The August issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Friday morning, features the articles: "Summer Asset Swoon Ending But Totals Back Below $5 Trillion," which focuses on recent declines in money market fund assets; "PM Perspectives: Walczak, Hill & Yi Discuss MMFs," which excerpts from our latest webinar; and, "Bank Regulators Getting Jump on Future Reg Changes," which discusses the potential for future reforms. We've also updated our Money Fund Wisdom database with July 31 statistics, and sent out our MFI XLS spreadsheet Friday a.m. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our August Money Fund Portfolio Holdings are scheduled to ship on Tuesday, August 11, and our August Bond Fund Intelligence is scheduled to go out Friday, August 14.
MFI's "Summer Swoon" article says, "Money fund assets declined by $44.2 billion in July to $4.991 trillion, after falling $127.9 billion in June. Prime MMFs saw their first drop since March (down $18.9 billion to $1.122 trillion), while Govt MMFs showed their third monthly drop in a row (down $18.9 billion to $3.738 trillion last month). MMFs fell below $5.0 trillion for the first time since late April according to our MFI XLS data series. They'd increased by a huge $1.192 trillion during the March through May period."
It continues, "Prime money fund assets fell by $123.9 billion in March, dropping below the $1.0 trillion level to $957.7 billion, but they rebounded by $104.7 billion in April, $53.2 billion in May and $25.6 billion in June, prior to this month's decline."
Our "Profile" reads, "We recently hosted 'Crane's Money Fund Webinar: Portfolio Manager Perspectives,' which featured Federated Hermes' Sue Hill, Northern Trust Asset Management's Peter Yi and UBS Asset Management's David Walczak. The three senior PMs discussed money market supply, asset flows, yields and the outlook for Prime money market funds, among other things. We quote some of the highlights of the webinar below. (Click here to access the recording and here for our Webinar page, and register for our next event, 'Crane's Money Fund Webinar: Mini Fund Symposium,' which will be August 26, 2020, 1-4pm EDT.)
Hill says, "We all know that in March there were enormous inflows of assets ... into government money market funds. We know the massive Fed actions across the board to support the market, support functioning, market liquidity. We know there's been massive fiscal support as a result to address the impact of the coronavirus and the shutdown."
She continues, "Government funds absorbed the inflows relatively well. Initially in March, through issuance on the agency side, Federal Home Loan banks in particular [supported the] growth. As we flipped the calendar into April and May, [we saw] substantial issuance, at a pace never seen before, of Treasury bills, through regular Treasury bill issuance and cash management bills. So we got through that time period reasonably well. That issuance by Treasury removes that threat of negative rates in the secondary market that we saw in late March and into early April."
The "Reg Changes" article tells readers, "As the money markets continue to stabilize and yields slowly grind down to zero, many, especially bank regulators, have begun discussing potential reforms to money funds, again. We think it will be some time before anything happens, and a lot depends on the elections, but the early conversations bear watching."
The piece continues, "The Centre for Economic Policy Research (VoxEU.org) published a brief from Federal Reserve economists entitled, "Runs on prime money funds during the COVID-19 crisis." The piece explains, "Liquidity restrictions on investors, like the redemption gates and liquidity fees introduced in the 2016 money market fund (MMF) reform, are meant to improve financial stability during a crisis. However, by comparing the latest outflow episode due to COVID-19 to those in 2008 and 2011, this column finds evidence that these liquidity restrictions might have exacerbated the run on prime MMFs in this episode."
The latest MFI also includes the News brief, "Dreyfus Liquidation General NJ MF," which says, "A Prospectus Supplement filing for Dreyfus's General New Jersey Money Market Fund tells us, 'The Board of Directors of General New Jersey Municipal Money Market Fund, Inc. has approved the liquidation of the Fund, effective on or about Sept. 11, 2020.' The fund had filed a Form N-CR after hitting a shadow price of 0.9975 a share in March. Also, Schwab filed a 'Form N-1A' for new 'Ultra Share' classes of its Schwab Govt Money Fund, Schwab Treasury Obligations MF and Schwab U.S. Treasury MF."
A second News piece titled, "SEC Statistics: Assets Fall Back to $5.1 Trillion in June, Yields Down," says, "The Securities and Exchange Commission's latest monthly 'Money Market Fund Statistics' summary shows that total money fund assets dropped by $127.3 billion in June to $5.104 trillion, just the 2nd decrease in the past 24 months. The SEC shows that Prime MMFs increased $21.3 billion in June to $1.162 trillion, while Govt & Treasury funds plummeted $145.1 billion to $3.806 trillion. Tax Exempt funds decreased by $3.5 billion to $136.6 billion. Yields were down across the board in June, except for a slight increase in Tax Exempt Institutional yields.
Our July MFI XLS, with July 31 data, shows total assets decreased by $44.2 billion in July to $4.991 trillion, after decreasing $113.0 billion in June, increasing $31.6 billion in May, jumping $417.9 billion in April and skyrocketing $688.1 billion in March. Our broad Crane Money Fund Average 7-Day Yield fell 2 bps to 0.05% during the month, while our Crane 100 Money Fund Index (the 100 largest taxable funds) was down 3 bps to 0.08%.
On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA was down at 0.28% while the Crane 100 fell to 0.27%. Charged Expenses averaged 0.23% (unchanged from last month) and 0.20% (down 3 bps and 1 basis point from the previous month), respectively for the Crane MFA and Crane 100. The average WAM (weighted average maturity) for the Crane MFA and Crane 100 was 39 (down 1 day) and 42 days (down a day) respectively. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
