Rates on money market funds, brokerage sweep accounts and bank accounts remained flat in December after falling in the weeks after the Fed's last (Oct. 30) rate cut. Our Money Fund Intelligence Daily shows that the flagship Crane 100 MF Index held at 1.46% over the past week. The Crane 100 is down from 1.81% on Sept. 30, down from 2.18% on June 30, and down from 2.23% at the start of the year. Following a flurry of cuts in November, our latest Brokerage Sweep Intelligence publication, with data as of Friday, Dec. 20, shows every major brokerage keeping rates steady in the past week. As we move into 2020, we expect rates to remain flat at least during the first part of the New Year.
Our broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data, shows a 7-day yield of 1.34%, unchanged in the week through Friday, Dec. 20. Treasury Inst MFs were down by 1 bps to 1.35%. Government Inst MMFs and Prime Inst MMFs remained unchanged at 1.41% and 1.56%, respectively. Treasury Retail MFs currently yield 1.09%, (down 0.01%), Government Retail MFs yield 1.10% (unchanged) and Prime Retail MFs yield 1.39% (unchanged). Tax-exempt MF 7-day yields increased 0.09% to 0.80%.
Crane's Brokerage Sweep Index remained flat at 0.14% in the week ended December 20 (for balances of $100K). No firms changed rates. 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 and Ameriprise are paying 0.08%. 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.
Securities America currently has the lowest rate for balances at the $100K level (0.05%). Meanwhile, Robinhood has the highest sweep rate (1.80%). LPL and SSN Securities are paying 0.10% and 0.12%, respectively. Edward Jones offers rates of 0.15% on 100K balances and Folio Institutional offers rates of 0.14%. JPMS Brokerage is paying 0.20%, while Commonwealth is paying 0.25%. TIAA is paying 0.30%, Cetera is paying 0.32%, Pershing and Ally Bank are paying 0.75%, Pershing Dreyfus is paying 0.80%. And, JPMS Advisory is paying 1.55% for balances of $100K.
Crane Data's demo Bank Deposit Intelligence collection shows the average high-yielding internet bank deposit product yielding 1.39%. HSBC Direct offers the highest rate currently at 2.05% while Vio Bank yields 2.02%. These are the only banks with yields still above 2.0%. The next highest yielding banks include: Comenity Direct and UFB Direct at 1.98%, Web Bank at 1.95% and My Savings Direct and Popular Direct at 1.90%.
In brokerage sweep news, Barron's wrote recently about the "Charles Schwab-TD Ameritrade Merger." They tell us that, "Schwab also negotiated lower payments to Canada's TD Bank -- 43% owner of Ameritrade -- for cash deposits held by Ameritrade customers. TD Bank will retain 13% ownership of Schwab."
Barron's continues, "Brokers, and Schwab in particular, are also likely to keep paying skimpy yields on cash in customers' accounts. Though rivals Fidelity Investments and Vanguard Group offer higher-yielding money-market funds for brokerage customers' cash, less competition gives Schwab less incentive to offer higher-yielding alternatives.... Fidelity, meanwhile, seemed to taunt Schwab in August, issuing a press release and ads that touted its money-market yields on cash held in 'sweep' accounts -- way higher than the yields that Schwab customers get on cash sweeps (which are funneled to Schwab Bank)."
The article says, "While the commission cuts were the spark that led to a deal, the tipping point for Schwab came this summer when the Fed started cutting rates for the first time in over a decade -- only a few years after it had begun raising them. Analysts cut revenue and profit forecasts for brokerages to account for lower interest income, and the stocks sank. The Fed's interest-rate cuts threatened Schwab's strategy of gathering assets by slashing prices on trading, investing, and financial advice. Those concessions were subsidized by interest income from its bank."
The Barron's piece continues, "The firm generates more than half of its revenue from interest, much more than rivals -- meaning that it's effectively a bank with a brokerage arm.... Aside from rates, there were several other parts to the deal rationale. Ameritrade's active trader and options platforms are considered top-notch, and in striking the deal, Schwab is landing a big pool of advisor accounts. Schwab also gets an infusion of up to $10 billion a year in deposits from TD Bank and Ameritrade customers for 10 years, starting in 2021."
Finally, it adds, "Gaining brokerage assets will lift custodians' interest revenue and fees off money-market funds (if they're sponsored in-house), and they'll have more opportunities to cross sell other services and securities.... [B]anks with large capital pools and lending operations could monetize E*Trade's customer cash more than a broker that invests it in low-risk, highly liquid securities."
