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 May 23) includes Holdings information from 69 money funds (up 7 from a week ago), or $3.904 trillion (up from $3.623 trillion) of the $7.314 trillion in total money fund assets (or 53.4%) tracked by Crane Data. (Note: 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 May 12 News, "May Money Fund Portfolio Holdings: FICC Repo Hits $1T, T-Bills Drop.")
Our latest Weekly MFPH Composition summary shows Government assets dominating the holdings list with Treasuries totaling $1.728 trillion (up from $1.638 trillion a week ago), or 44.3%; Repurchase Agreements (Repo) totaling $1.411 trillion (up from $1.311 trillion a week ago), or 36.1%, and Government Agency securities totaling $334.9 billion (up from $329.7 billion), or 8.6%. Commercial Paper (CP) totaled $182.7 billion (up from a week ago at $140.7 billion), or 4.7%. Certificates of Deposit (CDs) totaled $95.9 billion (up from $79.0 billion a week ago), or 2.5%. The Other category accounted for $97.8 billion or 2.5%, while VRDNs accounted for $54.1 billion, or 1.4%.
The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $1.728 trillion (44.3% of total holdings), Fixed Income Clearing Corp with $452.0B (11.6%), the Federal Home Loan Bank with $216.2 billion (5.5%), JP Morgan with $126.8B (3.2%), Citi with $107.5B (2.8%), RBC with $91.1B (2.3%), BNP Paribas with $89.9B (2.3%), Federal Farm Credit Bank with $78.5B (2.0%), Bank of America with $61.4B (1.6%) and Barclays PLC with $57.9B (1.5%).
The Ten Largest Funds tracked in our latest Weekly include: JPMorgan US Govt MM ($286.2B), JPMorgan 100% US Treas MMkt ($254.0B), Goldman Sachs FS Govt ($248.1B), Fidelity Inv MM: Govt Port ($231.0B), BlackRock Lq FedFund ($173.5B), Morgan Stanley Inst Liq Govt ($165.8B), Federated Hermes Govt ObI ($164.9B), State Street Inst US Govt ($158.8B), Fidelity Inv MM: MM Port ($153.8B) and BlackRock Lq Treas Tr ($151.9B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary.)
In other news, the website Governing.com published the update, "A Tipping Point for Public Cash Managers." It says, "Money market interest rates have held quite steady this year.... Public treasurers and cash managers have lost nothing so far by staying ultra-short in their portfolio maturities, but external, outsourced managers running public money against popular indexes in the one- to three-year range have outperformed most others. That's because notes maturing in 2026 and 2027 have produced capital gains on top of coupon income, resulting in total returns this past year of 6 percent versus 4-ish percent for those who stayed short."
The article continues, "But that's now just history. The challenge for public cash managers is what to do next. Normally, interest rates on bonds and money market instruments give investors a higher yield for longer maturities to reflect liquidity preference, market segmentation and market risk on longer-term paper. The current yield curve for U.S. treasuries is showing a relatively rare configuration: a 'swayback' formation in which yields for investments maturing between four and 30 months are successively lower but thereafter increase as maturities lengthen, as would normally be expected. Therein lies the challenge for today’s governmental money managers."
It tells us, "This is a reflection of market expectations that the Federal Reserve will cut its overnight interest rate, the Fed Funds rate, later this year and into 2026.... If that's the case, then the Fed Funds rate could reasonably drift down by about a half-percentage point by year-end without re-stoking inflation -- or so the thinking goes. The aforementioned Treasury yield curve would then look pretty flat in the range of one month to one year, while retaining its normal upward slope for longer maturities. So those who lock in today's rates on one-year paper would likely come out ahead, but they will have to keep explaining to overseers and stakeholders the mathematical logic of that strategy in the face of today's higher returns on shorter-term investments."
Governing says, "One interesting wrinkle in this outlook is how local governments react in coming months to the potential disparity in yields on various local government investment pools (LGIPs). The LGIPs that operate like money market mutual funds, with very short-term maturities, would be expected to see their yields hold up around 4 percent until the Fed starts reducing its overnight interest rate -- assuming it does. But those like the California Local Agency Investment Fund, which typically invest in maturities averaging longer than 200 days, will continue to live off their unrealized capital gains because they do not mark to market, valuing their assets and liabilities based on current market conditions." If the Fed does cut rates, don't be surprised if eligible local agencies dive into those pools this fall to capitalize on the higher yields from older portfolio holdings."
They comment, "From that perspective, the nuances of cash management at this point will seem like inside baseball. For treasurers who manage the public's cash themselves, there is always the strategy of simply 'laddering' their investment maturities to match the cashflow forecasts from the budget office and splitting the rest between equal maturities of 4 and 12 months as a hedge against extreme outcomes either way."
The piece adds, "For external money managers of governmental operating funds, who are evaluated on their performance against benchmark indexes, the next six months will test their mettle and their portfolio skill. Those who simply mirror their index will fail to earn their management fee but will probably at least keep their jobs because 'who knew?' is always a safe excuse. This would be an appropriate year for low and flat management-fee structures."
Finally, the article states, "The bottom line is that even though there is considerable uncertainty about the future rate of inflation and thus the direction and timing of Federal Reserve monetary policy and short-term interest rates, the markets have discounted most of that already. As a result, the average cash manager is unlikely to find very many low-risk opportunities to outshine others until the likely inflation impact of tariffs is more obvious, presumably around Labor Day. Until then, staff time is likely spent better on other priorities, like finding ways to trim organization-wide fiscal 2026 expense budgets to match other revenue shortfalls thrust upon them by cost-shifting Washington politicians."
