As expected, the Federal Reserve didn't hike short-term interest rates at its meeting yesterday, but they remain on track to raise rates above the 2% level at their June 12-13 meeting next month. A release entitled, "Federal Reserve issues FOMC statement" explains, "Information received since the Federal Open Market Committee met in March indicates that the labor market has continued to strengthen and that economic activity has been rising at a moderate rate. Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low.... On a 12-month basis, both overall inflation and inflation for items other than food and energy have moved close to 2 percent." We review the Fed's statement, as well as the latest Treasury auction and statement and our latest Weekly Portfolio Holdings data set below.

The FOMC says, "Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with further gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace in the medium term and labor market conditions will remain strong. Inflation on a 12-month basis is expected to run near the Committee's symmetric 2 percent objective over the medium term. Risks to the economic outlook appear roughly balanced."

They continue, "In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1-1/2 to 1-3/4 percent. The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation."

The Fed adds, "In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation.... The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data."

The "U.S. Treasury's latest Quarterly Refunding Statement" tells us, "[A]ggregate bill supply, which peaked in late March in response to elevated borrowing needs, including seasonal factors and Treasury's efforts to rebuild cash balances consistent with our stated cash balance policy, is expected to decrease modestly over the remainder of the fiscal year, barring any substantial, unexpected changes in financing needs." (See the Treasury's "Most Recent Quarterly Refunding Documents" here.)

The statement continues, "Treasury intends to introduce a new 2-month bill later this calendar year. Treasury has had extensive discussions about the benefits of a 2-month bill offering with a variety of market participants, including the Treasury Borrowing Advisory Committee (TBAC). Our analysis suggests that this new product will meet the needs of many investors, while also enhancing Treasury cash management, reducing operational risks, and helping us in our mission to fund the government at the least cost over time."

It adds, "In the coming months, Treasury will further study operational details related to offering the 2-month bill for settlement on a date different from the traditional Thursday settlement date for Treasury bills, such as Tuesday. Treasury will explore alternative ways to enhance liquidity of the 2-month bill, if it is offered on a different settlement date, such as moving the settlement date of an existing bill tenor so that it aligns with the settlement date of the 2-month bill. More details regarding the operational aspects of this decision, including the timing of the first auction, will be provided at a later Quarterly Refunding." (Note: The U.S. Treasury's Debt Manager Tom Katzenbach has been added to the agenda for our upcoming Money Fund Symposium conference, which is June 25-27 in Pittsburgh.)

In other news, Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics and summary Tuesday. Our weekly holdings track a shifting subset of our monthly Portfolio Holdings collection, and the latest cut (with data as of April 27) includes Holdings information from 76 money funds (down 14 from 4/20), representing $1.414 trillion (down from $1.560 trillion last week) of the $2.967 (47.7%) in total money fund assets tracked by Crane Data. (For our monthly Holdings recap, see our April 11 News, "April Money Fund Portfolio Holdings: Treasury Now Biggest; Repo Down.")

Our latest Weekly MFPH Composition summary shows Government assets dominating the holdings list with Repurchase Agreements (Repo) totaling $505.4 billion (down from $542.3 billion a week ago), or 35.7%, Treasury debt totaling $460.9 billion (down from $507.0 billion) or 32.6%, and Government Agency securities totaling $293.0 billion (down from $327.9 billion), or 20.7%. Commercial Paper (CP) totaled $51.6 billion (down from $60.5 billion), or 3.6%, and Certificates of Deposit (CDs) totaled $40.5 billion (down from $45.0 billion), or 2.9%. A total of $31.1 billion or 2.2%, was listed in the Other category (primarily Time Deposits), and VRDNs accounted for $31.8 billion, or 2.3%.

The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $460.9 billion (32.6% of total holdings), Federal Home Loan Bank with $236.7B (16.7%), BNP Paribas with $77.8 billion (5.5%), Federal Farm Credit Bank with $39.6B (2.8%), RBC with $36.5B (2.6%), Credit Agricole with $33.3B (2.4%), Wells Fargo with $32.0B (2.3%), HSBC with $30.1B (2.1%), Societe Generale with $26.1B (1.8%), and Natixis with $25.3B (1.8%).

The Ten Largest Funds tracked in our latest Weekly include: JP Morgan US Govt ($134.7B), Fidelity Inv MM: Govt Port ($107.6B), BlackRock Lq FedFund ($96.1B), Goldman Sachs FS Govt ($92.9B), BlackRock Lq T-Fund ($72.8B), Wells Fargo Govt MMkt ($68.2B), Dreyfus Govt Cash Mgmt ($67.0B), Morgan Stanley Inst Liq Govt ($58.9B), State Street Inst US Govt ($54.3B), and Goldman Sachs FS Trs Instruments ($49.0B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary, or our Bond Fund Portfolio Holdings data series.)

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