Money market fund yields, which fell below the 1.0% level seven weeks ago and below the 0.5% level five weeks ago, continued inching lower in the latest week. Our flagship Crane 100 Money Fund Index was down 5 basis points over the past week (through May 1) to 0.25%, and down 25 bps for the month of April (through 4/30). The Crane 100 is down from 1.46% at the start of the year and down 1.97% from the beginning of 2019 (2.23%). While some funds have already hit the zero floor, most money funds maintain stubbornly high (given the Fed funds target), and they still maintain a yield advantage over sweeps and bank deposits, albeit a thinner one.
According to our Money Fund Intelligence Daily, as of Friday, 4/30, 292 funds (out of 852 total) yielded 0.00% or 0.01% with total assets of $901.2 billion, or 17.9% of total assets. (This is up from 255 funds last week with $485.2B in assets.) There were 118 funds yielding between 0.02% and 0.10%, totaling $538.1B, or 10.7% of assets; 199 funds yielded between 0.11% and 0.25% with $2.173 trillion, or 43.1% of assets; 136 funds yielded between 0.26% and 0.50% with $569.3 billion in assets, or 11.3% ; 103 funds yielded between 0.51% and 0.99% with $860.0 billion in assets or 17.1%; no funds yielded over 1.00%.
The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 674), shows a 7-day yield of 0.21%, down 3 basis points in the week through Friday. (It remained 0.21% on May 1 too.) The Crane Money Fund Average is down 25 bps from 0.47% at the beginning of April. Prime Inst MFs were down 3 bps to 0.48% in the latest week, and down 40 bps over the course of April. Government Inst MFs fell by 3 bps to 0.18%, they are down 25 bps MTD. Treasury Inst MFs dropped by 3 bps to 0.12%, and were down 18 bps in April. Treasury Retail MFs currently yield 0.01%, (down 1 basis point for the week, and down 6 bps in April), Government Retail MFs yield 0.07% (down 2 bps for the week, and down 22 bps in April), and Prime Retail MFs yield 0.40% (down 4 bps for the week, and down 39 bps for April), Tax-exempt MF 7-day yields dropped by 4 bps to 0.10%, they were down 2.91% in April.
As we've mentioned in previous weeks, our Crane Brokerage Sweep Index, the average rate for brokerage sweep clients, has already hit the floor at 0.01%. It's down 27 bps from the end of 2018 (0.28%). The latest Brokerage Sweep Intelligence, with data as of May 1, shows no rate changes over the past week. All of major brokerages now offer rates of 0.01% for balances of $100K.
No brokerage sweep rates or money fund yields have dropped to zero or gone negative to date, but this could become a distinct possibility in coming weeks or months. Crane's Brokerage Sweep Index has been flat for the last four weeks at 0.01% (for balances of $100K). Ameriprise, E*Trade, Fidelity, Merrill Lynch, Morgan Stanley, Raymond James, RW Baird, Schwab, TD Ameritrade, UBS and Wells Fargo all currently have rates of 0.01% for balances at the $100K tier level (and almost every other tier too).
In related news, Stifel Financial Corp recently reported Q1 2020 Earnings, and the earnings call transcript has a couple of mentions of brokerage sweeps. CFO James Marischen comments, "I would also highlight that market volatility did increase client allocations to cash. Within our Sweep Program, we saw balances increase by nearly $2.5 billion. We have seen the trend continue thus far in the second quarter and would expect to see that continue, given the current environment."
He adds, "Liquidity remains strong across our various legal entities. In addition to the sweep program, the bank had access to off-balance sheet funding of $4 billion. Within our primary broker-dealer and holding company, we have access to more than $1 billion of liquidity from cash, credit facilities that are committed and unsecured as well as secured funding sources."
A Goldman Sachs Analyst asked, "Are the [sweep] cash balance actually above where they ended the first quarter? Or they're at around the same level? And then can you give us a sense for the third-party bank sweep rate that you guys are earning on those balances now, as we're sort of jumping into the April, May dynamic? [and] Any comment around demand from third-party banks for cash sweep balances ... spreads that they're paying, etc.?"
Marischen answers, "In regards to the sweeps, we have seen that continue to increase since quarter end. We haven't given that number. I would say that there's an opportunity for that to accelerate, if we particularly look at the ticketed money funds. There's still almost $7 billion over there. And as that product continues to converge down from a rate perspective, more equivalent with the sweep program, you'll see more funds come in there. In total, we're making around 30 basis points on the Sweep program that shows up in the asset management line item. I would say there still is very strong demand from third-party banks to step in and take those deposits. We have a lot of relationships with a number of banks from a treasury perspective that are very interested in stepping up and setting into the program."
CEO Ronald Kruszewski comments, "One thing just to point out [that] was sort of a negative for us: As rates were going up, which was on a relative basis, we don't sweep that many deposits to third party banks. And so that was not as much of a tailwind as you saw those rates getting as high as 150 basis points. Conversely, it's not as big of a downshift for us because we just don't have as many balances down to 30 basis points. Most of the impact of what we're seeing will be in our NIM versus the combination of NIM and reduction in deposits swept away."
Finally, as we reported last week, money market fund assets broke the $5.0 trillion level for the first time ever, according to our MFI Daily publication. Money fund assets continued to rise through the end of April, and they were up $450.8 billion through April 30 to $5.041 trillion. Government funds jumped $363.0 billion in April to $3.884 trillion (assets skyrocketed $790.4 billion in March). Prime fund assets increased $82.1 billion to $1.018 trillion in April. With the help of April's asset gains, Prime funds again surpassed the $1.0 trillion level, after falling by $159.6 billion in March. Tax-Exempt assets increased $5.7 billion to finish April at $140.0 billion.
Crane Data's MFI International shows assets in European or "offshore" money market mutual assets jumping in USD, GBP and EUR currencies in the latest month. These U.S.-style funds, domiciled in Ireland or Luxemburg and denominated in US Dollars, Pound Sterling and Euros, increased by $64.0 billion over the last 30 days to $972.1 billion; they're up by $95.5 billion year-to-date.
Offshore USD money funds, which broke over $500 billion in January, increased by $40.5 billion in April, and they're are up $18.0 billion YTD. Euro funds increased by E6.3 billion over the previous 30 days, while YTD they're up E24.4 billion. GBP funds rose by L12.6 billion in April, and are up by L21.8 billion YTD. U.S. Dollar (USD) money funds (192, up one from March) account for over half ($512.4 billion, or 52.7%) of our "European" money fund total, while Euro (EUR) money funds (92, unchanged from March) total E123.1 billion (12.7%) and Pound Sterling (GBP) funds (123, unchanged from March) total L246.7 billion (25.4%).
