Deutsche Asset Management, which recently announced a name change to DWS Investment Management, filed to change the monikers of its Deutsche money market funds back to DWS, which they were named prior to 2014. The Prospectus Supplement says, "The following changes will take effect on or about July 2, 2018: Deutsche Investment Management Americas Inc., the investment advisor for the below-listed funds, will be renamed to DWS Investment Management Americas, Inc. In addition, the "Deutsche funds" will become known as the "DWS funds" and the below-listed Deutsche funds and share classes, as applicable, will be renamed as follows." (For the previous name change, see Crane Data's Aug. 15, 2014 News, "DWS Funds Change to Deutsche.")
The filing lists these changes: Deutsche Government & Agency Securities Portfolio: Deutsche Government & Agency Money Fund, DWS Government & Agency Money Fund Deutsche Government Cash Institutional Shares, and DWS Government Cash Institutional Shares will be renamed DWS Government & Agency Securities Portfolio; Deutsche Tax-Exempt Portfolio will be renamed DWS Tax-Exempt Portfolio; Deutsche Government Cash Management Fund will be renamed DWS Government Cash Management Fund; Deutsche Treasury Portfolio will be renamed DWS Treasury Portfolio; and Deutsche Variable NAV Money Fund will be renamed DWS Variable NAV Money Fund.
The update adds, "In addition, Deutsche AM Trust Company will be renamed to DWS Trust Company. Under a separate agreement, Deutsche Asset Management Investment GmbH has granted a license to DWS Group GmbH & Co. KGaA which permits the funds to utilize the 'DWS' trademark." (See also the Reuters article, "Deutsche asset management to rebrand as DWS, plans KGaA structure.) Deutsche, or soon to be DWS, is the 17th largest manager of money market funds with $29.1 billion. Years ago the manager merged with and had funds with the names Scudder, Zurich, and Kemper.
In other news, the latest "Minutes of the Federal Open Market Committee, May 1-2, 2018" discussed upwards pressure in the Federal funds and short-term markets and the possibility of tweaking the IOER. The update says, "The Federal Reserve Board and the Federal Open Market Committee on Wednesday released the attached minutes of the Committee meeting held on May 1-2, 2018. The minutes for each regularly scheduled meeting of the Committee ordinarily are made available three weeks after the day of the policy decision and subsequently are published in the Board's Annual Report. The descriptions of economic and financial conditions contained in these minutes are based solely on the information that was available to the Committee at the time of the meeting."
The update explains, "The deputy manager followed with a briefing focused on recent developments in the federal funds market, noting that the effective federal funds rate had increased in recent weeks and had moved toward the top of the target range for the federal funds rate. In large part, this development seemed to reflect a firming in rates on repurchase agreements (repos) that, in turn, had resulted from an increase in Treasury bill issuance and the associated higher demands for repo financing by dealers and others. Higher rates had reportedly made repos a more attractive alternative investment for major lenders in the federal funds market, thus reducing the availability of funding in that market and putting some upward pressure on the federal funds rate. While some of the recent pressure on the federal funds rate could be expected to fade over coming weeks as the market adjusts to higher levels of Treasury bills, the gradual normalization of the Federal Reserve's balance sheet and the accompanying decline in reserves was anticipated to continue putting some upward pressure on the federal funds rate relative to the interest on excess reserves (IOER) rate."
It continues, "The deputy manager then discussed the possibility of a small technical realignment of the IOER rate relative to the top of the target range for the federal funds rate. Since the target range was established in December 2008, the IOER rate has been set at the top of the target range to help keep the effective federal funds rate within the range. Lately the spread of the IOER rate over the effective federal funds rate had narrowed to only 5 basis points. A technical adjustment of the IOER rate to a level 5 basis points below the top of the target range could keep the effective federal funds rate well within the target range. This could be accomplished by implementing a 20 basis point increase in the IOER rate at a time when the Committee raised the target range for the federal funds rate by 25 basis points. Alternatively, the IOER rate could be lowered 5 basis points at a meeting in which the Committee left the target range for the federal funds rate unchanged."
The Fed Minutes tell us, "In their discussion of this issue, participants generally agreed that it could become appropriate to make a small technical adjustment in the Federal Reserve's approach to implementing monetary policy by setting the IOER rate modestly below the top of the target range for the federal funds rate. Such an adjustment would be consistent with the Committee's statement in the Policy Normalization Principles and Plans that it would be prepared to adjust the details of the approach to policy implementation during the period of normalization in light of economic and financial developments. Many participants judged that it would be useful to make such a technical adjustment sooner rather than later."
They explain, "FOMC communications over the intermeeting period were generally viewed by market participants as reflecting an upbeat outlook for economic growth and as consistent with a continued gradual removal of monetary policy accommodation. The FOMC's decision to raise the target range for the federal funds rate 25 basis points at the March meeting was widely anticipated. Market reaction to the release of the March FOMC minutes later in the intermeeting period was minimal. The probability of an increase in the target range for the federal funds rate occurring at the May FOMC meeting, as implied by quotes on federal funds futures contracts, remained close to zero; the probability of an increase at the June FOMC meeting rose to about 90 percent by the end of the intermeeting period. Expected levels of the federal funds rate at the end of 2019 and 2020 implied by OIS rates rose modestly."
The Fed states, "Conditions in short-term funding markets remained generally stable over the intermeeting period. Spreads on term money market instruments relative to comparable maturity OIS rates were still larger than usual in some segments of the money market. Reflecting the FOMC's policy action in March, yields on a broad set of money market instruments moved about 25 basis points higher. Bill yields also stayed high relative to OIS rates as cumulative Treasury bill supply remained elevated. Money market dynamics over quarter-end were muted relative to previous quarter-ends."
They write, "All participants expressed the view that it would be appropriate for the Committee to leave the target range for the federal funds rate unchanged at the May meeting. Participants concurred that information received during the intermeeting period had not materially altered their assessment of the outlook for the economy.... Most participants judged that if incoming information broadly confirmed their current economic outlook, it would likely soon be appropriate for the Committee to take another step in removing policy accommodation. Overall, participants agreed that the current stance of monetary policy remained accommodative, supporting strong labor market conditions and a return to 2 percent inflation on a sustained basis."
The Minutes also say, "Meeting participants also discussed the recent flatter profile of the term structure of interest rates. Participants pointed to a number of factors contributing to the flattening of the yield curve, including the expected gradual rise of the federal funds rate, the downward pressure on term premiums from the Federal Reserve's still-large balance sheet as well as asset purchase programs by other central banks, and a reduction in investors' estimates of the longer-run neutral real interest rate. A few participants noted that such factors could make the slope of the yield curve a less reliable signal of future economic activity. However, several participants thought that it would be important to continue to monitor the slope of the yield curve, emphasizing the historical regularity that an inverted yield curve has indicated an increased risk of recession."
Finally, they add, "Participants commented on how the Committee's communications in its post-meeting statement might need to be revised in coming meetings if the economy evolved broadly as expected. A few participants noted that if increases in the target range for the federal funds rate continued, the federal funds rate could be at or above their estimates of its longer-run normal level before too long. In addition, a few observed that the neutral level of the federal funds rate might currently be lower than their estimates of its longer-run level. In light of this, some participants noted it might soon be appropriate to revise the forward-guidance language in the statement indicating that the 'federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run' or to modify the language stating that 'the stance of monetary policy remains accommodative.' Participants expressed a range of views on the amount of further policy firming that would likely be required over the medium term to achieve the Committee's goals."
