MMF Assets Flat; P&I Says Raise Rates
Money fund assets were down fractionally in the latest week (which included the month-end), following five straight weeks of asset gains, according to ICI's latest "Money Market Fund Assets" report. It says, "Total money market fund assets decreased by $30 million to $2.73 trillion for the week ended Wednesday, June 1, the Investment Company Institute reported today. Among taxable money market funds, government funds increased by $23.66 billion and prime funds decreased by $22.67 billion. Tax-exempt money market funds decreased by $1.02 billion." Government assets, including Institutional and Retail (and Treasury and Government), stand at $1.378 trillion, while Prime assets are at $1.146 trillion. Government fund assets moved ahead of Prime assets earlier this year, fueled by the conversion (or liquidation) of $245.4 billion of Prime funds to Govt funds through May 31. (The latest flows were also no doubt influenced by Prime to Govt conversions, including the liquidation of PNC's Prime and Tax Exempt MMFs.) The release continues, "Assets of retail money market funds decreased by $3.17 billion to $968.19 billion. Among retail funds, government money market fund assets increased by $130 million to $406.03 billion, prime money market fund assets decreased by $3.13 billion to $399.80 billion, and tax-exempt fund assets decreased by $170 million to $162.36 billion." It adds, "Assets of institutional money market funds increased by $3.14 billion to $1.77 trillion. Among institutional funds, government money market fund assets increased by $23.52 billion to $972.17 billion, prime money market fund assets decreased by $19.54 billion to $746.31 billion, and tax-exempt fund assets decreased by $840 million to $46.73 billion." Year-to-date through June 1, MMF assets are down $26 billion with Inst assets down $55 billion and Retail assets up $29 billion. A Footnote to ICI's release adds, "In anticipation of the Securities and Exchange Commission's (SEC) new money market fund regulations, many advisers are changing their prime money market funds into government money market funds. As a result, there have been, and will continue to be, large shifts in assets from prime funds to government funds before the October 2016 deadline." In other news, Pensions & Investments wrote the editorial, "Lift Heavy Hand Off Interest Rates." It says, "The FOMC should move in June to raise rates further and keep raising them to a normalized level. It is a challenge to determine what that normal level should be. Interest rates have fallen steadily for 35 years. The Fed should relax its grip to allow the market to determine interest rates at any time in the economic cycle. Current monetary policy has failed to invigorate a weak economy.... Minutes of FOMC activity show its members have failed to take into account the ramifications of monetary policy on investment markets and its impact on the economy.... Retirement plans, whether defined benefit or defined contribution, have important social and economic value that the FOMC and Fed fail to take into account in monetary decisions. Their strength helps relieve pressure on government safety nets, already financially strained because of a weak economy."
