Franklin, the 20th largest manager of money market funds with $22.3 billion, merged two of its Government MMFs, follows its recent filing for a Blockchain money market fund. A Prospectus Supplement filing for Franklin Templeton U.S. Government Money Market Fund, a series of Franklin Templeton Money Fund Trust, tells us, "On May 21, 2019, the Board of Trustees of Franklin Templeton Money Fund Trust, on behalf of Franklin Templeton U.S. Government Money Fund (the 'Fund'), approved a proposal to reorganize the Fund with and into the Franklin U.S. Government Money Fund." We look at the brief below, and we also quote from a Bloomberg article on repo and summarize our latest Weekly Money Fund Portfolio Holdings below.
Franklin's filing explains, "It is anticipated that in the third calendar quarter of 2019, shareholders of the Fund will receive a Prospectus/Information Statement detailing the reasons for, and other matters relating to, the reorganization. The reorganization does not require the approval of shareholders. The transaction is currently expected to be completed on or about October 18, 2019. The Fund will not accept any additional purchases after the close of market on or about October 16, 2019. The Fund reserves the right to change this policy at any time."
A notice on Franklin's website entitled, "Franklin Templeton U.S. Government Money Fund Reorganization Effective 10/18/19 - Read More," comments, "Effective 10/18/19, this fund reorganized into Franklin U.S. Government Money Fund. Please contact your financial advisor or call Shareholder Services for more information."
Franklin continues to offer the $19.5 billion Franklin Inst Fiduciary Trust US Govt MM (INFXX) and the $2.8 billion Franklin US Govt Money Market Fund (FMFXX), but there is no sign yet of the pending Franklin Blockchain Enabled U.S. Government Money Fund. (See Crane Data's Sept. 4 News, "Franklin Files for Blockchain Enabled U.S. Govt Money Market Fund.")
In other news, Yahoo Finance posted a Bloomberg article, entitled, "Repo Fretting Shifts to Treasuries as Market Faces Next Test." It explains, "Flare-ups in the repo market could still cause worries across the global banking system, more than two months after chaos subsided in this vital corner of finance. Of particular concern: U.S. Treasuries, the world's biggest bond market and the place where the federal government funds its escalating deficit. If repo rates become jumpy again -- and many are girding for that to happen in the middle and end of this month -- some of those leveraged investors may have to unwind Treasury holdings."
The piece tells us, "Mid-December will see a recurrence of the same circumstances that apparently led to the September eruption -- quarterly corporate tax payments that drained cash from the banking system, coupled with Treasury settlements that prompted a rush for scarce reserves. Also, many analysts believe banks, particularly those based in Europe, will retreat around New Year's Eve from the repo market, driving up rates by pulling cash from the system as others try to secure financing. European banks face slightly different capital rules, encouraging them to reduce their end-of-year footprint and the amount of equity financing they need to back up their assets."
Bloomberg writes, "While the Fed has taken steps to bring order back to repo, adding liquidity by buying Treasury bills and doing overnight repo operations, many fret that won't be enough to keep rates under control. For those still scarred by the financial crisis a decade ago, the spike in repo rates in September triggered painful memories of the credit contagion in 2008 that took down some of the largest U.S. banks. The risk has since shifted to hedge funds and independent broker-dealers, the primary users of short-term repos used to finance positions in U.S. government debt."
They quote Scott Skyrm of Curvature Securities LLC, "As banks got smaller in the repo market, non-bank dealers like us filled the void. We absorbed what used to go to the banks, and it's all divvied up among lots of small firms. Banks are still active, but they're not as big as they used to be."
The article adds, "Hedge funds and broker-dealers aren't the only buyers of U.S. government debt, of course. There are also cash buyers, such as mutual funds, foreign central banks and sovereign wealth funds, who buy the Treasuries with money they have, without any need to borrow. But leveraged buyers have gained importance as others slowed their purchases."
Finally, Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics and summary yesterday. Our weekly holdings track a shifting subset of our monthly Portfolio Holdings collection. The most recent cut (with data as of Nov. 29) includes Holdings information from 68 money funds (down 25 from last week), which represent $1.725 trillion (down from $2.081 trillion) of the $3.765 trillion (45.8%) in total money fund assets tracked by Crane Data.
Our latest Weekly MFPH Composition summary again shows Government assets dominating the holdings list with Treasury debt totaling $595.7 billion (down from $687.2 billion a week ago), or 34.5%, Repurchase Agreements (Repo) totaling $569.4 billion (down from $703.7 billion) or 33.0%, and Government Agency securities totaling $325.8 billion (down from $385.0 billion), or 18.9%. Certificates of Deposit (CDs) totaled $91.1 billion (down from $104.5 billion), or 5.3%, and Commercial Paper (CP) totaled $79.0 billion (down from $99.8 billion), or 4.6%. A total of $32.3 billion or 1.9%, was listed in the Other category (primarily Time Deposits), and VRDNs accounted for $31.9 billion, or 1.8%.
The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $595.7 billion (34.5% of total holdings), Federal Home Loan Bank with $236.7B (13.7%), Fixed Income Clearing Co with $90.6B (5.3%), BNP Paribas with $52.2 billion (3.0%), Federal Farm Credit Bank with $51.6B (3.0%), RBC with $41.5B (2.4%), Mitsubishi UFJ Financial Group Inc with $31.2B (1.8%), JP Morgan with $28.7B (1.7%), Societe Generale with $28.3B (1.6%) and Natixis with $28.0B (1.6%).
The Ten Largest Funds tracked in our latest Weekly include: JP Morgan US Govt ($155.9B), Fidelity Inv MM: Govt Port ($140.0B), Goldman Sachs FS Govt ($120.9B), BlackRock Lq FedFund ($113.4B), Wells Fargo Govt MM ($87.1B), BlackRock Lq T-Fund ($73.9B), Fidelity Inv MM: MM Port ($73.8B), JP Morgan 100% US Treas MMkt ($70.3B), Goldman Sachs FS Treas Instruments ($69.1B) and Morgan Stanley Inst Liq Govt ($64.5B). (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.)
