The December issue of our flagship Money Fund Intelligence newsletter, which was sent to subscribers Tuesday morning, features the articles: "Outlook for 2022 Brightens; JPM on Hikes, MM Supply," which discusses whether money funds might have a Happy New Year; "SSGA Debuts Opportunity; Bancroft, Cabrera Shares," which reviews yet more D&I share classes; and, "OFR Annual Report: Money Funds, Repo Among Risks," which examines the latest concerns of regulators over money funds. We also sent out our MFI XLS spreadsheet Thursday morning, and we've updated our database query system with 11/30/21 data. (Note: Money Fund Wisdom is down temporarily but should be back up next month. MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our December Money Fund Portfolio Holdings are scheduled to ship on Thursday, Dec. 9, and our December Bond Fund Intelligence is scheduled to go out on Tuesday, Dec. 14.
MFI's lead article says, "As the odds of higher short-term rates rise, the outlook for money market funds has brightened. Though pending money fund reforms and turmoil brought on by the rate shift pose risks, the prospect of fee waiver relief and asset inflows from banks and bond markets should make 2022 a very good year for cash."
We quote J.P. Morgan Securities' "Short-Term Fixed Income 2022 Outlook," which contains a piece entitled, "The same, only different." They tell us, "In 2022, the prospect of Fed rate hikes should meaningfully boost yields away from the zero bound, allowing money funds to recapture some fee waivers.... Even so, the amount of excess liquidity in the money markets, and the broader financial markets, will remain substantial. At the same time, overall money market supply will remain anemic as Treasury is unlikely going to revitalize its net T-bill issuance. Much like this year, the supply-demand mismatch will continue to pose challenges for participants in money markets. Usage at the Fed RRP is unlikely going to see much relief any time soon."
Our second article reads, "Money market fund managers continue to launch 'D&I' share classes, the latest trend in the ESG & Social money fund space. The most recent moves come from SSGA, which announced new 'Opportunity' share classes, and BlackRock, which went live with its new Bancroft and Cabrera classes. A press release, entitled, 'State Street Global Advisors Introduces I&D Focused Share Class within Cash Management Suite,' tells us, 'State Street Global Advisors, the asset management business of State Street Corporation (STT), announced the launch of a new money market fund share class, the Opportunity Class, which will benefit philanthropic organizations whose values align with State Street's commitment to racial equity and social justice. With the launch of the new Opportunity Class shares within State Street Global Advisors' existing money market fund suite, the firm is answering the call from clients who are increasingly interested in supporting I&D initiatives with their strategic cash investments."
We quote Kim Hochfeld, SSGA's Global Head of Cash, "As one of the world's largest fiduciary managers who is deeply committed to ESG-focused asset stewardship, we see it as our responsibility to offer our clients an opportunity to have a positive impact within their cash investment strategy.... Our clients are more interested than ever in a holistic, action-oriented approach to inclusion and diversity initiatives."
Our "OFR" excerpt explains, "The Treasury's Office of Financial Research published, 'OFR 2021 Annual Report to Congress,' which analyzes threats to financial stability and contains several quotes relating to money market funds. Under 'Assessing Risks Inside the Markets,' OFR writes, 'With respect to the financial markets themselves, vulnerabilities pose potential liquidity risks. While liquidity risks were contained this year ..., the OFR continues to study the uncertainty surrounding the impact of future investor runs in short-term funding markets. Sudden pressure on money market funds and other alternative cash vehicles to raise large amounts of cash strained liquidity in these markets in 2020 and prompted intervention by the Federal Reserve. As regulators explore reform options, there is a continuing need to monitor the interconnectedness of these markets and their participants."
They tell us, "To increase the transparency of financial data, the OFR in 2021 updated its U.S. Money Market Fund (MMF) Monitor to show both the principal amount of repurchase agreement (repo) transactions and the collateral pledged against these loans. The Short-term Funding Monitor was also upgraded to shed more light on the repo markets and to include a new collateral product that the Fixed Income Clearing Corporation (FICC) rolled out in September."
MFI also includes the News brief, "Assets Finishing Year Strong, Again. ICI's latest weekly 'Money Market Fund Assets' report shows assets rising for the fourth week in a row and the fifth week out of the past six. Assets are up $103.4 billion over 6 weeks, to $4.62 trillion, and they are up $324 billion, or 7.5%, YTD in 2021. Crane Data's MFI XLS shows assets rising $49.7 billion in November to $5.055 trillion."
Another News brief, "Meeder Liquidating Prime MF," says, "An SEC filing for Meeder Prime Money Market Fund tells us, 'The Board ... has determined that it is in the best interests of shareholders to liquidate the Prime Money Market Fund ... expected to take place on or about Dec. 28."
Our December MFI XLS, with Nov. 30 data, shows total assets increased $49.7 billion to $5.055 trillion, after increasing $20.5 billion October, decreasing $878 million in September and increasing $27.9 billion in August. Assets decreased $12.4 billion in July and $73.0 billion in June. Our broad Crane Money Fund Average 7-Day Yield was flat at 0.02%, and our Crane 100 Money Fund Index (the 100 largest taxable funds) also remained flat at 0.02%.
On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA and the Crane 100 both inched higher to 0.09%. Charged Expenses averaged 0.07% for the Crane MFA and the Crane 100. (We'll revise expenses Wednesday once we upload the SEC's Form N-MFP data for 11/30.) The average WAM (weighted average maturity) for the Crane MFA was 37 days (unchanged) while the Crane 100 WAM rose one day to 39 days). (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
