Money fund yields (7-day, annualized, simple, net) were unchanged at 4.16% on average during the week ended Friday, Feb. 28 (as measured by our Crane 100 Money Fund Index), after falling 1 bp the week prior and falling 1 bp two weeks prior. Fund yields have digested almost all of the Federal Reserve's 25 basis point cut from December 18, though they may inch down a basis point or 2 lower in coming days. They've declined by 90 bps since the Fed first cut its Fed funds target rate by 50 bps percent on Sept. 18, and they've declined by 47 bps since the Fed cut rates by 1/4 point on 11/7. Yields were 4.28% on average on 12/31/24, 4.45% on 11/30/24, 4.65% on 10/31, 4.75% on 9/30, 5.10% on 8/31, 5.13% on 7/31 and 6/28, 5.14% on 3/31 and 5.20% on 12/31/23. (Note: Register and make hotel reservations soon for Bond Fund Symposium, Crane Data's ultra-short bond fund conference, which will take place March 27-28 in Newport Beach.)
The broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 679), shows a 7-day yield of 4.06%, unchanged in the week through Friday. Prime Inst money fund yields were up 1 bp at 4.29% in the latest week. Government Inst MFs were unchanged at 4.17%. Treasury Inst MFs were unchanged at 4.11%. Treasury Retail MFs currently yield 3.87%, Government Retail MFs yield 3.86%, and Prime Retail MFs yield 4.06%, Tax-exempt MF 7-day yields were down 68 bps at 1.97%.
Assets of money market funds rose by $54.1 billion last week to $7.321 trillion, according to Crane Data's Money Fund Intelligence Daily. For the month of February, MMF assets have rose by $94.2 billion, after increasing by $52.8 billion in January, $110.9 billion in December, $200.5 billion in November, $97.5 billion in October and $149.8 billion in September. Weighted average maturities were down 1 day at 35 days for the Crane MFA and 1 day shorter at 36 days the Crane 100 Money Fund Index.
According to Monday's Money Fund Intelligence Daily, with data as of Friday (2/28), 116 money funds (out of 791 total) yield under 3.0% with $140.2 billion in assets, or 1.9%; 213 funds yield between 3.00% and 3.99% ($846.8 billion, or 11.6%), 462 funds yield between 4.0% and 4.99% ($6.334 trillion, or 86.5%) and following the recent rate cut there continue to be zero funds yielding 5.0% or more.
Our Brokerage Sweep Intelligence Index, an average of FDIC-insured cash options from major brokerages, was unchanged at 0.41%, after rising 1 bp six weeks prior. The latest Brokerage Sweep Intelligence, with data as of Feb. 28, shows no changes over the past week. 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.
In other news, Federated Hermes' latest monthly commentary from Debbie Cunnigham, titled, "We SECond this change," is subtitled, "Market intervention should subside under the new SEC leadership." She comments, "Perhaps because the SEC appears to impact the public less than other US agencies, its cost-cutting efforts mandated by the Trump administration have largely been overshadowed. But the Commission is in the midst of a sea change beyond the trimming of staff, and we welcome it. Recall its mission is, 'to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation.' Going after Ponzi schemes, scammers and fraudsters is critical, as is maintaining a level playing field. At their best, regulations safeguard the financial system from the repercussions of intentional or unintentional activity. But under Chair Gary Gensler, the SEC exceeded its mission. Instead of using wrenches to fine tune the machine, his staff often tossed them into its gears. Particularly frustrating was that they frequently limited time for public feedback, even for controversial proposals."
Cunningham continues, "We are biased, of course, but among the most detrimental interventions have been the bevy of anti-money market 'reforms.' The new rules implemented in 2024 again targeted prime institutional money market funds, popular investment options seeking higher yields than typically found in other liquidity vehicles, let alone FDIC-insured deposit products. The Investment Company Institute (ICI) reports that since the implementation of the mandatory liquidity fee for prime institutional money funds, industry assets have decreased by more than half. That's a shame. Institutions serve real people, and many now miss out on returns. The good news is that, industry-wide, these funds are collectively seeing inflows this year."
She states, "That brings us to today. Acting SEC Chair Mark Uyeda has announced several high-profile changes, such as the creation of a crypto task force and the layoff of regional office directors. But on a fundamental level, he and Trump's nominee for chair, Paul Atkins, are no fan of regulations. Expect fewer new rules and for some to be delayed in implementation. Others, such as the climate disclosure rule, are likely to be rolled back. We obviously would like the SEC to revisit the recent money fund amendments, but there seems to be little industry appetite for that at present. That won't stop us from making the case. Furthermore, our belief in the utility of prime means we will continue to develop alternative venues for investors of all types to have access to all its attractive features."
The commentary continues, "Speaking of appeal, it seems yields of most liquidity products will stay around present levels as the Federal Reserve likely won't cut rates this month. The January PCE report showed modest annualized improvement, but the monthly readings of headline and core growth were essentially unchanged. This likely means inflation remains too hot for the Fed, though we do anticipate two quarter-point cuts this year. The updated Summary of Economic Projections released at the FOMC meeting on March 19 should make that clearer. But we are just as interested in what it might reveal about the terminal rate. Once thought to be around 3%, we now think it could end up near 4% as the Fed may want to extend restrictive monetary policy to keep the lid on inflation. That would be great news for cash managers and investors."
Cunnigham concludes, "Once the nonsense of the debt-ceiling situation is resolved, the Fed may continue to taper, but probably not for much longer. Chair Jerome Powell and company aren't attempting to empty the shelves, but rather right-size its holdings in relation to the markets. We think that number will still be enormous, probably around $6 trillion. But with the uncertainty in fiscal policy, trade and geopolitics, the Fed is surely not interested in pushing its luck by excessively decreasing its holdings."
