The Securities and Exchange Commission released its latest "Money Market Fund Statistics" report, which shows assets flat, yields up, and WAMs lower for the month ended June 30, 2015. Government funds gained $23 billion while Prime funds lost $24 billion last month. The report summarizes monthly Form N-MFP data and 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. Overall, total money market fund assets stood at $2.965 trillion at the end of June, down $3.4 billion, after rising $32.2 billion in May, according to the SEC's broad total (which includes many private and internal funds not reported to ICI, Crane Data or other reporting agencies). Below, we also report on the latest meeting of the Treasury Borrowing Advisory Committee, who discussed T-bill issuance and the impact on money markets.
In the SEC's new update, of the $2.965 trillion in assets, $1.707 trillion was in Prime funds (down $24.3B from May 31), $1,007.0B was in Government/Treasury funds (up $23.1B), and $251.0 billion was in Tax-Exempt funds (down $2.3B). Total assets were down $116.2 billion year to date through June 30. Prime assets were down $65.9 billion year-to-date, while Government/Treasury MMF assets were down $31.1 billion year-to-date. Tax exempt assets were down $19.2 billion year-to-date. The number of money funds was 537, same as last month, but down 19 from a year ago and down 39 from 2 years ago.
The Weighted Average Gross 7-Day Yield for Prime Funds on June 30 was 0.23% (up from 0.22%), 0.10% for Government/Treasury funds (unchanged), and 0.10% for Tax-Exempt funds (down from 0.13%). The Weighted Average Net Prime Yield was 0.07% (up from 0.06% last month). The Weighted Average Prime Expense Ratio was 0.16% (unchanged). Gross yields for Prime MMFs are up 3 bps YTD (to 0.23%) and up 4 bps since a year ago, expense ratios for Prime MMFs are up just one bps YTD and over the past year (to 0.16%), and net yields for Prime MMFs are up 2 bps YTD and 3 bps over 1 year (to 0.07%).
The Weighted Average Life, or WAL, was 72.9 days (down from 74.4 last month) for Prime funds, 75.4 days (down from 78.2 days last month) for Government/Treasury funds, and 33.6 days (up from 28.3 days) for Tax Exempt funds. The Weighted Average Maturity, or WAM, was 36.8 days (down from 38.5) for Prime funds, 39.5 days (down from 40.9) for Govt/Treasury funds, and 31.6 days (up from 26.7) for Tax-Exempt funds. Total Daily Liquidity for Prime funds was 26.2% in June (down from 25.7% last month). Total Weekly Liquidity was 41.0% (up from 39.8%).
In the SEC's "Prime MMF Holdings of Bank Related Securities by Country" table, Canada topped the list with $216.7 billion, followed by the US at $190.8 billion. Japan was third with $179.9 billion, followed by France with $111.8 billion, Australia/New Zealand ($97.4B), Sweden ($87.9B), the UK ($67.5B), The Netherlands ($56.8B), Switzerland ($53.4B), and Germany ($44.7B). The biggest gainers for the month were Singapore (up $3.4B), Canada (up $3.2B), China (up $3.1B), and Japan (up $2.9B). The biggest drops came from France (down $52.6B), UK (down $39.3B), Norway (down $30.3B) and Sweden (down $25.4B). For Prime MMF Holdings of Bank-Related Securities by Major Region, Europe had $436.9 billion, while its subset, the Eurozone, had $219.7. The Americas was next with $410.2 billion, while Asia and Pacific had $307.2 billion.
Of the $1.688 trillion in Prime MMF Portfolios as of June 30, $540.9B was in CDs, $451.9B was in Government (including direct and repo), $357.4B was held in Non-Financial CP and Other Short term Securities, $244.9B was in Financial Company CP, and $92.7B was in ABCP. Also, the Proportion of Non-Government Securities in All Taxable Funds was 45.9% at month-end, down from 51.4% the previous month. All MMF Repo with Federal Reserve was $372.2 billion on June 30, up from $149.0B. Finally, the Trend in Longer Maturity Securities in Prime MMFs said 41.7% were in maturities of 60 days and over (up from 41.7% last month), while 10.6% were in maturities of 180 days and over (up from 10.0% last month).
In other news, the Treasury Borrowing Advisory Committee met earlier this week. In its "Report to the Secretary," that followed the meeting, TBAC writes, "The Committee's third charge was to examine whether adjustments to the Treasury's debt issuance schedule were warranted in light of current and projected funding needs.... Given the projected increased funding needs in FY2016 and beyond, which could increase further were the Fed to end reinvestment of Treasury maturities, the Committee recommended that the Treasury maintain its current issuance pattern. While operational cash balances can be adjusted via Treasury bill issuance, it was noted that both bill issuance and the Treasury's operational cash balance may need to be cut dramatically over coming weeks and months if Congress does not raise the debt limit in a timely manner."
It continues, "As discussed in prior letters from the Committee, there is potentially significant risk associated with holding a lower operational cash balance and there are negative implications for bill market functioning associated with large issuance reductions. These risks could be exacerbated by a confluence of events related to the implications of money market reform and the stance of Federal Reserve monetary policy. The Committee also emphasized the importance of smooth market functioning to minimizing the cost of debt issuance over time and was supportive of increasing the stock to T-bills outstanding to aid the proper functioning of the short-term debt markets given the increasing demand for high-quality liquid collateral in light of regulatory changes. The percentage of T-bills outstanding is at a multi-decade low of approximately 11%, with an outstanding stock of $1.4 trillion."
RBC Capital Markets' strategist Michael Cloherty commented, "The TBAC talked about moving to longer issuance (in part to take advantage of low rates).... Treasury did not provide a drop-dead date for the debt ceiling, so the bill curve won't get dramatically disrupted yet. But we would still stay far away from the Dec. 3 bills. They did not take their cash balance target as high as we thought they would (going to a $200bn-225bn target most of the time) -- that means fewer bills than we expected (so extreme richness expected through the money fund reform process), and means a smaller reserve drain from the Treasury cash balance."
