The December issue of our flagship Money Fund Intelligence newsletter, which was sent to subscribers Wednesday morning, features the articles: "Prime, Tax-Ex Assets Bottom; Rising Rates Returning Cash?" which reviews the latest yields, flow data and fund changes; "SSGA's Butler & McCusker on Cash Investing Post Reform," which profiles Yeng Felipe Butler and Pia McCusker on State Street's latest thinking; and "European Money Fund Regs Passed, But Details Murky," which looks at the EU's new money fund reforms. We have updated our Money Fund Wisdom database query system with Nov. 30, 2016, performance statistics, and also sent out our MFI XLS spreadsheet Wednesday a.m. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our December Money Fund Portfolio Holdings are scheduled to ship Friday, Dec. 9, and our Dec. Bond Fund Intelligence is scheduled to go out Wednesday, Dec. 14.
MFI's lead "Prime, T-E MMFs Stabilize" article says, "Prime money market fund assets, which slid $1.1 trillion, or 75% in the 52 weeks through the end of October, have been flat at around $375 billion for 5 weeks straight. Tax-exempt MMF assets too have seen outflows subside, as both savaged segments of the money fund world catch a breather and await a likely Fed hike next week. The return of Prime and the development of alternatives like conservative ultra-short bond funds depends heavily on growing spreads between these and Government products."
It adds, "While it's been a very rough year for Prime, the New Year looks a lot brighter. Yields have already risen slightly in recent weeks. Our Crane 100 Money Fund Index, the average yield of the 100 largest taxable MMFs, is up 2 basis points in November (to 0.30%) and another one in December month-to-date. If, as expected, the Fed moves its target funds rate to a range of 0.5-075% next week, money fund rates will quickly follow."
Our latest fund "profile" interview reads, "This month, Money Fund Intelligence interviews State Street Global Advisors' Senior Managing Directors and Global Heads of Cash Management Yeng Felipe Butler and Pia McCusker. We discuss a number of topics, including finding the right mix of liquidity and return for clients in the new post-reform money fund environment."
The article asks, "How long has State Street Global Advisors been involved in running cash and money market funds?" Butler tells us, "State Street Global Advisors has been managing client cash for nearly four decades. We launched our first prime money market fund in 1988 and have continued to bring new cash solutions to our clients over the years. Today, we provide commingled and tailored solutions to institutional clients around the world through our money market funds, separately managed accounts, cash ETFs, and ultra-short term bond funds."
Our "European Money Fund Regs" article explains, "The European Union agreed to a new set of money market fund regulations recently, which will introduce a hybrid of stable and variable NAV money funds in Europe. The European Parliament's release entitled, "Money Market Funds: breakthrough agreement between MEPs and Slovak Presidency," says, "An agreement on the EU money market funds regulation has been struck by the European Parliament, Council and Commission, after lengthy negotiations, more than three years after the Commission published the original proposal."
It adds, "U.K. Rapporteur Neena Gill comments, "This is one of the most contentious and complex pieces of legislation that has been held up for more than three years. I am delighted we have an overall agreement between Parliament and the Council. I believe this is a win-win deal for both major European MMF sectors, variable and constant net asset value MMFs (VNAVs and CNAVs) respectively."
In a sidebar, we discuss, "Wells and RBC on SIFMA," saying, "Wells Fargo Securities' Garret Sloan writes, "After taking a wild ride over the past few months, the SIFMA 7-day index appears to be finding an equilibrium level in the mid-50s. In December, the index remained relatively uncorrelated with the movement of the Fed funds rate, remaining pinned at 1 basis point for another three months before moving in response to tax-related outflows in March. Previous rate cycles have seen SIFMA move more quickly, though not in a 1-for-1 relationship."
We also do a sidebar, entitled, "JPM: 2017 Outlook Uncertain," which comments, "J.P. Morgan Securities' writes in a new "Short-Term Fixed Income 2017 Outlook" about life after Prime. They tell us, "Normally, these year-ahead outlooks are focused on the future.... Yet as we write this in November 2016, our forecasts are clouded with a level of uncertainty, not only because of the outcome of the US elections but also because there's been a significant transformation in the money markets this past year, leaving many to wonder just how liquidity investors and issuers will behave in the new world absent the large presence of prime MMFs."
Our December MFI XLS, with Nov. 30, 2016, data, shows total assets increased $32.1 billion in November to $2.646 trillion after decreasing $3.1 billion in October and $48.5 billion in September, and increasing $19.3 billion in August and $11.6 billion in July. Our broad Crane Money Fund Average 7-Day Yield was up 1 bps to 0.16% for the month, while our Crane 100 Money Fund Index (the 100 largest taxable funds) rose 2 bps to 0.30% (7-day).
On a Gross Yield Basis (before expenses were taken out), the Crane MFA inched up to 0.50% and the Crane 100 rose 3 bps to 0.55%. Charged Expenses averaged 0.33% and 0.25% for the Crane MFA and Crane 100, respectively (unchanged). The average WAM (weighted average maturity) for the Crane MFA was 35 days (up 1 day from last month) and for the Crane 100 was 36 days (up 1 day). (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
