Crane Data Subscribers
Money Fund Yields Pass Along Just 1/5 of Rate Cut, Rise on Month-End. Since the Federal Reserve reduced the target on its Federal funds benchmark from 5.25% to 4.75% on Sept. 18, money market mutual fund yields have fallen by just 11 basis points (0.11%). Last week, money fund yields stopped falling and fund yields actually rose by one basis point on Friday. Our Crane 100 Money Fund Index fell from 5.06% to 4.94% the week of the Fed cut, stabilized, then rose Friday to 4.95%. Though seasonal upward pressure on rates at quarter-end also contributed, higher yields on LIBOR-indexed floating rate products and asset-backed commercial paper are dramatically reducing the Fed cut's bite on money fund investors. Undoubtedly, more of the Fed cut will get passed through. But at this point it appears very unlikely investors will experience anywhere near the full 1/2 point decline any time soon.
