Crane Data's latest monthly Money Fund Portfolio Holdings statistics will be published today (Wednesday), and we'll be writing our normal monthly update on the November 30 data tonight for Thursday's News. But we've also been generating a separate and broader Portfolio Holdings data set based on the SEC's Form N-MFP filings. (We continue to merge the two series, and the N-MFP version is now available via Holdings file listings to Money Fund Wisdom subscribers.) Our summary, with data as of November 30, includes holdings information from 1,193 money funds (down from 1,224 on Oct. 31), representing $3.242 trillion (up from $3.191 trillion). We review the latest data below.
Our latest Form N-MFP Summary for All Funds (taxable and tax-exempt) shows that Repurchase Agreement (Repo) holdings in money market funds totaling $1,019.3 billion (up from $1,001.5 billion on Oct. 31, their first month over $1 trillion), or 31.4% of all assets. Treasury holdings total $880.6 billion (up from $846.0 billion) or 27.2%, and Government Agency securities total $656.2 billion (down from $665.3 billion), or 20.2%. Commercial Paper (CP) totals $250.2 billion (up from $250.0 billion), or 7.7%, and Certificates of Deposit (CDs) total $200.2 billion (up from $195.9 billion), or 6.2%. The Other category (primarily Time Deposits) totals $128.4 billion or 4.0%, and VRDNs account for $107.2 billion, or 3.3%.
Broken out into the SEC's more detailed categories, the CP totals were comprised of: $156.4 billion, or 4.8%, in Financial Company Commercial Paper; $51.3 billion or 1.6%, in Asset Backed Commercial Paper; and, $42.4 billion, or 1.3%, in Non-Financial Company Commercial Paper. The Repo totals were made up of: U.S. Treasury Repo ($624.8B, or 19.3%), U.S. Govt Agency Repo ($352.5B, or 10.9%), and Other Repo ($42.0B, or 1.3%).
The N-MFP Holdings summary for the 216 Prime Money Market Funds shows: CP holdings of $245.5 billion (the same as $245.5 billion Oct. 31), or 32.0%; CD holdings of $200.2B (up from $195.9B) or 26.1%; Repo holdings of $124.4B (up from $121.4B), or 16.2%; Other (primarily Time Deposits) holdings of $84.8B (down from $88.0B), or 11.0%; Treasury holdings of $77.1B (up from $50.9B), or 10.0%; Government Agency holdings of $29.6B or 3.9%; and VRDN holdings of $6.7B, or 0.9%.
The SEC's more detailed categories show CP in Prime MMFs made up of: $156.4 billion, or 20.4%, in Financial Company Commercial Paper; $51.3 billion, or 6.7%, in Asset Backed Commercial Paper; and, $37.8 billion, or 4.9%, in Non-Financial Company Commercial Paper. The Repo totals include: U.S. Treasury Repo ($42.0B, or 5.5%), U.S. Govt Agency Repo ($41.5B, or 5.4%), and Other Repo ($40.8B, or 5.3%).
In other news J.P. Morgan's "Short-Term Market Outlook and Strategy" discusses last week's asset outflow anomaly in the section "What happened to the repo markets?" They write, "US liquidity markets were thrown into a whirlwind this week as a result of the unexpected market closures on Wednesday. The unanticipated holiday led to a series of events which made it difficult to operate in the funding markets. This was most evident in the repo market, where overnight rates jumped 4bp on Tuesday and another 7bp on Thursday." (See our December MFI article, "Asset Whiplash from Wed..")
JPM continues, "Among those events, most notable was the decrease in government MMF balances. On 12/4, the day before the market close on Wednesday, shareholders withdrew about $50bn from government MMFs, making this the single biggest day of outflow since MMF reform.... Given that MMFs were closed on Wednesday, corporates likely wanted their cash on hand to manage any potential liquidity needs they might have that day. Indeed, using Good Friday as a comparison, we find that corporates often withdraw cash the day before a market holiday. And since most of their corporate money resides with government MMFs, it was obvious that these funds were going to be most impacted with redemptions."
They tell us, "This matters of course as government MMFs invest a substantial amount in repo. As of October month-end, they held $866bn in repo exposures, comprising about 38% of their portfolio. Generally, redemptions out of government funds mean there is less cash to lend to dealers. The confluence of these factors ultimately meant repo participants had to scramble to finance their collateral longs on Tuesday given the unexpected turn of events. It did not help that primary dealer balance sheets were already pretty heavy with collateral.... Tacking on the hangover from month-end, the unexpected market closures resulted in some pretty substantial dislocations in the repo markets."
Finally, the brief adds, "That said, we do not expect repo rates to remain elevated as we head into next week. Using Good Friday as a comparison again, we've generally found that institutional investors tend to allocate their cash back into MMFs the day after the holiday. To this end, we did see flows move back into government MMFs on Thursday and will likely make their way back into the repo markets."
Finally, this weekend The Wall Street Journal wrote, "Where to Put Your Money in 2019," and featured a brief segment entitled, "Cash, anyone?" They said, "Even the C-word -- cash -- is making a comeback for recommended asset allocations.... Goldman Sachs strategists, in their outlook for 2019, mentioned the idea of including cash as a reasonable alternative to stocks for the first time in several years. The theory: As the Fed continues to raise rates, parking cash in money-market funds and other similar ultrashort and ultrasafe vehicles could earn investors as much as 3%. In comparison, Goldman Sachs strategists figure the stock market's return on a risk-adjusted basis may be as little as 0.5% in 2019."
They quote financial planner Linda Erickson, "This is the first time I can remember in 10 or 12 years that cash has been a viable asset category." The Journal says, "But in today's volatile equity markets, she is pulling out 2% every quarter from gains in her clients' accounts and holding that as what she refers to as 'strategic cash'.... [S]he is quick to point out that the yield she can collect by investing that cash in ultra-short-term securities is roughly equivalent to the dividend yield on stocks in the S&P 500 index."
