Crane Data's latest MFI International shows that assets in European or "offshore" money market mutual funds rose over the past month to $969.0 billion. European MMF assets have declined during the first 4 1/2 months of 2022, after hitting a record high of $1.101 trillion in mid-December. These U.S.-style money funds, domiciled in Ireland or Luxembourg but denominated in US Dollars, Pound Sterling and Euros, increased by $6.2 billion over the 30 days through 6/13. They're down $93.9 billion (-8.8%) year-to-date. Offshore US Dollar money funds are up $20.1 billion over the last 30 days and are down $12.7 billion YTD to $521.7 billion. Euro funds rose E1.5 billion over the past month. YTD they're down E26.7 billion to E131.7 billion. GBP money funds decreased L11.6billion over 30 days; they are down by L26.1 billion YTD to L221.0B. U.S. Dollar (USD) money funds (206) account for over half (53.8%) of the "European" money fund total, while Euro (EUR) money funds (96) make up 15.4% and Pound Sterling (GBP) funds (133) total 30.8%. We summarize our latest "offshore" money fund statistics and our Money Fund Intelligence International Portfolio Holdings (which went out to subscribers Tuesday), below. (Note: For those attending our Money Fund Symposium, June 20-22 in Minneapolis, Minn, conference materials are being posted to our "Money Fund Symposium 2022 Download Center." Watch for more Powerpoints later this week, and for recordings to be posted next week after the show.)
Offshore USD MMFs yield 0.71% (7-Day) on average (as of 6/13/22), up from 0.59% a month earlier. Yields averaged 0.03% on 12/31/21, 0.05% on 12/31/20, 1.59% on 12/31/19 and 2.29% on 12/31/18. EUR MMFs yield -0.61% on average, up from -0.80% on 12/31/21. They averaged -0.71% at year-end 2020, -0.59% at year-end 2019 and -0.49% at year-end 2018. Meanwhile, GBP MMFs yielded 0.84%, up 10 bps from a month ago, and up from 0.01% on 12/31/21. Sterling yields were 0.00% on 12/31/20, 0.64% on 12/31/19 and 0.64% on 12/31/18. (See our latest MFI International for more on the "offshore" money fund marketplace. Note that these funds are only available to qualified, non-U.S. investors.)
Crane's March MFII Portfolio Holdings, with data as of 5/31/22, show that European-domiciled US Dollar MMFs, on average, consist of 22% in Commercial Paper (CP), 16% in Certificates of Deposit (CDs), 25% in Repo, 19% in Treasury securities, 17% in Other securities (primarily Time Deposits) and 1% in Government Agency securities. USD funds have on average 55.8% of their portfolios maturing Overnight, 6.3% maturing in 2-7 Days, 10.3% maturing in 8-30 Days, 7.3% maturing in 31-60 Days, 6.5% maturing in 61-90 Days, 11.2% maturing in 91-180 Days and 2.5% maturing beyond 181 Days. USD holdings are affiliated with the following countries: the US (30.8%), France (16.1%), Canada (12.6%), Japan (9.9%), Sweden (6.7%), the Netherlands (4.1%), Australia (3.6%), the U.K. (3.6%), Germany (2.6%) and Switzerland (2.0%).
The 10 Largest Issuers to "offshore" USD money funds include: the US Treasury with $97.3 billion (18.5% of total assets), RBC with $25.3B (4.8%), Credit Agricole with $24.1B (4.6%), BNP Paribas with $21.3B (4.1%), Fixed Income Clearing Corp with $18.7B (3.6%), Sumitomo Mitsui Banking Corp with $15.8B (3.0%), Federal Reserve Bank of New York with $14.0B (2.7%), Skandinaviska Enskilda Banken AB with $12.2B (2.3%), RaboBank with $10.8B (2.0%) and Toronto-Dominion Bank with $10.7B (2.0%).
Euro MMFs tracked by Crane Data contain, on average 37% in CP, 23% in CDs, 27% in Other (primarily Time Deposits), 11% in Repo, 2% in Treasuries and 0% in Agency securities. EUR funds have on average 36.7% of their portfolios maturing Overnight, 7.1% maturing in 2-7 Days, 12.9% maturing in 8-30 Days, 23.0% maturing in 31-60 Days, 12.0% maturing in 61-90 Days, 7.5% maturing in 91-180 Days and 0.9% maturing beyond 181 Days. EUR MMF holdings are affiliated with the following countries: France (29.8%), Japan (12.0%), the U.S. (8.7%), Sweden (6.9%), Germany (6.3%), the U.K. (5.8%), Austria (5.4%), Netherlands (4.9%), Switzerland (4.8%) and Canada (4.5%).
The 10 Largest Issuers to "offshore" EUR money funds include: Credit Agricole with E7.0B (5.4%), BNP Paribas with E5.9B (4.5%), Societe Generale with E5.8B (4.4%), BPCE NA with E5.1B (4.0%), DZ Bank AG with E4.6B (3.5%), Mizuho Corporate Bank Ltd with E4.4B (3.4%), Natixis with E4.2 (3.3%), ING Bank with E3.8B (2.9%), Barclays PLC with E3.8B (2.9%) and Nordea Bank with E3.4B (2.6%).
The GBP funds tracked by MFI International contain, on average (as of 5/31/22): 41% in CDs, 19% in CP, 20% in Other (Time Deposits), 19% in Repo, 1% in Treasury and 0% in Agency. Sterling funds have on average 38.0% of their portfolios maturing Overnight, 6.1% maturing in 2-7 Days, 11.2% maturing in 8-30 Days, 18.2% maturing in 31-60 Days, 10.1% maturing in 61-90 Days, 9.5% maturing in 91-180 Days and 7.0% maturing beyond 181 Days. GBP MMF holdings are affiliated with the following countries: France (17.6%), Japan (15.0%), Canada (14.7%), the U.K. (14.6%), Australia (7.3%), the Netherlands (5.1%), Sweden (5.1%), the U.S. (4.7%), Germany (3.6%) and Spain (2.1%).
The 10 Largest Issuers to "offshore" GBP money funds include: UK Treasury with L12.4B (6.6%), Toronto-Dominion Bank with L8.1B (4.3%), BNP Paribas with L7.8B (4.1%), Mitsubishi UFJ Financial Group Inc with L7.5B (4.0%), Bank of Nova Scotia with L6.8B (3.6%), Mizuho Corporate Bank Ltd with L6.8B (3.6%), National Australia Bank Ltd with L6.7B (3.6%), Nordea Bank with L6.6B (3.5%), Credit Agricole with L6.1B (3.3%), and Sumitomo Mitsui Trust Bank with L5.8B (3.1%).
In other news, J.P Morgan's latest "Short-Term Market Outlook And Strategy features a section that asks, "How have yields of MMFs and bank deposits fared YTD?" They explain, "One key theme we have emphasized this year is the expected divergence between bank deposit yields and MMF yields. We posited that MMFs would display a much higher sensitivity to the fed funds rate than bank deposits as large banks would be hesitant to increase yields, similar to the period in 2017-2019.... In the absence of SLR relief, large banks remain leverage-constrained in the current environment, limiting their willingness to hold more deposits than needed."
The piece continues, "Indeed, using the cost of interest-bearing transaction accounts at US GSIBs as a proxy for yields paid on operational deposits, yields of bank deposits barely budged as of 1Q22 even though the Fed raised rates by 25bp.... Meanwhile, net yields of government MMFs increased by 10bp to 0.12%, showing a much higher beta to the funds rate (40%) as they benefited from the aggressive shift in Fed market expectations. Current net yields of government MMFs are at 0.58%."
It tells us, "Interestingly, based on the last tightening cycle, we also posited that it would take about 3-4 rate hikes before MMF managers pass on full rate hikes to end shareholders as funds look to recoup fee waivers provided during ZIRP. However, even as the Fed has raised rates by 75bp YTD, expense ratios at government MMFs are lower than where they were the last time the funds rate was at 1.00%.... This seems to suggest that government MMFs are recouping less fee waivers and passing more of the increased yields to end shareholders earlier than normal, aggressively widening the spread between MMFs and bank deposits."
JPM also asks, "Will banks become more competitive? We think that is unlikely any time soon. As we noted, large banks continue to be leverage-constrained, tying up excess capital on their balance sheets. The slow pace of Fed QT relative to the size of the Fed's balance sheet doesn't help (Fed assets are estimated to decline by only $470bn from the end of May to December). In fact, one CEO of a large US GSIB noted that he might want to shed non-operational deposits to reallocate the banks' excess capital towards other uses, especially as we continue to head into an uncertain economic environment. Typically, non-operational deposits find their way into MMFs. It's possible that the money could move to regional banks, which might be less leverage constrained, but based on their deposit rates, this doesn't seem likely.... The best deposit rates out there are those of online banks, which are primarily a retail savings product and not necessarily for institutional clients. All told, expect Fed RRP balances to remain high. What's $2tn between friends?"
