On Sunday, Investment News mentioned FDIC-insured brokerage sweeps in "Schwab outlines products, enhancements for 2010". They say, "Included in the mix are expanded trust capabilities, online foreign-stock trading and Federal Deposit Insurance Corp.-insured sweep accounts for parking clients' cash at multiple banks." And on Friday, we hear news that Bill Gross isn't practicing what he preaches. (See Crane Data's Nov. 20 News, "PIMCO's Bill Gross Says 'Anything But 0.01 Percent' in Latest Outlook".) Bloomberg wrote Friday, "Pimco's Gross Boosts Cash to Most Since Lehman Failed", which says, "Bill Gross, who runs the world's biggest bond fund at Pacific Investment Management Co., cut holdings of government debt and boosted cash to the most since Lehman Brothers Holdings Inc. collapsed in September 2008."
The Investment News piece explains, "For RIA clients, he [chief executive Walter W. Bettinger II] singled out a plan for 'a multibank sweep initiative which enables advisers to deliver to their end-clients likely a higher yield than they can get today in a traditional sweep money market fund.' Schwab officials wouldn't comment on when the offering will be ready, but said the firm has to make systems and other operational adjustments."
IN adds, "TD Ameritrade this month plans to double the FDIC-insured capacity it offers on sweep accounts by adding a second bank affiliated with TD Bank Financial Group, its largest stakeholder, a spokeswoman said. It began offering its first sweep vehicle in May as an alternative to rock-bottom money market rates with a government guarantee."
The Bloomberg PIMCO article says, "Gross increased cash in the $199.4 billion Total Return Fund's to 7 percent in November from negative 7 percent in October, according to Pimco's Web site.... Cash and equivalent securities can include commercial paper, short-term government and mortgage-backed securities, short-maturity company bonds and money market derivatives, according to the site."
We assume that most bond funds, which have grown to $2.13 trillion YTD and which have seen asset increases of a stunning $560.7 billion through Oct. 31, have been increasing cash levels due to the flood of inflows. Note that the ICI doesn't publish cash holdings for bond funds, but that stock funds' holdings of "Liquid Assets of Stock Mutual Funds" remains near record low levels at 3.9% in October. (See ICI's monthly "Trends in Mutual Fund Investing".)
