The Securities and Exchange Commission has begun publishing a monthly "Money Market Fund Statistics" report, which summarizes Form N-MFP data and which includes totals on assets, yields, liquidity, WAM, WAL, holdings, and other money market fund trends. The data is produced by the SEC's Division of Investment Management. This inaugural release includes data as of Dec. 31, 2014, but the Jan. 31, 2015 data should be available shortly. Overall, total money market fund assets stood at $3.081 trillion at the end of the year, up $27 billion from Dec. 31, 2013, according to the SEC's broad total (which includes many private and internal funds not reported to ICI, Crane Data or other reporting agencies). We review the SEC's summary below, and also excerpt from Chair Mary Jo White's recent comments on money funds and from Fed Chair Yellen's testimony Tuesday.
Of the $3.081 trillion, $1.772 trillion was in Prime funds (down $20B from Dec. 31, 2013), $1.038 was in Government/Treasury funds (up $57B), and $270 billion was in Tax-Exempt funds (down $11B). There was quite a bit of consolidation as well, as the number of funds dropped to 546 from 561 at year-end 2013 and 592 on Dec. 31, 2012. We plan to track this new aggregate data and compare it month-to-month going forward.
Looking at other statistics, the Weighted Average Gross 7-Day Yield for Prime Funds was 0.20% on Dec. 31, 0.08% for Government/Treasury funds, and 0.07% for Tax-Exempt funds. The Weighted Average Net Prime Yield was 0.05% and the Weighted Average Prime Expense Ratio was 0.15%. All these numbers were virtually the same a year ago when rounded. The Weighted Average Life, or WAL, for Prime funds at year-end was 76.6 days (down from 79.6 days on Dec. 31, 2013), for Government/Treasury funds was 74.9 days (up from 65.7), and for Tax Exempt funds was 37.2 days (up from 36.4 days). The Weighted Average Maturity, or WAM, for Prime funds was 42.8 days (up from 46.0), for Govt/Treasury funds was 43.5 days (down from 48.3), and for Tax-Exempt funds was 36.2 days (up from 35.3 days). Total Daily Liquidity for Prime funds was 22.5% (down from 23.9% at the end of 2013), while Total Weekly Liquidity was 41.3% (up from 37.3%).
In the category Prime MMF Holdings of Bank Related Securities by Country, the US topped the list with $209.8 billion, just ahead of Canada at $209.2 billion. Japan was third with $176.9 billion, followed by France $130.4, Australia/New Zealand at $99.7B, and the UK at $71.7B. The Netherlands ($58.2B), Switzerland ($48.6B), Germany ($37.4B), and Singapore ($24.7B) round out the top 10. For Prime MMF Holdings of Bank-Related Securities by Region, Europe had $462.7 billion in while its subset, the Eurozone, had $235.2. The Americas was next with $421.7 billion, while Asia and Pacific had $308.9 billion.
The Total Amortized Cost of Prime MMF Portfolios was $1.759 trillion as of Dec. 31, 2014, down from $1.774 trillion 12 months earlier. That was made up of $580 billion in CDs, $504 billion in Government (including direct and repo), $340 billion in Non-Financial CP and Other Short term Securities, $238 billion in Financial Company CP, and $97 billion in ABCP. Also, the Proportion of Non-Government Securities in All Taxable Funds was 44.8% at year-end, down from 45.7% at year-end 2013. Further, All MMF Repo with Federal Reserve was $371.1 billion on Dec. 31, 2014, up from $154.6 billion at the end of 2013. Finally, the Trend in Longer Maturity Securities in Prime MMFs said 41.6% were in maturities of 60 days and over, while 12.0% were in maturities of 180 days and over.
In other news, SEC Chair Mary Jo White at Friday's "SEC Speaks" conference, discussed money fund reform and the SEC's plans for 2015. Chair White said 2014 was "a year of significant accomplishment" for the agency, commenting, "In 2014, we also adopted a number of critical reforms to promote financial stability for the protection of investors and to strengthen our markets following the financial crisis, including reforms related to money market funds, over-the-counter derivatives, asset-backed securities and credit rating agencies."
On MMF reform, she said, "U.S. money market funds, which hold more than $3 trillion, are critical to investors, corporations, municipalities and the overall economy. The crisis sparked important concerns about the operation of money market funds, particularly in times of stress. Following an extensive and careful analysis, the Commission, in July, adopted final rules that will fundamentally change the way these funds operate.... This was a very significant and important accomplishment for the agency and our staff will continue to carefully monitor market adjustments to the new reforms as they are fully implemented in 2016."
Commenting on what's ahead, White said, "Our post-crisis focus needs to include, among other things, particular attention to the activities of asset managers. As I outlined in remarks in December, the staff has been developing three sets of initial recommendations to address the increasingly complex portfolio composition and operations of today's asset management industry, which manages more than $62 trillion of assets.... The first seeks to modernize and enhance data reporting for both funds and investment advisers. The second would require registered funds to have controls in place to more effectively identify and manage the risks related to the diverse composition of their portfolios, including liquidity management and the use of derivatives in mutual funds and ETFs. The third focuses on planning for the impact of market stress events or when an adviser is no longer able to serve its clients."
Finally, Federal Reserve Board Chair Janet Yellen testified before Congress yesterday, providing some details on what "patient" means and the mechanics of rate hikes moving forward. Yellen said, "The FOMC is also providing forward guidance that offers information about our policy outlook and expectations for the future path of the federal funds rate. In that regard, the Committee judged, in December and January, that it can be patient in beginning to raise the federal funds rate.... The FOMC's assessment that it can be patient in beginning to normalize policy means that the Committee considers it unlikely that economic conditions will warrant an increase in the target range for the federal funds rate for at least the next couple of FOMC meetings. If economic conditions continue to improve, as the Committee anticipates, the Committee will at some point begin considering an increase in the target range for the federal funds rate on a meeting-by-meeting basis. Before then, the Committee will change its forward guidance. However, it is important to emphasize that a modification of the forward guidance should not be read as indicating that the Committee will necessarily increase the target range in a couple of meetings."
Yellen added, "Let me now turn to the mechanics of how we intend to normalize the stance and conduct of monetary policy when a decision is eventually made to raise the target range for the federal funds rate... The FOMC intends to adjust the stance of monetary policy during normalization primarily by changing its target range for the federal funds rate and not by actively managing the Federal Reserve's balance sheet. The Committee is confident that it has the tools it needs to raise short-term interest rates when it becomes appropriate to do so and to maintain reasonable control of the level of short-term interest rates as policy continues to firm thereafter, even though the level of reserves held by depository institutions is likely to diminish only gradually. The primary means of raising the federal funds rate will be to increase the rate of interest paid on excess reserves. The Committee also will use an overnight reverse repurchase agreement facility and other supplementary tools as needed to help control the federal funds rate. As economic and financial conditions evolve, the Committee will phase out these supplementary tools when they are no longer needed."
