why retail investors are in no hurry to shift their holdings."
Bloomberg explains, "Of the $6.24 trillion of cash parked in money market funds, roughly 60% of that is from corporations that have been stockpiling cash following the pandemic, while the rest is from mom-and-pop investors who are content to continue earning more yield than what they can earn by merely keeping that money in the bank. Those yields are also significantly higher than what investors can get by moving into longer-term Treasury bonds -- though nothing like the stock market's gains. Even after the Fed starts lowering borrowing costs, money-market funds should continue to lure at least some cash from retail investors. That's because they will still offer higher yields than banks and attract institutions that prefer to outsource cash management."
They state, "Of course, for some the choice isn't just between bills and longer-term bonds. Warren Buffett's Berkshire Hathaway Inc. increased its holdings of Treasury bills to $234 billion in the second quarter after cashing in on investments in equities including Apple Inc. For investors like him, holding cash equivalents while rates are still reasonable makes sense until fresh bargains in stocks appear."
Finally, the article adds, "Don't tell that to Bill Eigen, manager of the $10 billion JPMorgan Strategic Income Opportunities Fund. For him, the idea of moving money into a US 10-year note currently yielding around 3.82% has little appeal. His fund held 54% in cash at the end of July, according to the latest filing. 'You can get mid-5% in cash, get 6% in short-term investment grade floating rate,' Eigen said. 'I won't lend to the government for 10 years and get paid less.'"
In other news, 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. 23) includes Holdings information from 79 money funds (up 11 from a week ago), or $3.638 trillion (up from $3.207 trillion) of the $6.577 trillion in total money fund assets (or 55.3%) 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 $1.561 trillion (up from $1.428 trillion a week ago), or 42.9%; Repurchase Agreements (Repo) totaling $1.420 trillion (up from $1.239 trillion a week ago), or 39.0%, and Government Agency securities totaling $296.4 billion (up from $257.3 billion), or 8.1%. Commercial Paper (CP) totaled $127.5 billion (up from a week ago at $80.3 billion), or 3.5%. Certificates of Deposit (CDs) totaled $82.2 billion (up from $61.4 billion a week ago), or 2.3%. The Other category accounted for $106.4 billion or 2.9%, while VRDNs accounted for $44.8 billion, or 1.2%.
The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $1.561 trillion (42.9% of total holdings), Fixed Income Clearing Corp with $430.4B (11.8%), the Federal Home Loan Bank with $218.3 billion (6.0%), JP Morgan with $109.1B (3.0%), Citi with $96.8B (2.7%), the Federal Reserve Bank of New York with $93.4B (2.6%), BNP Paribas with $87.4B (2.4%), Federal Farm Credit Bank with $68.5B (1.9%), RBC with $61.1B (1.7%) and Goldman Sachs with $54.7B (1.5%).
The Ten Largest Funds tracked in our latest Weekly include: JPMorgan US Govt MM ($260.9B), Goldman Sachs FS Govt ($238.6B), Fidelity Inv MM: Govt Port ($227.1B), JPMorgan 100% US Treas MMkt ($208.5B), Federated Hermes Govt ObI ($168.5B), BlackRock Lq FedFund ($167.0B), Fidelity Inv MM: MM Port ($134.5B), State Street Inst US Govt ($133.8B), BlackRock Lq Treas Tr ($130.5B) and Morgan Stanley Inst Liq Govt ($126.5B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary.)
