As the Federal Reserve Board of Governors meets and prepares to cut short-term interest rates a third time, yields on money market funds, bank deposits and brokerage sweeps continue to inch lower. (They should drop again following an expected Fed cut Wednesday.) The highest-yielding money market funds, which rose above the 2.0% level about a year ago, are now almost all below 2.0% once again. As of 10/28, just one money fund on CraneData.com's Highest-Yielding Money Funds table (which excludes internal or restricted funds), DWS ESG Liquidity Fund Cap, yields over 2.0%. Only a handful of "fin-tech" and internet banks are still paying over 2.0% currently, but these should all be gone by next week. The average money fund, as measured by our Crane 100 Money Fund Index, is yielding 1.68% as of Oct. 29, down from 1.80% a month ago and down from 2.08% at the start of the year.
Brokerage sweep rates inched lower in the latest week as Wells Fargo cut rates. Wells dropped its rate for a number of tiers (including the $100K) from 0.16% to 0.10%. Our Crane Brokerage Sweep Index inched down to 0.19% from 0.20% in the week ended October 25 for balances of $100K. TD Ameritrade has the lowest rates for balances at this level (0.04%) while Fidelity continues to have the highest rates (0.94%). E*Trade, Merrill and Morgan Stanley are all paying 0.05%, Ameriprise, Schwab and UBS and now Wells Fargo are paying 0.10%, Raymond James is paying 0.15%, and RW Baird is paying 0.45% for balances of $100K.
Bankrate.com recently wrote about sweep accounts in, "With commission-free trading nearly everywhere, here's what investors should demand now." They tell us, "Fidelity Investments took a few days to fire its shot in the price war ... and ... said that it would 'automatically direct retail investors' cash into higher yielding alternatives available for new brokerage and retirement accounts.... The sweep account could be a new battlefront, and investors should keep an eye on this area to see who might be helping or shortchanging them as a way to make up lost trading revenue."
Financial Planning also writes about sweep in its article, "3 retail broker titans went commission free. Here's what happens next." They tell us, "With the Fed cutting interest rates twice this year, and the 10-year Treasury yield edging toward an all-time low, brokerages scratched commission revenue 'precisely when the markets look least robust,' Michael Pizzi, CEO of E-Trade, said on the company's earnings call."
The article adds, "[TD Ameritrade] may also look to cash interest to boost its bottom line, albeit in the future. Hockey says the company will be able to renegotiate its bank deposit pricing in 2021 with TD Bank, which currently owns 43% of TD Ameritrade. That new arrangement would become effective in 2023.... Cash sweeps may also help E-Trade's bottom line, according to CFO Chad Turner. At the end of this year, the company will have the option to sweep its premium savings deposits to third-party institutions. Turner adds, 'As of the end of the quarter, we have almost $12 billion of sweep deposits that are off balance sheet.'"
In other news, a press release entitled, "360T and ICD Drive Treasury Efficiency Through Deep Integration" tells us, "ICD and 360T have deepened the integration of their respective trading applications, allowing mutual clients to seamlessly leverage both platforms and unlock over 300 money market funds (MMFs), time deposits from nearly 300 banks, short-duration bond funds, FX and more. Through the enhanced end-to end workflow, practitioners can utilize a simple and highly-automated experience, designed to offer greater insight into their investments, cash positions, consolidated reporting and exposure analytics at no additional cost."
Fiona Seifferer, COO Americas at 360T, comments, "The deep integration with ICD was designed in partnership with clients in an effort to save time, improve security and to offer better visibility through consolidated reporting." The release adds, "In addition to broader access to short-term investment and FX products, clients receive exceptional service from both 360T and ICD, ensuring they maximize the benefits of the integrated offering."
Tory Hazard, ICD's CEO explains, "ICD's mission is to provide a superior product to the corporate treasury marketplace. With the enhanced integration through our single-sign-on and data flow into our award-winning Transparency Plus, clients now have a complete picture of their entire investment portfolio and underlying exposures."
Finally, Crane Data published its Weekly Money Fund Portfolio Holdings statistics and summary yesterday. Our weekly holdings track a shifting subset of our monthly Portfolio Holdings collection. The latest cut (with data as of Oct. 25) includes Holdings information from 84 money funds (up 15 from a week ago), which represent $1.973 trillion (up from $1.465 trillion) of the $3.885 trillion (50.8%) in total money fund assets tracked by Crane Data.
Our latest Weekly MFPH Composition summary again shows Government assets dominating the holdings list with Repurchase Agreements (Repo) totaling $690.7 billion (up from $520.8 billion a week ago), or 35.0%, Treasury debt totaling $621.5 billion (up from $448.9 billion) or 31.5%, and Government Agency securities totaling $365.7 billion (up from $297.6 billion), or 18.5%. Commercial Paper (CP) totaled $99.0 billion (up from $71.6 billion), or 5.0%, and Certificates of Deposit (CDs) totaled $96.7 billion (up from $75.5 billion), or 4.9%. A total of $58.3 billion or 3.0%, was listed in the Other category (primarily Time Deposits), and VRDNs accounted for $41.1 billion, or 2.1%.
The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $621.5 billion (31.5% of total holdings), Federal Home Loan Bank with $266.2B (13.5%), Fixed Income Clearing Co with $110.6B (5.6%), BNP Paribas with $78.3 billion (4.0%), Federal Farm Credit Bank with $55.4B (2.8%), JP Morgan with $42.2B (2.1%), RBC with $40.6B (2.1%), Wells Fargo with $38.8B (2.0%), Societe Generale with $35.5B (1.8%) and Federal Home Loan Mortgage Co with $34.8B (1.8%).
The Ten Largest Funds tracked in our latest Weekly include: JP Morgan US Govt ($161.0), Fidelity Inv MM: Govt Port ($138.2B), Goldman Sachs FS Govt ($105.0B), BlackRock Lq FedFund ($105.0B), Federated Govt Oblg ($98.4B), Wells Fargo Govt MMkt ($84.2B), BlackRock Lq T-Fund ($79.0B), Fidelity Inv MM: MMkt Port ($71.3B), JP Morgan 100% US Trs MMkt ($68.6B) and Morgan Stanley Inst Liq Govt ($62.4B). (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.)
