Money market mutual fund assets broke the $7.0 trillion barrier for the first time ever on Wednesday, Nov. 13, according to our Money Fund Intelligence Daily. Assets have jumped following the Federal Reserve's 25 basis point rate cut last Thursday (11/7), increasing by $91.4 billion in the week through Wednesday to a record $7.001 trillion. Money fund assets have increased by $147.3 billion in November month-to-date through 11/13, and they have increased by $709.4 billion (11.3%) year-to-date in 2024. (Note: Register soon for our "basic training" event, Money Fund University, which takes place Dec. 19-20 in Providence, RI, and please join us there for Crane Data's Holiday, and now $7 Trillion, Party!)
Assets rose by $97.5 billion in October, $149.8 billion in September, $109.7 billion in August, $16.6 billion in July, $15.7 billion in June and $91.4 billion in May. They declined by $15.8 billion in April and $68.8 billion in March. They rose $72.1 billion in February, $93.9 billion in January, $32.7 billion in December and $226.4 billion last November. Watch for ICI's latest "Money Market Fund Assets" report to show money fund assets hitting yet another record later today once they're published. Note that `Crane Data's asset totals include a number of funds tracked by the SEC but not reported to ICI, so our data is about $350 billion higher than ICI's asset series.
Money market mutual fund assets broke the $6.0 trillion barrier in August 2023. (See Crane Data's 9/28/23 News, "Sept. MFI: Assets Break $6.0 Trillion; Dechert on Reforms; 15 Years Ago.") They rose above $5.0 trillion for the first time in April 2020 (see our 4/30/20 News, "Money Fund Assets Break $5.0 Trillion; Crane Featured in Ignites Piece"), but needed a couple more years to retake that level for good. Assets rose back above $5.0 trillion in October 2021, then again in July 2022. Assets broke the $4.0 trillion level in March 2020 during the Covid asset super-spike. (See our 3/10/20 News, "MMF Yields, Sweep Rates Slide, MFID Assets Hit $4.0 Tril; N-MFP Holdings.")
Money fund assets first rose above $3.0 trillion in January 2008 as the Federal Reserve cut short-term interest rates to near zero, and it took until December 2017 to reclaim the $3.0 trillion level. (Assets declined by over $1.0 trillion from 2008 through 2011, then remained flat for about 7 years after rates bottomed at zero.) Assets rose above $2.0 trillion in 2001 and again in 2006 (Crane Data launched in 2006), and they broke the $1.0 trillion level in 1997 (looking back at ICI annual data). We expect assets to continue higher in coming weeks as funds benefit from MMFs "lag effect" vs. the direct money market, and as funds benefit from the strongest two months of the year (Nov. and Dec.) seasonally.
In other news, S&P Global Ratings published "U.S. Domestic 'AAAm' Money Market Fund Trends (Third-Quarter 2024)" earlier this week, which tells us, "Rated MMF assets grew 7% over the quarter, with flows primarily into rated government funds. However, total assets in rated prime MMFs decreased roughly 5% from the prior quarter. This unique decline was mainly a function of fund sponsors consolidating or eliminating their institutional prime offerings. Among the sponsors S&P Global Ratings covers, 10 prime MMFs were liquidated or merged into an existing government strategy. With adjustments to consider only the remaining rated prime funds quarter over quarter, assets increased 2%."
It continues, Prime fund closures were one of the driving factors of flows into rated government funds. Additionally, MMFs, whether government or prime, continued to provide a higher yield than other liquidity options, such as stand-alone treasury bills and bank deposits, to house short-term cash. We do not expect further material effects from the latest 2a-7 SEC reforms by the Securities and Exchange Commission now that they are in effect."
S&P writes, "Seven-day net yields decreased for rated government and prime MMFs following the start of the Federal Reserve (Fed)'s interest-rate-cutting cycle.... Ultimately, the Fed voted on a 50-bps cut in September, while S&P Global Ratings economists expect further 25-bps increments and the terminal rate to settle at 3.00%-3.25% by year-end 2025.... Seven-day net yields for rated government and prime MMFs dropped 33 bps and 34 bps, respectively."
They comment, "Average repurchase agreement (repo) exposure in rated government MMFs decreased slightly over the quarter, to 41% from 43%. Usage of the Fed's reverse repo program (RRP) remained muted relative to prior quarters, with a minor uptick for quarter-end liquidity. Managers opted to purchase more treasury bills, given higher supply, and U.S. agency notes. They also added to their floating-rate exposure, especially agency floaters, citing relative value in this part of the market."
S&P adds, "Exposure to treasury bills and certificates of deposits (CDs) in rated prime MMFs decreased. Managers re-allocated to commercial paper and asset-backed commercial paper. Corporate bond exposure also increased to the highest level so far in 2024, at just over 4% on average. Managers of rated government and prime MMFs kept maturity profiles short, citing more value on shorter parts of the yield curve."
They write, "Average weighted-average maturities (WAMs) decreased by roughly five days versus the second quarter for rated government funds. Rated prime fund WAMs saw an upward spike early in the quarter due to certain funds closing and rolling into overnight securities. After these closures, prime fund WAMs normalized. We anticipate overall maturity profiles will begin to increase based on the Fed rate path and dependent on yield curve normalization.... The distribution of net asset values (NAVs) per share for rated MMFs was generally stable, with most of the movement being on the upside. At quarter-end, the range for rated fund NAVs was 0.9995-1.0011."
