Assets of money market mutual funds dropped by $15.4 billion, or 0.6%, in March according to Crane's Money Fund Intelligence Daily (through 3/31/11), while yields remained at record low levels. Analysis of Friday's MFI Daily shows that Tax-Exempt money funds drove the declines in March, falling $9.4 billion, or 3.0%. Assets had risen slightly in February (up $1.2 billion) after falling sharply in January by $67.2 billion, or 2.5%. Declines early in the year were driven by outflows from Government and Treasury Institutional funds.

The 7-day (net) annualized yield of our Crane 100 Money Fund Index, an average of the 100 largest taxable money funds, dipped to 0.06% as of March 31 from 0.07% in January and February. Our broader Crane Money Fund Average, a measure of all taxable money funds, remained at 0.03%, where it has been all year. The Crane Tax-Exempt Money Fund Index remained at 0.03% in March, after falling to 0.04% in February and 0.05% in January. Look for more information on yields and assets in March in our Money Fund Intelligence and monthly data products, which come out Thursday morning.

In other news, Professional Pensions reports "DB Advisors looks to absorb SLI money market assets", which says, "DB Advisors could win up to $12bn (L7.4bn) in money market fund assets from rival Standard Life Investments after SLI's withdrawal from the sector over regulatory concerns. Standard Life Investments became the latest manager to quit its money market funds on the grounds it does not offer banking products to its clients. Global regulators are considering ushering Treasury-style money market funds into the scope of banking regulations."

Also, Capital Advisors released a research piece entitled, "The Path for Housing GSEs and its Impact on Corporate Cash Investors." It says, "Recent events related to government sponsored enterprise (GSE) reform have prompted short-duration investors to question the level and nature of government support for their debt issuance after December 31, 2012. The housing GSEs play a critical role in the U.S. mortgage market, representing 99% of all new mortgage backed securities (MBS) issuance in recent years. Money market funds owned $402 billion in agency debt at the end of 2010, which accounts for approximately 15% of all fund assets, and direct holdings of agency debt doubled in corporate cash portfolios between 1Q 2009 and 4Q2010."

The piece continues, "Due to their current government debt classification, the sudden removal of U.S. Treasury support for GSE debt may pose systemic risk. Current and projected capital draws by their regulator indicate that Fannie Mae (FNM) and Freddie Mac (FRE) may not need additional Congressional capital appropriations after 2012. The government's proposal to Congress also indicates its strong commitment to maintaining support. In conclusion, an expected lengthy political process, the possibility of grandfathering existing debt, and the short duration nature of cash debt, should provide additional comfort to corporate cash investors."

Finally, Treasury Strategies issued a press release entitled, "Comptroller of the Currency Says Moody's Proposed Rating Methodology For Money Market Funds Must Not Rely on Sponsor Support." It says, "Criticism is mounting for a proposal from Moody's Investor Services that would rate money market funds based on a fund sponsor's ability and willingness to support a distressed fund. Acting Comptroller of the Currency John Walsh expressed the regulator's opposition in a letter to Congressman Gregory Meeks, stating, 'We are opposed to any policy that creates an expectation that a national bank will be relied upon to provide support to a sponsored fund.'"

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