The Investment Company Institute released its latest "Money Market Fund Holdings" report, which tracks the aggregate daily and weekly liquid assets, regional exposure, and maturities (WAM and WAL) for Prime and Government money market funds (as of July 31, 2014). ICI's "Prime and Government Money Market Funds' Daily and Weekly Liquid Assets" table shows Prime Money Market Funds' Daily liquid assets at 23.2% as of July 31, 2014, down from 24.2% on June 30. Daily liquid assets were made up of: "All securities maturing within 1 day," which totaled 19.0% (vs. 19.7% last month) and "Other treasury securities," which added 4.2% (vs. 4.5% last month). Prime funds' Weekly liquid assets totaled 37.9% (vs. 36.1% last month), which was made up of "All securities maturing within 5 days" (31.6% vs. 30.0% in June), Other treasury securities (4.2% vs. 4.4% in June), and Other agency securities (2.1% vs. 1.7% a month ago).
Government Money Market Funds' Daily liquid assets total 59.1% as of July 31 vs 62.8% in June. All securities maturing within 1 day totaled 25.4% vs. 27.8% last month. Other treasury securities added 33.7% (vs. 35.0% in June). Weekly liquid assets totaled 79.8% (vs. 81.6%), which was comprised of All securities maturing within 5 days (37.4% vs. 39.0%), Other treasury securities (31.7% vs. 32.5%), and Other agency securities (10.7% vs. 10.1%).
ICI's "Prime and Government Money Market Funds' Holdings, by Region of Issuer" table shows Prime Money Market Funds with 41.6% in the Americas (vs. 47.9% last month), 19.9% in Asia Pacific (vs. 20.0%), 38.2% in Europe (vs. 32.0%), and 0.2% in Other and Supranational (same as last month). Government Money Market Funds held 83.1% in the Americas (vs. 89.9% last month), 1.0% in Asia Pacific (vs. 0.5%), 15.9% in Europe (vs. 9.6%), and 0.1% in Supranational (vs. 0.0%).
The table, "Prime and Government Money Market Funds' WAMs and WALs" shows Prime MMFs WAMs at 44 days as of July 31 vs. 45 days in June. WALs was at 78 days, down from 80 last month. Government MMFs' WAMs increased to 45 days, up from 42 last month, while WALs jumped to 74 days from 71 days. ICI's release explains, "Each month, ICI reports numbers based on the Securities and Exchange Commission's Form N-MFP data, which many fund sponsors provide directly to the Institute. ICI's data report for May covers funds holding 94 percent of taxable money market fund assets." Note: ICI doesn't publish individual fund holdings.
In other news, Fitch Ratings released its "US Money Market Funds Quarterly 2Q14" in which it tracks money market fund flows following the SEC money market reforms. Writes Fitch, "It appears that money fund investors have thus far taken a wait-and-see approach to the SEC's reform efforts, and many are still reviewing the final rules. Institutional investors will need to re-examine and update their investment policies to be able to use the new money fund structures or access alternative liquidity management solutions. Once this process is under way, prime money funds may experience more significant outflows and will need to be prepared to handle them." According to Crane Data's Prime Institutional Money Fund Index, as of August 15, prime institutional funds had $784.5 billion, down from $800.5 billion on July 23, when the SEC adopted money fund reforms, a decrease of 2.0%.
Fitch also commented on the Federal Reserve's reverse repo program. "Prime and government money funds allocated a record $275 billion to the Fed's reverse repo facility (RRP) at the end of 2Q14 to offset the seasonal reduction in banks' balance sheet capacity. Between May-end and June-end, money funds increased their allocations to the RRP facility by $148 billion, according to Crane Data. At the same time, the funds reduced investments in government and treasury repos with banks by $72 billion. Banks have historically sought to reduce the size of their balance sheets and leverage on quarter-end reporting dates, but the phenomenon seems to have been exacerbated due to new bank regulatory requirements."
The Fitch quarterly saw little change in liquidity in Q2. "At the end of June, Fitch-rated prime MMFs had on average 25% and 39% of their portfolios in daily and weekly liquid assets, respectively. This is almost unchanged compared to liquidity numbers at the end of March and remains well above Fitch's criteria guidelines for 'AAAmmf' funds."
The ratings agency also saw stable durations. "The weighted average maturity (WAM) and weighted average life (WAL) of Fitch-rated prime MMFs were at 41 and 66 days at the end of June, compared with March figures of 40 and 68 days. All funds remain under the respective WAM and WAL thresholds for Fitch's 'AAAmmf' rating of 60 days and 120 days. The average portfolio credit factor (PCF) of Fitch-rated prime MMFs ticked up slightly to 1.17 at the end of June, compared with 1.16 at the end of March. The maximum PCF threshold for Fitch's 'AAAmmf' rated funds is 1.50. PCF is a fund’s asset-weighted average of credit risk factors, based on each portfolio security's rating and maturity."
On holdings, Fitch commented: "The use of the Fed's reverse repo facility was at a record high of $339 billion for the June quarter end. Fitch-rated prime MMFs invested nearly 9.5% of assets altogether with the Fed. Demand for CP holdings in Fitch-rated prime MMF decreased to 22% of total assets in June, down from 23% at the end of March. Government MMFs made asset allocation changes by moving out of Treasuries and into repo. Municipal fund allocations were largely stable over the quarter."
Fitch also saw increased exposure in the U.S. "Allocations to the U.S. continue to increase as money funds take advantage of the availability of the Federal Reserve Bank of New York's reverse repo facility. Exposure to Germany decreased the most across countries, driven by reduced investments in Deutsche Bank. All other country allocation changes amounted to less than 1% of prime funds' portfolios, reflecting the current relative stability of short-term markets."
