Money market fund yields have surged by 50 basis points since the Federal Reserve's 75-basis-point rate hike on June 15. The 7-Day Yield Average for our flagship Crane 100 Money Fund Index rose by 27 basis points to 1.15% in the week ended Friday, 6/24, after rising by 23 basis points on June 16 and 17. Last week was the first time money funds yielded over 1.0% since February 2020. The average has almost doubled from 0.58% on May 31, and is up from 0.21% on April 29, 0.15% on March 31 and 0.02% on February 28 (where it had been for almost 2 years prior). Brokerage sweep rates also jumped over the past week as Fidelity more than doubled its FDIC insured sweep rates, and Raymond James and Schwab also moved rates higher. Our latest Brokerage Sweep Intelligence shows most brokerages now paying an average of 0.11% or higher (on FDIC insured deposits), up from 0.04% a month ago. We review the latest money fund and brokerage sweep yields below.
The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 671), shows a 7-day yield of 1.00%, up 25 basis points in the week through Friday. The Crane Money Fund Average is up 53 bps from 0.47% at the beginning of June. Prime Inst MFs were up 34 bps to 1.23% in the latest week, and up 59 bps over the course of June. Government Inst MFs rose by 24 bps to 1.08%, they are up 54 bps MTD. Treasury Inst MFs rose by 21 bps to 1.01%, up 51 bps in June. Treasury Retail MFs currently yield 0.76%, (up 19 bps for the week, and up 46 bps in June), Government Retail MFs yield 0.77% (up 23 bp for the week, and up 51 bps in June), and Prime Retail MFs yield 1.03% (up 31 bps for the week, and up 55 bps for June), Tax-exempt MF 7-day yields rose by 13 bps to 0.56%, they were up 16 bps in June.
Our Crane Brokerage Sweep Index, the average rate for brokerage sweep clients (most of which are swept into FDIC insured accounts; only Fidelity sweeps to a money market fund), inched higher to 0.11%. This follows increases over the past several weeks but also follows 2 straight years of yields at 0.01%. Sweep yields were 0.12% on average at the end of 2019 and 0.28% on average at the end of 2018. The latest Brokerage Sweep Intelligence, with data as of June 24, shows numerous changes over the previous week.
Our latest Brokerage Sweep Intelligence reports that Fidelity hiked its FCash brokerage account and Cash Management Account rates to 0.69% across all tiers. (Fidelity's Government Money Market Fund, also a default sweep option, yields 0.97%, but we only include FDIC insured sweeps in our Brokerage Sweep Index.)
We also show that Raymond James increased rates to 0.10% for balances under $100K, to 0.20% for balances between $100K and $250K, to 0.35% for balances between $250K and $1 million, to 0.45% for balances between $1 million and $2.5 million and to 0.55% for balances $2.5 million to $5 million. Also, Schwab increased its sweep rates from 0.01% to 0.15% for the week ended June 24 and TD Ameritrade increased its sweep rates from 0.01% to 0.10% for the week ended June 24. Just four of 11 major brokerages still offer rates of 0.01% for balances of $100K (and most other tiers). These include: E*Trade, Merrill Lynch, Morgan Stanley, and UBS.
According to Monday's Money Fund Intelligence Daily, with data as of Friday (6/24), just 23 funds (out of 818 total) still yield 0.00% or 0.01% with assets of $10.1 billion, or 0.2% of total assets. (This compares to 593 funds with $2.623 trillion yielding 0.00% or 0.01% at the beginning of the year.) There were 93 funds yielding between 0.02% and 0.49%, totaling $72.8B, or 1.4% of assets; 329 funds yield between 0.50% and 0.99% with $1.177 trillion in assets, or 23.7%; 191 funds yield between 1.00% and 1.24% with $1.244 trillion in assets or 25.0%; 186 funds yielded between 1.25% and 1.49% with $2.299 or 46.3%; and just 6 funds yielded over 1.50% ($162.4 billion, or 3.3%).
In related news, website JDSupra features a posting by law firm Seward & Kissel entitled, "FDIC Adopts Rule Prohibiting Misleading Statements About FDIC Insurance that Impacts a Broad Range of Deposit Placement Arrangements Offered by Brokers, Banks, and FinTechs." It tells us, "On May 17, 2022, the Board of Directors of the Federal Deposit Insurance Corporation ('FDIC') adopted a final rule setting forth its procedures for investigating and enforcing false advertising, false or misleading representations about deposit insurance, or misuse of the FDIC's logo. A central target of the Rule are issuers of digital 'stablecoins,' some of which have made claims about the availability of FDIC insurance on bank deposits they hold at FDIC-insured banks to back the coins. The Rule will also affect broker-dealers, banks and other entities offering bank deposit 'sweep' programs, brokered CD programs, or other deposit placement programs relying on 'pass-through' deposit insurance (i.e., insurance that passes through a fiduciary to an underlying depositor)."
The piece continues, "Because of its impact on programs like these, the Rule has broader implications than appear on the surface. Pursuant to the Rule, all persons or entities making claims about FDIC insurance -- regardless of whether they are insured depository institutions -- must have a basis for those claims. Critically, the Rule deems it a 'material omission' for a non-bank entity not to identify banks at which depositor funds may be placed when making claims about the availability of pass-through deposit insurance."
It also states, "Although identifying the names of the banks receiving deposits on a pass-through basis is consistent with existing FDIC guidance on pass-through deposit insurance, the new requirement applies to any 'statement regarding deposit insurance.' An entity offering a sweep program could, in many cases, maintain a bank list on a website and include a link to that list in their disclosure document concerning the program, but the language used in the Rule -- 'statement' -- could be read by the FDIC to apply much more broadly, to many other documents and communications."
It adds, "Further, pass-through deposit insurance remains available only when customers establish a bona fide agency relationship with the third party placing deposits and when the deposit accounts satisfy applicable titling requirements. That is, compliance with the Rule is not sufficient on its own in order for deposits to qualify for pass-through treatment. The Rule was published in the Federal Register on June 2, 2022, and it will go into effect on July 2, 2022." (See the full FDIC Financial Institution Letter here.)
Website AdvisorHub writes on another regulatory issue involving "cash," in, "Wells Fargo Tightens Rules on Cash in Advisory Accounts." They tell us, "A policy change to further restrict the amount of cash that Wells Fargo Advisors brokers can hold in customers' advisory accounts has some of them hunting for safe alternatives in a turbulent market. Wells Fargo Advisors as of April 1 began counting money market funds toward a 25% limit on cash holdings in advisory accounts in several wrap fee programs, according to an internal notice. The firm previously counted only cash sweep deposits toward its tolerance threshold, according to the memo which was posted to broker workstations at the end of March."
They explain, "Customer accounts can be above the limit for a maximum of six months, according to the posting, which did not define a prior cap in at least one advisory program. The firm did not detail penalties, but a veteran broker at the firm said it appeared they would no longer receive payout on cash-heavy accounts. The move aims to mitigate risk and matches standard practice at other firms, according to the notice. Many of Wells' peers already have similar restrictions aimed at avoiding the appearance of 'reverse churning' or improperly collecting fees on unmanaged funds."
