Rates on money market funds, brokerage sweep accounts and bank accounts are flattening out after declining in the four weeks after the Fed's third, and possibly final, rate cut on Oct. 30. Our Money Fund Intelligence Daily shows that the flagship Crane 100 MF Index inched down 0.01% to 1.50% over the past week. The Crane 100 is down from 1.81% on Sept. 30 and down from 2.18% on June 30 and 2.23% at the start of the year. Our latest Brokerage Sweep Intelligence publication, with data as of Friday, Nov. 29, shows only Wells Fargo lowering rates in the past week. (See our Oct. 31 Link of the Day, "Fed Cuts Rates a Third Time.")
Our broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data, shows a 7-day yield of 1.38%, down 0.01% in the week through 11/29. Treasury Inst and Prime Inst MFs were down by 1 bps to 1.40% and 1.59%, respectively. Government Inst MMFs remained unchanged at 1.46%. Treasury Retail MFs currently yield 1.13%, (down 0.01%), Government Retail MFs yield 1.16% (down 0.01%) and Prime Retail MFs yield 1.42% (down 0.01%). Tax-exempt MF 7-day yields remained unchanged at 0.72%.
Crane's Brokerage Sweep Index inched down to 0.14% from 0.15% in the week ended November 29 (for balances of $100K) as Wells Fargo cut rates across the board by 2 bps to 0.05% (for most tiers). E*Trade and TD Ameritrade currently have the lowest rate for balances at the $100K level (0.01%). Meanwhile, Fidelity continues to have the highest sweep rate (0.82%). (Fidelity also have a higher-yielding money fund option for new accounts.) Morgan Stanley is paying 0.03%. UBS, Merrill and Wells Fargo are all paying 0.05%, and Schwab is paying 0.06%. Raymond James is paying 0.08% and Ameriprise is paying 0.09%. RW Baird is paying 0.33% for balances of $100K.
Crane Data has also started tracking some of the other brokerages beyond the largest ones in our Brokerage Sweep Intelligence, just for internal purposes. (Let us know if you'd like to receive this "shadow" BSI report if you're a subscriber to Brokerage Sweep Intelligence.) Below, we list some of the rates (for balances of $100K) for some of these lesser-known or up-and-coming sweep programs.
LPL currently has the lowest rate for balances at the $100K level (0.10%). Meanwhile, Robinhood has the highest sweep rate (1.80%) (see today's "Link of the Day"). SSN Securities and Securities America are paying 0.12% and 0.13%, respectively. Edward Jones and Folio Institutional both offer rates of 0.15% on 100K balances. Betterment and Commonwealth are both paying 0.25% while TIAA and JPMS Brokerage are paying 0.30%. Cetera is paying 0.40%, Pershing and Ally Bank are paying 0.75%, Pershing Dreyfus is paying 0.79% and JPMS Advisory is paying 1.60% for balances of $100K.
In related news, the Minneapolis Star-Tribune website recently featured an AP story on the Schwab/TD Ameritrde merger, entitled, "This stock trade isn't free: Schwab scoops up rival for $26B." It says, "Beyond commissions, brokerages make money from account fees and from interest earned on customers' cash, among other things. Schwab and TD Ameritrade made a combined $2 billion in net interest revenue in their latest quarters, for example. Rival Fidelity pointed out how Schwab and TD Ameritrade make some of that money by paying customers lower rates for cash in their trading accounts, known as 'sweep accounts.' Fidelity, which is privately held, would still have more in total customer assets than a combined Schwab."
In other news, Federated Investors' Debbie Cunningham asks, "Could Fed voters finally be on the same page?" In her latest commentary, she explains, "'Some,' 'a couple,' 'a few,' 'most.' If you are looking for precise numbers in the minutes of a Federal Open Market Committee (FOMC) meeting, you will be disappointed. They don't mention names at all, and when they refer to how many officials agreed on a given point, they use vague quantifiers."
Cunningham writes, "With the Federal Reserve shifting policy after a summer and fall of rate cuts, scouring the document is still worthwhile. In this case, the minutes from the October FOMC meeting simply confirmed what the statement and Chair Jerome Powell said. Policymakers feel it's time to see what the effect of the rate cuts are on the economy. They are going to rely on the data -- there's the precision! -- to give them direction. With the economy showing moderate growth, underpinned by that remarkable labor market and moderate inflation, they are on hold now unless something drastic alters the economic path. The Fed doesn't generally act on a month’s worth of data."
She continues, "Actually, the last policy-setting meeting of the year on Dec. 10-11 might result in an 'all.' A flurry of speeches by Fed governors and regional presidents in the last few weeks suggest there won't be any dissenters to the vote, which will almost certainly be to leave rates unchanged. If so, that would be the first unanimous vote since May."
Federated's update tells us, "How this all shakes out in 2020 depends on many factors, but fed funds futures aren't predicting any move until the second half. One thing certain is the complexion of the FOMC will change. Every year, four of the regional presidents roll off from being voting members and four new ones take their place. The two who dissented the most this year -- Esther George and Eric Rosengren -- will not have a vote in 2020. However, as best we can tell, the new group will be a mix of hawks and doves, on net not changing the overall policy stance."
It adds, "So where does this put liquidity products? In a good position again. The prevailing expectation this year that the Fed would not take rates to post-financial crisis lows has proven true. With cuts likely behind us for now, money market funds' core attributes of relative safety, liquidity and diversity can play their traditional role for portfolios -- especially as other asset classes have swayed with the state of the U.S.-China trade war and other uncertainties. With the Treasury yield curve no longer inverted and the London interbank offered rate (Libor) positively sloped, investors are getting some risk premium for going out the curve."
Finally, the monthly says, "A few comments on the repo markets. The Fed continues to do everything it can to control the volatility in the overnight rate with temporary and permanent open market operations. It continues to consider creating a repo facility and also issuing a 1-year Treasury bill floater indexed to the Secured Overnight Finance Rate (SOFR). It seems this combination is working, as repo rates held pretty well in the 1.50-1.60% range in November. We were opportunistic with our purchases in November, open to just about any approved investment: asset-back securities, bank instruments, commercial paper, government securities, Treasuries, etc. The target weighted average maturity (WAM) of our funds remained in a range of 35-45 days for government and 40-50 days for prime and municipal."
