Brokerages continue to shift cash "sweep" assets into bank deposits and away from money market funds, but they are also steadily increasing the rates on their lower paying FDIC insured options. The latest sign of the former is a recent Prospectus Supplement announcing the liquidation of the $6.0 billion Morgan Stanley Active Assets Government Trust. It tells us, "The Board of Trustees of Active Assets Government Trust (the ‘Fund’) approved the termination (the 'Termination') of the Fund. The Fund will suspend the offering of its shares to all investors at the close of business on August 13, 2018 and the Termination is expected to occur on or about that date." (See also our Jun. 6 2018 News, "Morgan Stanley to Sweep More to Banks from MMFs.") Below, we review the latest rates on brokerage sweep cash options, which have been steadily climbing over the past year, in particular the last couple of months.
Crane Data's Brokerage Sweep Intelligence, which tracks the rates paid by the largest brokerages on their cash sweep options, shows the average sweep rate for clients with $100,000 in cash at 0.22% in the latest week, as Wells Fargo hiked rates on most of its tiers from 0.20% to 0.25%. At the start of the year, the average brokerage sweep rate (for the $100K tier) was 0.11%, and a year ago it was 0.06%. In comparison, our Crane 100 Money Fund Index, an average of the 100 largest taxable money market funds, stands at 1.75%, up from 1.74% a week ago, 1.12% at the start of the year and 0.81% a year earlier.
Looking at individual brokerage sweep rates, Ameriprise has increased its rates (on the $100K tier) to 0.14% from 0.10% at the start of the year and from 0.05% a year earlier. E*Trade finally moved rates off the 0.01% floor (where most brokerages were prior to mid-2017), where its rates were a year ago and at the start 2018. They now pay 0.15%. Fidelity is paying 0.53%,almost double the level of the start of the year (0.27%) and over four times the level of a year ago (0.14%).
Merrill Lynch is paying the second lowest rate among brokerages (for balances of $100K) at 0.14%. They've been paying this same rate since the start of the year and since a year ago. Morgan Stanley Smith Barney is paying just a touch higher, 0.15%, but they've increased their $100K tier from 0.02% on Dec. 29, 2017 (the same level it was a year ago too). Raymond James is paying 0.25% on sweeps; they were at 0.05% at year-end and a year ago. RW Baird was also at 0.25%, up from 0.08% on Dec. 29, 2017 (and a year ago).
Schwab is paying 0.22% on $100K cash balances, up from 0.12% at the start of the year and up from 0.05% a year ago. TD Ameritrade has the lowest rates of all the major brokerages. Their sweep option pays 0.08%, up from 0.01% a year ago and up from 0.05% at yearend. UBS is paying 0.30%, up from 0.25% at the start of the year and up from 0.05% a year earlier.
Finally, Wells Fargo increased its rates in the latest week, raising the main sweep rate ($100K) from 0.20% to 0.25%. Their rates were 0.10% at the beginning of 2018 and they were 0.05% a year earlier. We expect sweep rates to continue inching higher in coming weeks as higher-yielding money funds begin to draw cash back out of bank products. (Let us know if you'd like to see a copy of our most recent Brokerage Sweep Intelligence report.)
For more news on brokerage sweeps, see our Feb. 16 2018 News, "Schwab Changes Brokerage Cash Sweep, Adds Bank, Cuts Money Funds," our Jan. 4 2018 News, "Schwab Liquidating MMF, Shifting to FDIC; Brokerage Sweep Rates Jump," and our October 12 2017 News, "Wells Bumps Up Brokerage Sweep Rates, Raises FDIC Insurance Coverage."
In other news, Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics and summary yesterday. Our weekly holdings track a shifting subset of our monthly Portfolio Holdings collection, and the latest cut (with data as of July 20) includes Holdings information from 84 money funds (up 16 from 68 on June 15), representing $1.413 trillion (up from $1.142 billion on June 15) of the $2.871 (49.2%) in total money fund assets tracked by Crane Data. (For our latest monthly Money Fund Portfolio Holdings numbers, see our July 12 News, "July Money Fund Portfolio Holdings: Repo Falls, But Fed RRP Rebounds.")
Our latest Weekly MFPH Composition summary shows Government assets dominating the holdings list with Repurchase Agreements (Repo) totaling $520.6 billion (up from $422.3 billion on June 15), or 36.8%, Treasury debt totaling $385.5 billion (up from $372.8 billion) or 27.3%, and Government Agency securities totaling $309.5 billion (up from $232.9 billion), or 21.9%. Commercial Paper (CP) totaled $64.0 billion (up from $35.9 billion), or 4.5%, and Certificates of Deposit (CDs) totaled $47.0 billion (up from $25.2 billion), or 3.3%. A total of $45.2 billion or 3.2%, was listed in the Other category (primarily Time Deposits), and VRDNs accounted for $41.1 billion, or 2.9%.
The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $385.5 billion (27.3% of total holdings), Federal Home Loan Bank with $241.7B (17.1%), BNP Paribas with $80.2 billion (5.7%), Federal Farm Credit Bank with $46.3B (3.3%), RBC with $42.5B (3.0%), Wells Fargo with $31.9B (2.3%), Societe Generale with $27.1B (1.9%), Credit Agricole with $25.7B (1.8%), JP Morgan with $25.6B (1.8%), and Natixis with $24.7B (1.7%).
The Ten Largest Funds tracked in our latest Weekly include: JP Morgan US Govt ($131.6B), Fidelity Inv MM: Govt Port ($107.9B), BlackRock Lq FedFund ($94.8B), Wells Fargo Govt MMkt ($72.5B), BlackRock Lq T-Fund ($69.0B), Dreyfus Govt Cash Mgmt ($68.1B), Federated Govt Oblg ($66.1B), Morgan Stanley Inst Liq Govt ($55.4B), State Street Inst US Govt ($50.5B), and JP Morgan Prime MM ($40.6B).(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.)
