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 Nov. 26) includes Holdings information from 64 money funds (down from 78 a week ago), which represent $2.201 trillion (down from $2.458 trillion) of the $4.925 trillion (44.7%) in total money fund assets tracked by Crane Data. (Our Weekly MFPH are e-mail only and aren't available on the website. See our Nov. 10 News, "Nov. MF Portfolio Holdings: Treasuries Recover But Repo Still No. 1," for more.)
Our latest Weekly MFPH Composition summary again shows Government assets dominating the holdings list with Repurchase Agreements (Repo) totaling $1.009 trillion (down from $1.086 trillion a week ago), or 45.8%; Treasuries totaling $893.6 billion (down from $1.004 trillion a week ago), or 40.6%, and Government Agency securities totaling $127.0 billion (down from $148.9 billion), or 5.8%. Commercial Paper (CP) totaled $59.5 billion (down from a week ago at $73.4 billion), or 2.7%. Certificates of Deposit (CDs) totaled $40.3 billion (down from $49.0 billion a week ago), or 1.8%. The Other category accounted for $54.6 billion or 2.5%, while VRDNs accounted for $17.7 billion, or 0.8%.
The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $893.6 billion (40.6% of total holdings), the Federal Reserve Bank of New York with $559.1B (25.4%), Fixed Income Clearing Corp with $61.3B (2.8%), BNP Paribas with $60.7B (2.8%), RBC with $55.9B (2.5%), Federal Home Loan Bank with $51.6B (2.3%), Federal Farm Credit Bank with $40.8B (1.9%), Societe Generale with $26.0B (1.2%), Federal National Mortgage Association with $24.3B (1.1%) and Canadian Imperial Bank of Commerce with $21.7B (1.0%).
The Ten Largest Funds tracked in our latest Weekly include: JPMorgan US Govt MM ($245.1B), Goldman Sachs FS Govt ($214.8B), Morgan Stanley Inst Liq Govt ($155.7B), Wells Fargo Govt MM ($140.9B), Fidelity Inv MM: Govt Port ($136.4B), Dreyfus Govt Cash Mgmt ($128.9B), Goldman Sachs FS Treas Instruments ($111.6B), JPMorgan 100% US Treas MMkt ($102.0B), State Street Inst US Govt ($89.7B) and First American Govt Oblg ($88.7B). (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.)
In other news, Western Asset released an article on, "The Unstable Future for Stablecoins," which explains, "On November 1, 2021, the President's Working Group on Financial Markets in conjunction with the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency published a detailed report on the stablecoin market called the PWG Report. Stablecoins are one of the latest financial products to join the global digital ecosystem which already includes many buzzword-worthy digital innovations that have dominated the financial and mainstream media headlines in recent years."
They continue, "Superficially, stablecoins are just another type of digital asset used predominately as a short-term stopgap for investors trading in -- or between -- other longer-term speculative digital assets, such as cryptocurrencies or non-fungible tokens (NFTs). When comparing the digital-only world with the more traditional investment fund industry, stablecoins are often likened to money market funds. Just like constant net asset value (CNAV) money market funds, stablecoins are designed to maintain a stable value relative to a fiat currency such as the US dollar. This perceived stability offers investors a safe harbor when switching among assets in their digital wallets while earning a small amount of interest."
Author Jason Straker writes, "The utilization of the stablecoin market has been swift and widespread. By October 31, 2021, total market capitalization of the top three stablecoins [Tether, USD Coin and Binance] rose to more than $114 billion with the majority of this growth witnessed in the past 12 months.... The assumed stability of value is really where the comparison with CNAV money market funds ends. Unlike those types of funds, stablecoins are currently largely unregulated. While sponsors of money market funds must adhere to a variety of strict regulations covering the underlying investment types -- NAV accounting practices, portfolio liquidity and stress testing -- providers of stablecoins are not bound by such rules and restrictions."
He comments, "An investment in a CNAV money market fund represents a share of the value of the underlying portfolio, and the fund is managed in such a way that that value is essentially equal to one unit of currency. Conversely, no such relationship exists between the value of the stablecoin token and its underlying portfolio, which can be invested in both low-risk securities permitted for money market funds (e.g., T-bills), as well as in other assets not permitted, such as lower-quality corporate bonds. This funding gap was one of three major risks and regulatory gaps highlighted by the PWG Report."
The article also says, "The potential for a run on a stablecoin is not just a concern for the stablecoin investors, it also creates nervousness for managers of traditional money market funds. If an underlying stablecoin portfolio holds large volumes of money market instruments, such as commercial paper, then a sudden and dramatic liquidation could result in downward price pressure in the broader market. This is something a money market fund manager would be keen to avoid."
It adds, "The PWG Report makes a number of recommendations to address each of the three concerns we mention, most significantly that issuance of stablecoins be limited to banks only. This would lessen the potential for destabilizing, confidence-driven runs as banks would have access to the various safety nets offered by official institutions, such as the Federal Reserve. Whatever form stablecoins may end up taking in the future, investors deserve the information they will need to make informed decisions regarding investment risks—and this will undoubtedly be facilitated by the involvement of regulators." (For more, see our Nov. 2 Crane Data News, "PWG Report on Stablecoin Risks," and our July 21 News, "Tether Hits Keep Coming: WSJ, PWG, CNBC; Taming Wildcat Stablecoins.")
