Assets of Prime money market funds rose Tuesday, their second increase over the past week, which likely marks an end to the massive $1.1 trillion Prime to Government shift over the past year. According to our Money Fund Intelligence Daily, Prime MMFs rose by $202 million on Oct. 25 to $385.5 billion; assets are down a mere $1.1 billion over the past week. Weighted average maturities have inched out and yields have crept higher, so these funds appear to be slowly attracting back some client assets. Whether Prime will make a true comeback remains to be seen, but the early post-reform signs appear encouraging. (Note: Last Friday we made some final categorization tweaks, shifting a handful of funds from retail to inst and from prime vs. government. We'd missed these ahead of the Oct. 14 reforms.) We briefly review recent changes below, and we also cover the SEC's September "Money Market Fund Statistics."
Our MFI Daily shows Prime Institutional funds currently totaling $128.9 billion and Prime Retail funds totaling $256.5 billion. Prime Inst MMFs on average are now yielding 0.29%, 13 bps higher than Govt Inst MMFs and 17 bps higher than Treas Inst MMFs. Prime Inst funds have extended their WAMs by 2 days over the past week (to 14 days) from recent record low levels, and Prime Retail MMFs have extended WAMs by 4 days to 28 days. Weekly Liquid Assets (WLA) have risen fallen to 77.1% (from 79.7%) for Prime Inst and to 54.0% (from 60.6%) for Prime Retail.
A number of money fund providers at this week's AFP Annual Meeting, the largest gathering of corporate treasury investors, said they've seen positive Prime inflows and have heard encouraging comments from investors about returning. Our discussions and public statements from investors too indicate that Prime might make a comeback at some point, though a number of rate increases will likely be needed before assets begin growing in earnest. While it's too early to predict that Prime assets will retake the $500 billion level, it is a relief to see that they're no longer going down.
In other news, the SEC released its latest "Money Market Fund Statistics" last week, and the latest data shows that assets were down slightly in September but that almost $300 billion shifted from Prime to Government MMFs last month. Gross yields increased for Prime MMFs and jumped for Tax Exempt MMFs. The SEC's Division of Investment Management summarizes monthly Form N-MFP data and includes asset totals and averages for yields, liquidity levels, WAMs, WALs, holdings, and other money market fund trends. The Commission's latest statistics show total money market fund assets decreased by $35.2 million in September to $2.945 billion. (The SEC's series includes some private and internal funds not reported to ICI, Crane Data or other reporting agencies.) Assets fell $33.7 billion in August, $21.2 billion in July, and $20.7 billion in June. Year-to-date, total assets are down $140.6 billion, or 4.6%, through 9/30.
Of the $2.945 billion in assets, $741.0 billion was in Prime funds, which dropped by $292.1 billion in September after falling $201.3 billion in August, $44.5 billion in July, $124.5 billion in June, and $66.9B in May. Prime funds represented 25.2% of total assets at the end of Sept.; they've declined by $831.0 billion YTD, or 52.9%, and they've fallen $1.050 trillion, or 58.6% since 10/31/15. Government & Treasury funds total $2.068.2 billion, or 70.2% of assets, up $280.3 billion in September, after being up $198.7 billion in August, $77.0 billion in July and $120B in June. Govt & Treas MMFs are up $818.6 billion YTD (65.5%) and $1.027 trillion (98.7%) since 10/31/15, just prior to the start of the Prime to Govt conversion trend. Tax Exempt Funds were down again, dropping $23.5 billion to $135.6 billion, or 4.6% of all assets. The number of money funds was 443, down 10 for the month and down 78 from 9/30/15.
Yields increased in September. The Weighted Average Gross 7-Day Yield for Prime Funds on September 30 was 0.63%, up 6 basis point from the previous month, and more than double the 0.27% of November 2015 (before the Fed hike). Gross yields were 0.42% for Government/Treasury funds, up 1 basis point from the previous month but up 0.27% since 11/15. Tax Exempt Weighted Gross Yields jumped 21 basis points in September to 0.81%. The `Weighted Average Net Prime Yield was 0.40%, up by 0.05% from the previous month and up 0.29% since 11/15. For the year-to-date, 7-day gross yields for Prime are up 22 basis points and net yields are up 18 basis points. The Weighted Average Prime Expense Ratio was 0.23% in September (up one bps from August). Prime expense ratios have risen from 0.16% in November 2015. (Note: These averages are asset-weighted.)
Weighted Average Maturities rebounded but liquidity continued to inch higher in September. The average Weighted Average Life, or WAL, was 43.0 days (up 6.5 from last month) for Prime funds, 94.6 days (down 3.8 days) for Government/Treasury funds, and 27.5 days (down 1.5 days) for Tax Exempt funds. The Weighted Average Maturity, or WAM was 25.8 days (up 4.0 days from the previous month) for Prime funds, 42.2 days (up 1.0 days) for Govt/Treasury funds, and 24.9 days (down 1.7 days) for Tax-Exempt funds. Total Daily Liquidity for Prime funds was 43.0% in September (up 4.3% from previous month). Total Weekly Liquidity was 63.0% (up 0.8%) for Prime MMFs.
In the SEC's "Prime MMF Holdings of Bank Related Securities by Country" table, ` the U.S. topped the list with $77.2 billion, followed by Canada with $77.0 billion <b:>`_. Sweden was third with $57.3 billion, followed by France ($55.6B), Japan with $50.6B and Australia/New Zealand ($37.6B), the UK ($30.3B) and Germany ($28.7B). The Netherlands ($23.8B) and Switzerland ($13.2B) round up the top 10.
Once again, there were not any gainers among Prime MMF bank related securities for the month. The biggest drops came from France (down $89.9B), Sweden (down $38.4B), Japan (down $37.0B), and the U.S. (down $23.3B). For Prime MMF Holdings of Bank-Related Securities by Major Region, Europe had $218.8B (down $195.8B from last month), while the Eurozone subset had $110.6 billion (down from $117.2B). The Americas had $154.6 billion (down from $46.8B), while Asian and Pacific had $98.9 billion (down from $63.0B).
Of the $731.8 billion in Prime MMF Portfolios as of September 30, $260.2M (35.6%) was in CDs (down from $458.6B), $224.1B (30.6%) was in Government securities (including direct and repo), up from $220.1B, $129.1B (17.6%) was held in Non-Financial CP and Other Short Term Securities (down from $159.0B), $86.1B (11.8%) was in Financial Company CP (down from $141.5B), and $32.2B (4.4%) was in ABCP (down from $50.5B).
The Proportion of Non-Government Securities in All Taxable Funds was 18.4% at month-end, down from 28.5% the previous month. All MMF Repo with Federal Reserve rebounded to $387.5B in September from $149.9B the previous month. Finally, the "Trend in Longer Maturity Securities in Prime MMFs" tables shows 25.0% were in maturities of 60 days and over (up from 20.9%), while 3.7% were in maturities of 180 days and over (up from 3.0%).
