S&P Global Ratings published an update entitled, "U.S. Domestic 'AAAm' Money Market Fund Trends (Third-Quarter 2020)," which explains, "After strong inflows during the second quarter, U.S. money market funds (MMFs) lost steam in the third quarter as the uncertainty of the COVID-19 pandemic continued. Although market conditions have markedly improved since March, the third quarter saw multiple fund closures, declining yields, and a renewed market focus on regulatory liquidity metrics. Assets under management (AUM) for rated government and prime funds plateaued over the summer, ending the quarter at $3.1 trillion." (Thanks to those who attended Crane's Money Fund Symposium Online yesterday! See the replay here, and watch for coverage of the sessions in coming days and in our November Money Fund Intelligence.)
The piece continues, "Government MMFs saw outflows of 6.3%, in part because of investors reversing course from their 'flight to quality' during the first half of the year, by moving toward other liquidity or ultrashort products in search of higher yield. Notably, some of the industry's largest MMF managers took action to liquidate their prime MMFs, alongside new announcements of converting their existing prime funds into government strategies. With some balances in government funds moving back to higher-yielding prime funds, prime AUM saw modest net growth of 0.5%."
S&P comments, "We observed further consolidation in the tax-exempt space amid closures of state-specific municipal money market funds, which invest in short-dated instruments issued by state and local governments. Managers of these funds have cited a lack of investment supply and weak demand for these products, which have been squeezed in the current low rate environment."
They add, "As MMFs' higher-yielding assets purchased before the Fed's March rate cut matured during the third quarter, yields continued to deteriorate. Seven-day net yields declined to 0.03% for government funds and 0.13% for prime funds. Net 30-day yields dropped to 0.03% for government funds and 0.14% for prime funds. Given the Fed's current forward guidance, rates are likely to remain positive, but near zero for the foreseeable future."
S&P Global also published, "European 'AAAm' Money Market Fund Trends (Third-Quarter 2020)," which tells us, "In the third quarter of 2020, rated European-domiciled MMFs' net assets continued to grow, and it appears that only the end of quarter outflows saw sterling funds have a negative quarter, albeit down 2%. That said, in August 2020, sterling-denominated funds reached an all-time asset high of £250.6 billion, well above the £32 billion recorded in January 2006, when we launched our quarterly statistics publication. The same can be said for U.S.-dollar funds, which recorded new asset highs of $524 billion in August but finished the third quarter at $504 billion."
Finally, they comment, "With the dramatic actions the Federal Reserve and Bank of England took during March to offset the effects of COVID-19, it is no surprise to see a marked decline in the seven-day yields of U.S. dollar and sterling-denominated funds. Generally, MMFs' returns lag the actions of central banks because of their maturity profiles, but operating in a post-regulatory era and MMFs holding more short-dated assets, the lag is not as great as it once was."
Fitch Ratings also published, "U.S. Money Market Funds: October 2020." They comment, "Total taxable money market fund (MMF) assets decreased by $55 billion from Sept. 17, 2020 to Oct. 16, 2020, according to iMoneyNet data. Prime assets decreased by $136 billion and government funds increased by $80 billion during this period. This is partly due to the conversion of the $126 billion Vanguard Prime Money Market Fund from a prime fund to a government money market fund on Sept. 29, 2020."
The update adds, "Low MMF yields continued into October with net yields decreasing from 0.02% and 0.07% to 0.01% and 0.04% for institutional government funds and institutional prime funds, respectively, from Sept. 17, 2020 to Oct. 16, 2020, according to iMoneyNet data. Yields are likely to remain near zero for a prolonged period as the Federal Open Market Committee indicated at their meeting on Sept. 16, 2020."
In other news, Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics Tuesday, which track a shifting subset of our monthly Portfolio Holdings collection. The most recent cut (with data as of October 23) includes Holdings information from 93 money funds (up 27 from a week ago), which represent $2.586 trillion (up from $1.831 trillion) of the $4.772 trillion (54.2%) in total money fund assets tracked by Crane Data. (Note that our Weekly MFPH are e-mail only and aren't available on the website. For our latest monthly Holdings, see our October 13 News, "October MF Portfolio Holdings: CP, CDs, TDs Fall; Treasury, Repo Flat.")
Our latest Weekly MFPH Composition summary again shows Government assets dominating the holdings list with Treasury totaling $1.373 trillion (up from $949.9 billion a week ago), or 53.1%, Repurchase Agreements (Repo) totaling $598.1 billion (up from $443.8 billion a week ago), or 23.1% and Government Agency securities totaling $338.7 billion (up from $263.2 billion), or 13.1%. Commercial Paper (CP) totaled $97.1 billion (up from $60.7 billion), or 3.8%, and Certificates of Deposit (CDs) totaled $77.5 billion (up from $58.1 billion), or 3.0%. The Other category accounted for $62.4 billion or 2.4%, while VRDNs accounted for $39.9 billion, or 1.5%.
The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $1.373 trillion (53.1% of total holdings), Federal Home Loan Bank with $177.1B (6.8%), BNP Paribas with $81.9B (3.2%), Fixed Income Clearing Corp with $75.8B (2.9%), Federal Farm Credit Bank with $63.6B (2.5%), Federal National Mortgage Association with $58.1B (2.2%), RBC with $46.7B (1.8%), JP Morgan with $40.7B (1.6%), Federal Home Loan Mortgage Corp with $37.6B (1.5%) and Credit Agricole with $35.8B (1.4%).
The Ten Largest Funds tracked in our latest Weekly include: JP Morgan US Govt MM ($170.2 billion), Goldman Sachs FS Govt ($168.4B), Wells Fargo Govt MM ($158.7B), Fidelity Inv MM: Govt Port ($152.3B), BlackRock Lq FedFund ($150.4B), Federated Hermes Govt Obl ($123.3B), BlackRock Lq T-Fund ($99.7B), JP Morgan 100% US Treas MMkt ($99.1B), Morgan Stanley Inst Liq Govt ($90.6B) and Dreyfus Govt Cash Mgmt ($84.5B). (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.)
