ignites: Crane on Deposits Moving
Mutual fund publication ignites features a video brief with Crane Data's Peter Crane entitled, "'Frustrated' by Low Bank Deposit Yields, Investors Moving to Money Funds." The brief interview, which was posted last week, says, "The biggest competitors right now to money market funds are bank deposit accounts, which have lured significant market share from the funds, says Peter Crane, president and CEO of Crane Data. But some investors who are frustrated by bank products' near-zero yields are growing more sensitive to rising interest rates and starting to move into money funds, he adds." When asked about competition, Crane comments, "There are potential threats from ultra-short bond funds, from a money market ETF being developed [or] from something new occurring, but the biggest competition and threat right now is from bank deposits, who have taken major slices of market share. It's unclear whether banks will aggressively push up deposit rates to protect that money if it starts leaving towards money market funds.... In the past they haven't. Banks have been content to underpay. But there are signs [that] banks are moving and tweaking [rates]. Banks are trying to have it both ways, where they pay near zero on the vast majority of deposits, and then they run a special for new accounts where they're paying 1.6% or something to try to get new money." He adds, "Investors really became desensitized to interest rates during the zero-yield environment. Whether they become re-sensitized -- if that's a word -- remains to be seen. But there's clearly indications that there are slices of cash that are frustrated by the zero yields and are starting to move. Whether that spreads to the broad base of money out there remains to be seen. But the longer we're here at 1.75%, 2% yields, or the higher we go, or depending on what happens in the stock market, the more likely that is to happen."
