Barron's writes, "5% Money-Market Rates Are Done. Where to Put Cash Now." The piece says, "Short-term interest rates are coming down. Money-market investors haven't gotten the memo -- and financial advisors say they may be missing out on the chance to earn better returns by moving money into longer-dated bonds and riskier assets like stocks.... The move was supposed to trigger a rush out of cash vehicles, such as online savings accounts and money-market funds.... Indeed, interest rates for market leading money-market funds, which stood at around 5.1% before the Fed's recent move, have tumbled to about 4.75%, according to Crane Data, a company that follows the industry." (Note: Please join us for our "basic training" event, Money Fund University, which will take place Dec. 19-20 in Providence, R.I. Click here to register or for more information.)
The article explains, "Money-market investors don't seem to be sweating the Fed's move. Assets in money-market funds hit a record $6.47 trillion for the week ended Oct. 9, according to the Investment Company Institute, a trade group. While much of that money is from large institutions, individual investors poured an additional $8 billion into retail money-market funds, which now hold more than $2.61 trillion."
It tells us, "Notions of a stampede out of money-market funds may be misplaced, says Crane Data President Peter Crane. There are good reasons for investors to pump money into the funds, even as rates decline. First, while short-term oriented, money funds tend to buy Treasury bills with durations of around a month, so while their yields generally follow the federal-funds rate, they often do so at a lag of a few weeks. Some investors aim to take advantage of this slow fade following Fed cuts."
Barron's quotes, "He also notes that while money-market rates are declining, yields remain higher than what investors can find on most savings accounts and sweep accounts that brokerages use as default vehicles to hold clients' temporarily uninvested cash. Sweep accounts, which often pay less than 1%, have come under fire recently, with lawsuits charging a number of prominent brokerages, including Schwab, Morgan Stanley and others, are shortchanging customers. Crane says investors have gotten wise and started moving money out of sweep accounts into higher-yielding money funds, a trend he expects to continue."
They add, "It doesn't help that, with the yield curve inverted, investors often need to accept lower interest rates on more volatile longer-date bonds. (See too the WSJ's "Money-Market Fund Assets Surge to Record," which states, "Assets in money-market funds have increased by around $160 billion since the Federal Reserve trimmed interest rates for the first time since 2020. The flood of money into the ultra-safe funds, illustrated this week in new numbers from Crane Data, is an unexpected twist for many investors who expected that such interest-rate cuts would lead to a rush out of the funds. Instead, the opposite has happened.")
In other news, Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics Wednesday, which track a shifting subset of our monthly Portfolio Holdings collection. The most recent cut (with data as of Oct. 11) includes Holdings information from 61 money funds (unchanged from two weeks ago), or $3.375 trillion (up from $3.361 trillion) of the $6.794 trillion in total money fund assets (or 49.7%) 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 Oct. 10 News, "October Money Fund Portfolio Holdings: Repo Surges, Reclaims Top Spot.")
Our latest Weekly MFPH Composition summary shows Government assets dominating the holdings list with Treasuries totaling $1.561 trillion (up from $1.494 trillion two weeks ago), or 46.3%; Repurchase Agreements (Repo) totaling $1.244 trillion (down from $1.312 trillion two weeks ago), or 36.9%, and Government Agency securities totaling $286.6 billion (up from $280.1 billion), or 8.5%. Commercial Paper (CP) totaled $109.2 billion (up from two weeks ago at $104.9 billion), or 3.2%. Certificates of Deposit (CDs) totaled $61.2 billion (down from $62.6 billion two weeks ago), or 1.8%. The Other category accounted for $81.3 billion or 2.4%, while VRDNs accounted for $31.0 billion, or 0.9%.
The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $1.561 trillion (46.3% of total holdings), Fixed Income Clearing Corp with $351.9B (10.4%), the Federal Home Loan Bank with $201.7 billion (6.0%), JP Morgan with $92.1B (2.7%), BNP Paribas with $88.6B (2.6%), the Federal Reserve Bank of New York with $87.8B (2.6%), Citi with $79.5B (2.4%), Federal Farm Credit Bank with $66.2B (2.0%), RBC with $57.0B (1.7%) and Goldman Sachs with $53.5B (1.6%).
The Ten Largest Funds tracked in our latest Weekly include: JPMorgan US Govt MM ($266.1B), Goldman Sachs FS Govt ($246.5B), Fidelity Inv MM: Govt Port ($233.9B), JPMorgan 100% US Treas MMkt ($226.7B), State Street Inst US Govt ($169.5B), BlackRock Lq FedFund ($168.4B), Morgan Stanley Inst Liq Govt ($140.5B), Fidelity Inv MM: MM Port ($138.7B), BlackRock Lq Treas Tr ($134.3B) and Dreyfus Govt Cash Mgmt ($125.4B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary.)
Finally, ICI released its latest monthly "Money Market Fund Holdings" summary, which reviews the aggregate daily and weekly liquid assets, regional exposure, and maturities (WAM and WAL) for Prime and Government money market funds. This release says, "The Investment Company Institute (ICI) reports that, as of the final Friday in September, prime money market funds held 42.3 percent of their portfolios in daily liquid assets and 61.7 percent in weekly liquid assets, while government money market funds held 77.5 percent of their portfolios in daily liquid assets and 87.9 percent in weekly liquid assets." Prime DLA was down from 46.5% in August, and Prime WLA was down from 63.6%. Govt MMFs' DLA fell from 77.9% and Govt WLA increased from 87.7% the previous month.
ICI explains, "At the end of September, prime funds had a weighted average maturity (WAM) of 24 days and a weighted average life (WAL) of 47 days. Average WAMs and WALs are asset-weighted. Government money market funds had a WAM of 32 days and a WAL of 81 days." Prime WAMs were 4 days shorter and WALs were unchanged from the previous month. Govt WAMs were 2 days shorter and WALs were 2 days shorter from August.
Regarding Holdings by Region of Issuer, the release tells us, "Prime money market funds' holdings attributable to the Americas rose from $492.19 billion in August to $532.92 billion in September. Government money market funds' holdings attributable to the Americas rose from $4,618.30 billion in August to $4,870.02 billion in September." The Prime Money Market Funds by Region of Issuer table shows Americas-related holdings at $532.9 billion, or 51.6%; Asia and Pacific at $184.6 billion, or 17.9%; Europe at $291.2 billion, or 28.2%; and, Other (including Supranational) at $23.0 billion, or 2.3%. The Government Money Market Funds by Region of Issuer table shows Americas at $4.870 trillion, or 91.0%; Asia and Pacific at $136.2 billion, or 2.5%; Europe at $323.7 billion, 6.0%, and Other (Including Supranational) at $23.5 billion, or 0.4%.
