The Wall Street Journal again covers money market funds in China in the piece, "China's Giant Money-Market Fund Scraps Investment Caps." They tell us, "China's biggest money-market mutual fund is lifting restrictions on how much individuals can invest in it, after suffering through months of outflows to rivals. Tianhong Asset Management Co., a unit of Jack Ma's Ant Financial Services Group, said individuals in its flagship Tianhong Yu'e Bao money-market fund would no longer be subject to an investment cap of 100,000 yuan ($14,900). It first imposed a ceiling on account sizes in May 2017, following a surge in the funds' assets."

The Journal article continues, "The fund said it would also eliminate a 20,000 yuan cap on daily inflows from individuals. Tianhong Yu'e Bao became the world's largest money-market mutual fund by 2017 after hundreds of millions of people in China stashed money into the online fund. At the end of last year, it had 588 million investors, representing more than a third of China's population. The fund's assets under management topped 1.69 trillion yuan ($251.6 billion) in March 2018, but have fallen steadily since, ending the year at 1.13 trillion yuan."

They tell us, "Though the fund hasn't disclosed its latest size, it continued to shrink during the first quarter of 2019, according to a person familiar with the matter." Note that a chart accompanying the article shows the Yu'e Bao money fund with approximately $149 billion early this year, so we'd estimate that the fund is now below $140 billion. This would bring its asset total below those of Fidelity Cash Reserves, which is currently $143 billion. Thus, Fidelity is likely now the world's largest money market fund once again, though this remains to be confirmed (and could change with this latest news).

The WSJ adds, "The decision to remove investment limits was approved by Chinese regulators after Tianhong Asset Management and its parent Ant Financial pointed to the fund’s continuing outflows, the person added. In a statement, Beijing-based Tianhong Asset Management said removing the caps -- originally implemented to stabilize the fund -- would help the fund better serve investors."

Finally, they write, "The fund has had to contend with increasing competition in the past year. Last May, Ant began offering other money-market mutual funds to users of its popular Alipay mobile-payments network. Tencent Holdings Ltd., whose WeChat Pay network competes with Alipay, started a similar program that lets customers stash their spare cash in high-yielding online funds."

For more on money funds in China and Yu'e Bao, see these Crane Data News pieces and Links of the Day: "Worldwide MMF Assets Reclaim $​6T Mark in Q4: US Jumps, China Drops" (3/28/19), "WSJ Also Writes on China's Yu'e Bao" (3/28/19), "SCMP on Yu'e Bao MMF Platform" (3/27/19), "WSJ Says China's Yu'e Bao Shrinks" (2/1/19) and "FT Says China's Ant Shrinks; More on BlackRock LEAF; Weekly Holdings" (1/30/19).

In other news Bloomberg writes, "Money Markets Brace to See If Fed Will Play Repo Whack-a-Mole," which discusses a potential cap on repo rates. Author Alex Harris explains, "The Federal Reserve could be preparing to explain within days how -- or even if -- it will add a new mechanism to help keep a closer rein on how the central bank actually implements monetary policy."

She explains, "Rates for repurchase agreements -- a central component of short-term funding markets -- have recently shown a tendency to spike, especially at month-end. The move was especially eye-catching at the end of 2018, but it's also happened in subsequent months as financial institutions scrambled to secure enough financing to meet their needs, prompting those with capacity to lend to jack up rates."

The piece tells us, "There's evidence the Fed is genuinely considering doing something, even if what that looks like isn't clear. A standing repo facility is one of the tools that many think the Fed should look at. Such a mechanism would allow banks to convert Treasuries into reserves on demand, making it easier for them to get cash at crucial moments and potentially relieving upward pressure across money markets."

Finally, the Federal Reserve released its "Minutes of the Federal Open Market Committee, March 19-20, 2019" yesterday, which say, "Conditions in short-term funding markets generally remained stable over the intermeeting period. The EFFR was consistently equal to the rate of interest on excess reserves, while take-up in the overnight reverse repurchase agreement facility remained low. Yield spreads on commercial paper and negotiable certificates of deposit generally narrowed further from their elevated year-end levels, likely reflecting an increase in investor demand for short-term financial assets. Meanwhile, the statutory federal government debt ceiling was reestablished at $22 trillion on March 1."

They also comment, "The deputy manager provided an overview of money market developments and policy implementation over the intermeeting period. The effective federal funds rate (EFFR) continued to be very stable at a level equal to the interest rate on excess reserves. Rates in overnight secured markets continued to exhibit some volatility, particularly on month-end dates. Market participants attributed some of the volatility in overnight secured rates to persistently high net dealer inventories of Treasury securities and to Treasury issuance coinciding with the month-end statement dates."

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