While we haven't quite reached the record low yields of 0.02% see during much of 2014, money market fund yields continue to inch towards zero. Our flagship Crane 100 inched down another basis point in the latest week to 0.06%. The Crane 100 Money Fund Index fell below the 1.0% level in mid-March and below the 0.5% level in late March. It is down from 1.46% at the start of the year and down from 2.23% at the beginning of 2019. Just under two-thirds of all money funds and just over a third of MMF assets have since landed on the zero yield floor, though many continue to show some yield.
According to our Money Fund Intelligence Daily, as of Friday, 8/14, 562 funds (out of 855 total) yield 0.00% or 0.01% with assets of $1.782 trillion, or 36.3% of the total $4.912 trillion. There are 193 funds yielding between 0.02% and 0.10%, totaling $2.297 trillion, or 46.8% of assets; 90 funds yielded between 0.11% and 0.25% with $739.1 billion, or 15.0% of assets; 10 funds yielded between 0.26% and 0.50% with $94.2 billion in assets, or 1.9%. No funds yield over 0.50%.
The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 671), shows a 7-day yield of 0.04%, unchanged in the week through Friday, 8/14. The Crane Money Fund Average is down 43 bps from 0.47% at the beginning of April. Prime Inst MFs were down a basis point to 0.09% in the latest week and Government Inst MFs were flat at 0.04%. Treasury Inst MFs were also unchanged at 0.03%. Treasury Retail MFs currently yield 0.01%, (unchanged in the last week), Government Retail MFs yield 0.01% (unchanged in the last week), and Prime Retail MFs yield 0.05% (unchanged), Tax-exempt MF 7-day yields were down a basis point at 0.02%. (Let us know if you'd like to see our latest MFI Daily.)
Our Crane Brokerage Sweep Index, which hit the zero floor four months ago, remains at 0.01%. The latest Brokerage Sweep Intelligence, with data as of August 14, shows no changes in the last week. All of the major brokerages now offer rates of 0.01% for balances of $100K. No brokerage sweep rates or money fund yields have 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 17 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 other news, ICI released its latest monthly "Money Market Fund Holdings" summary yesterday, which reviews the aggregate daily and weekly liquid assets, regional exposure, and maturities (WAM and WAL) for Prime and Government money market funds. (For more, see our August 12 News, "August MF Portfolio Holdings: Treasury Bender Ends; Repo, TDs Jump.")
The MMF Holdings release says, "The Investment Company Institute (ICI) reports that, as of the final Friday in July, prime money market funds held 40.2 percent of their portfolios in daily liquid assets and 50.4 percent in weekly liquid assets, while government money market funds held 74.2 percent of their portfolios in daily liquid assets and 84.0 percent in weekly liquid assets." Prime DLA increased from 40.3% in June, and Prime WLA increased from 50.2%. Govt MMFs' DLA decreased from 74.6% in June and Govt WLA increased from 83.6% from the previous month.
ICI explains, "At the end of July, prime funds had a weighted average maturity (WAM) of 47 days and a weighted average life (WAL) of 68 days. Average WAMs and WALs are asset-weighted. Government money market funds had a WAM of 43 days and a WAL of 101 days." Prime WAMs were up two days from the previous month and WALs were up four days from the previous month. Govt WAMs and WALs were both unchanged in the previous month.
Regarding Holdings By Region of Issuer, the release tells us, "Prime money market funds' holdings attributable to the Americas declined from $430.17 billion in June to $414.44 billion in July. Government money market funds' holdings attributable to the Americas declined from $3,400.40 billion in June to $3,273.06 billion in July." The Prime Money Market Funds by Region of Issuer table shows Americas-related holdings at $414.4 billion, or 54.5%; Asia and Pacific at $108.4 billion, or 14.3%; Europe at $229.2 billion, or 30.1%; and, Other (including Supranational) at $8.5 billion, or 1.1%. The Government Money Market Funds by Region of Issuer table shows Americas at $3.273 trillion, or 88.0%; Asia and Pacific at $112.0 billion, or 3.0%; Europe at $232.7 billion, 8.7%, and Other (Including Supranational) at $10.2 billion, or 0.3%."
Finally, J.P. Morgan Securities' latest "Short-Term Fixed Income" update says, "MMFs dialed back their T-bills" in their latest weekly. They explain, "As expected, flows out of taxable MMFs continued in July driven in large part by the mid-month tax date. Based on data from iMoneyNet, month-over-month, government and prime MMF AUMs decreased by $40bn and $6bn, respectively. Since their local peak earlier this year, government MMF balances are down about $230bn. Still, there continues a substantial amount of cash in this sector, with AUM totaling over $3.6tn. More notably, even with the slight decline in balances recently, prime MMF AUMs have recovered most of their loss in March and currently register about $750bn."
The segment continues, "For the first time since March, holdings of T-bills fell in both government and prime MMFs, declining by $10bn and $22bn, respectively.... This does not come as a surprise given that the yield gap between T-bills and repo narrowed substantially in July, providing little pickup to go into longer duration T-bills.... At the same time, we suspect that with the tax season behind us, prime funds felt more comfortable extending their portfolio and investing in more credit, as evidenced by the elevated exposure to FRNs.... FRNs tend to have longer dated maturities, are predominately issued by banks, and as a result have higher yields. Continued investments in FRNs should boost the yields of prime MMFs."
It adds, "Agency holdings in government MMFs also decreased in July, driven by declines in discos (down $57bn). We suspect this was more supply driven as advances at FHLBs have fallen significantly post-March when funding conditions normalized. As a result, this limited FHLBs' need to borrow to fund advances. Indeed, our Agency strategists note that FHLB advances fell by $249bn in 2Q20, more than fully reversing the sharp rise in 1Q20. Given banks are now flushed with deposits and home price appreciation is expected to be flat to down over the coming year, we see risk to lower net disco issuance over the remainder of the year, and wouldn't be surprised if the trend of lower disco holdings continues (see Agencies)."
JPM adds, "Somewhat surprisingly, for another month, we found another uptick in GSE SOFR-based FRNs in prime money funds (+$15bn). To be clear, this dynamic is not widespread and is only found across a handful of accounts. We suspect investors see this asset class as an alternative to T-bills, and saw better relative value earlier in July (e.g., 6m GSE SOFR FRNs were yielding as much as 5bp above 6m T-bills). That said, the spread differential has collapsed more recently, and given the recent cheapening in T-bills, we suspect we won't see as much of an increase in GSE FRNs next month."
