Fidelity Investments distributed a recent "Viewpoint" to investors entitled, "Seek more from your cash amid higher rates." Subtitled, "Money markets and CDs may offer more income, and risk, than savings accounts," the piece tells us, "If you do have money in cash, you should consider your options. Interest rates have moved up significantly for some types of investments in recent years, but the average savings account still pays barely any interest. While rates are still low, choosing a higher-yielding home for some of your cash could make a meaningful difference. If you have $50,000 in cash for the next 3 years, the difference between the average savings account, and some higher-yielding options could be thousands of dollars." We review their update, and we also quote from a Bloomberg article on GE CP and review our latest Weekly Portfolio Holdings data below.
Fidelity comments, "Before you move your cash to find the highest yield -- meaning the amount of income relative to the amount invested, be sure to consider the tradeoffs that come with these other options. For instance, CDs and bonds might come with less liquidity, meaning you have to wait for a set period of time, accept the price a buyer is willing to pay to get your cash, or pay a fee that could impact your expected return. Finding an appropriate choice depends on your situation."
They add, "If you have cash, it may well be worth considering some options beyond a savings account. Unlike risky stocks, longer-dated bonds, or other income producing investments, money markets, CDs, and short-duration bonds and bond funds all offer a mix of yield, risk, and access that could make them an alternative for some situations. The key is to look at your situation, feelings about risk, timeline, and goals, and find an option that works for you."
In other news, Bloomberg writes "GE Downgrade Hits Company in a Debt Market It Once Ruled," which says, "A ratings downgrade this week may hit General Electric Co. in one particular bond market: short-term debt. That's where the manufacturing giant lost its near-top credit ratings on Tuesday. Without those ratings, at least some investors in IOU's known as commercial paper won't be willing to invest in GE's debt anymore."
The article explains, "GE relies on commercial paper to help fund its daily operations, and it used to be one of the biggest issuers of the debt. The manufacturer had on average around $16.6 billion of the debt outstanding during the second quarter. At the end of June, it had about $115.6 billion of total debt, of which about $6 billion was commercial paper, according to company filings."
Bloomberg says, "With fewer funds interested in buying at current ratings, GE will probably have to pay higher rates to sell its commercial paper, said Peter Crane, president of Crane Data, which tracks money market funds. 'They'll still be able to find buyers, but at a cost of course,' Crane said. On Monday, it cost 2.25 percent for a top-tier corporation to borrow for 90 days, according to U.S. Federal Reserve data. Companies the next tier down, where one ratings firm has GE, paid 2.56 percent."
Crane Data's August 31 Money Fund Portfolio Holdings collection shows money funds holding just $1.4 billion in General Electric Commercial Paper. Twelve money funds from seven managers, almost all retail or internal money funds, shows holdings. (Note: Our 9/30 Portfolio Holdings will be out next Wednesday, Oct. 10.)
Finally, Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics and summary Tuesday, which tracks a shifting subset of our monthly Portfolio Holdings collection. The latest cut, with data as of Sept. 28, includes Holdings information from 63 money funds (down from 86 on Sept. 21), representing $1.290 trillion (down from $1.533 trillion) of the $2.937 (43.9%) in total money fund assets tracked by Crane Data. (For our latest monthly Money Fund Portfolio Holdings numbers, see our Sept. 13 News, "September MF Portfolio Holdings: Treasuries Up; Agency, Repo Down.")
Our latest Weekly MFPH Composition summary shows Government assets dominating the holdings list with Repurchase Agreements (Repo) totaling $471.8 billion (down from $551.4 billion on Sept. 21), or 36.6% of holdings, Treasury debt totaling $401.6 billion (up from $469.2 billion) or 31.1%, and Government Agency securities totaling $251.7 billion (down from $300.5 billion), or 19.5%. Commercial Paper (CP) totaled $54.9 billion (down from $71.3 billion), or 4.3%, and Certificates of Deposit (CDs) totaled $49.0 billion (down from $57.8 billion), or 3.8%. VRDNs accounted for $33.6 billion, or 2.6% and a total of $27.4 billion or 2.1% was listed in the Other category (primarily Time Deposits).
The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $401.6 billion (31.1% of total holdings), Federal Home Loan Bank with $200.7B (15.6%), BNP Paribas with $76.7 billion (5.9%), RBC with $39.1B (3.0%), Fixed Income Clearing Co with $37.7B (2.9%), Federal Farm Credit Bank with $36.0B (2.8%), Nomura with $26.8B (2.1%), Wells Fargo with $24.3B (1.9%), HSBC with $22.7B (1.8%), and Mitsubishi UFJ Financial Group Inc with $20.8B (1.7%).
The Ten Largest Funds tracked in our latest Weekly Holdings update include: JP Morgan US Govt ($142.8B), Fidelity Inv MM: Govt Port ($109.6B), Goldman Sachs FS Govt ($101.3B), BlackRock Lq FedFund ($83.7B), Wells Fargo Govt MMkt ($69.4B), BlackRock Lq T-Fund ($63.7B), Dreyfus Govt Cash Mgmt ($58.4B), Goldman Sachs FS Trs Instruments ($56.7B), Morgan Stanley Inst Liq Govt ($53.0B), and JP Morgan Prime MM ($42.3B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary.)
