Money fund yields declined by 2 basis points to 4.66% on average during the week ended Friday, Oct. 25 (as measured by our Crane 100 Money Fund Index) after inching down 2 bps the week prior. They've declined by 40 bps since the Fed cut its Fed funds target rate by 50 bps percent on Sept. 18. Yields were 4.75% on 9/30, 5.10% on 8/31, 5.13% on 7/31 and 6/28, 5.14% on 5/31, 5.13% on 4/30, 5.14% on 3/31 and 2/29/24, 5.17% on 1/31/24, 5.20% on 12/31/23, 4.94% on 6/30/23, 4.61% on 3/31/23 and 4.05% on 12/31/22. Yields should continue to bottom out as they digest the final remnants of the Fed cut, and they await the results of the next Fed meeting on Nov. 7.
The broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 664), shows a 7-day yield of 4.56%, down 2 bps in the week through Friday. Prime Inst money fund yields were unchanged at 4.79% in the latest week. Government Inst MFs were down 1 bp at 4.66%. Treasury Inst MFs were down 2 bps at 4.60%. Treasury Retail MFs currently yield 4.38%, Government Retail MFs yield 4.37%, and Prime Retail MFs yield 4.56%, Tax-exempt MF 7-day yields were up 2 bps to 3.22%.
Assets of money market funds rose by $25.6 billion last week to $6.833 trillion according to Crane Data's Money Fund Intelligence Daily. Assets reached its record high Tuesday Oct. 22 at $6.847 trillion. For the month of October, MMF assets have increased by $67.7 billion, after increasing by $149.8 billion in September. Weighted average maturities were unchanged at 34 days for the Crane MFA and up 1 day at 35 days for the Crane 100 Money Fund Index.
According to Monday's Money Fund Intelligence Daily, with data as of Friday (10/25), 25 money funds (out of 781 total) yield under 3.0% with $14.2 billion in assets, or 0.2%; 128 funds yield between 3.00% and 3.99% ($150.1 billion, or 2.2%), 625 funds yield between 4.0% and 4.99% ($6.578 trillion, or 96.3%) and just 3 funds now yield 5.0% or more ($90.5 billion, or 1.3%).
Our Brokerage Sweep Intelligence Index, an average of FDIC-insured cash options from major brokerages, was unchanged at 0.51%, after dropping 2 basis points two weeks prior. The latest Brokerage Sweep Intelligence, with data as of Oct. 25, shows that there was only one change over the past week. Merrill Lynch lowered rates again for their advisory accounts, now at 4.69% (down 4 bps). Three of the 10 major brokerages tracked by our BSI still offer rates of 0.01% for balances of $100K (and lower tiers). These include: E*Trade, Merrill Lynch and Morgan Stanley. (Note: Five weeks prior we added advisory rates to Brokerage Sweep Intelligence for Merrill Lynch and Morgan Stanley.)
In other news, Ameriprise Financial reported Q3'24 Earnings last week (see the transcript here). CFO Walter Berman comments, "Wrap flows were strong in the quarter at $8 billion or 6% on an annualized flow rate. Pre-tax adjusted operating earnings increased 13% to $826 million, driven by quite strong year-over-year core wealth management earnings growth, offset by lower cash sweep earnings and margin remained strong at 30%. Adjusted operating net revenues increased 14% to $2.7 billion from growth in client assets, increased transactional activity, and a 6% increase in net investment income in the bank. This drove revenue per adviser to a new high of $997,000 up 11% from a year ago."
He explains, "Total cash balances, including third-party money market funds and broker CDs was $83 billion, which was over 8% of the clients' assets. Clients remain heavily concentrated in yield-oriented products with highly liquid products like money market funds being more in favor than the term products like certificates and brokered CDs. We are beginning to see clients put more money back to work in wrap and other products on our platform, and we expect this to continue over time as markets and rates normalize, which creates a significant opportunity."
Berman adds, "Client cash sweep balances were stable at approximately $28 billion. Bank assets grew to $23.2 billion, providing sustainable net investment income in this forecasted lower rate environment. These trends continued in October."
During the Q&A, one analyst asks, "On the comment that you made about client cash moving into money market funds as opposed to the term products, what is your read in terms of what's going on there? Is it that the advisers are sort of positioning for a rotation into these other longer-duration sort of wealth wrap products?"
CEO Jim Cracchiolo responds, "So, we saw like a 50% increase into wrap flows again in diversified portfolios, which includes fixed income, so it's a nice rebalancing occurring there.... What we did see just more broadly is a move out of brokered CDs and certificates, even though the cash levels didn't go down in total, it moved into money markets. What that says is really the people ... are locking less up in those, what I would call just pure interest-earning assets, and [are moving] into vehicles that then they could possibly move back into things like wrap or other fixed income products that have longer duration."
Goldman Sachs' Alex Blostein says, "I was hoping you guys could talk about your outlook for cash revenues within AWM in totality.... You made some comments earlier this morning regarding ... ways you could still aim to kind of keep NII stable to growing within the bank. Maybe just expand that a little bit ... given the forward curve trajectory and current cash balances. What are your thoughts for the revenue trends there for 2025?"
Berman replies, "For the bank, yes, on the revenue trends and the net interest income, we do see that is going to be stable -- or would actually increase and we feel very good about that positioning. We do see, as Jim mentioned, ... we're hoping that money will stop moving, and we believe it will, from the third party -- money market and third-party CDs. And [you'll] probably see some continued softening in CDs depending on again how drastic the rate [reduction] is. But overall, I think the bulk of our earnings ... will be from the bank, and certainly sweep will be impacted as the rates come down. But ... then hopefully we will get that rotation out of the money market and third-party CDs to ... go back into product."
Cracchiolo adds, "From the bank perspective, we will be launching bank CDs that would be another cash alternative where clients are holding cash out in the banks.... So, again, that could bring more cash activities from current bank accounts that our clients are holding to having more cash here ... that they can utilize or save. Those things ... will be gradual builds, but I think they'll be nice and complementary. And we think we can garner both savings as well as lending activities from our clients because we know they have a lot out there."
