Money fund yields (7-day, annualized, simple, net) increased by two basis points to 4.12% on average during the week ended Friday, May 30 (as measured by our Crane 100 Money Fund Index), after declining by one basis point the previous week. Fund yields should stay relatively flat until the Fed moves rates again later this year. They've declined by 94 bps since the Fed first cut its Fed funds target rate by 50 bps on Sept. 18, 2024, and they've declined by 51 bps since the Fed last cut rates by 1/4 point on 11/7/24. Yields were 4.13% on 4/30/25, 4.14% on 3/31/25, 4.16% on 2/28/25, 4.19% on 1/31/25, 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 ASAP for our upcoming Crane's Money Fund Symposium, which is in just 3 weeks -- June 23-25 -- in Boston!)
The broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 682), shows a 7-day yield of 4.02%, up 1 bp in the week through Friday. Prime Inst money fund yields were up 1 bp at 4.25% in the latest week. Government Inst MFs were up 1 bp at 4.12%. Treasury Inst MFs were up 1 bp at 4.07%. Treasury Retail MFs currently yield 3.83%, Government Retail MFs yield 3.82%, and Prime Retail MFs yield 4.01%, Tax-exempt MF 7-day yields were down 38 bps to 2.13%.
Assets of money market funds rose by $85.7 billion last week to a record $7.400 trillion, according to Crane Data's Money Fund Intelligence Daily. This is the first record for MMF assets since the previous high of $7.383 trillion set on April 3. For the month of May (MTD), MMF assets have increased by $100.9 billion, after decreasing $24.4 billion in April, increasing by $2.8 billion in March, $94.2 billion in February, $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 at 37 days for the Crane MFA and 39 days the Crane 100 Money Fund Index.
According to Monday's Money Fund Intelligence Daily, with data as of Friday (5/30), 115 money funds (out of 794 total) yield under 3.0% with $147.6 billion in assets, or 2.0%; 249 funds yield between 3.00% and 3.99% ($1.306 trillion, or 17.7%), 430 funds yield between 4.0% and 4.99% ($5.946 trillion, or 80.4%) 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 0.40%, after falling 1 bp two weeks prior. The latest Brokerage Sweep Intelligence, with data as of May 30, 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' MM CIO Deborah Cunningham writes, "The answer is, 'No'." She explains, "The question: Has Moody's downgrade of the US credit rating impacted money market funds? This is one of those instances when it is best to be direct. As soon as the news hit about Moody's recent downgrade of the US credit rating, we knew cash managers would be fielding questions about its impact on US money market funds. There are no ramifications: The rating agency has affirmed its Aaa-mf assessment of money funds is unaffected by the 'demotion.'"
The piece explains, "It's been some time since the other two major agencies lowered their US ratings -- the S&P in 2011 and Fitch in 2023 -- but it was almost instantly old news in our minds. The downgrades reflect the agencies' views on the federal government's inability to reduce its mammoth debt. By its nature, that is a long-term problem, meaning applicable to US Treasury bonds and notes. Bills, which have shorter maturities, are not subject to the same concern. And, among the three, most money market funds predominately or exclusively own bills."
It comments, "So, why doesn't a US downgrade impact a money fund rating? Well, it's all about time and methodology. Like the others, Moody's framework takes a holistic view of a fund, incorporating not only a credit assessment but also maturity and liquidity metrics, among other aspects. Although the downgrade may affect the credit-quality measure, the short-term nature of money fund holdings due to the maturity restrictions of Rule 2a-7 likely kept this impact modest. At the same time, the very high liquidity positions of these products remain robust, augmenting the overall stability profile of portfolios."
Cunningham says, "Critically, money fund risk management measures go several steps beyond simply choosing Treasury bills over notes and bonds. Generally speaking, the weighted average maturity of a fund's entire portfolio must be 60 days or less, it must hold a large amount of securities redeemable daily or weekly, and any asset it holds other than T-bills (such as Fannie Mae securities or commercial paper) must also be highly rated. In other words, Moody's and the like have not changed their opinion about the soundness of these financial products that operate in the short range of high-quality securities and that seek stability and preservation of capital. We think investors reach the same conclusion."
Finally, she adds, "President Trump has tested the bulwark protecting the Federal Reserve from political interference and found it as sturdy as ever. His insults of Chair Powell are one thing, but claiming he had the authority to fire him is another. That stance threatened the Fed's independent stature and was serious enough to earn a slapdown by the bond market. No one bullies like bondholders.... Thankfully, the Supreme Court stepped in. While it affirmed that the White House could dismiss the directors in question, it proactively shut the door on any similar attempt with the central bank: 'The Federal Reserve is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States.'"
