Money fund yields, as measured by our Crane 100 Money Fund Index (7-Day Yield), continued grinding higher, rising by 6 basis points to 1.34% in the week ended Friday, 7/22. Yields rose by 6 basis points the previous week and 4 basis points the week before that too. On average, they're up from 1.18% on June 30 and more than double their level of 0.58% on May 31, and up from 0.21% on April 29, 0.15% on March 31 and 0.02% on February 28 (where they'd been for almost 2 years prior). Yields should jump again late this week if the Fed hikes rates by 75 bps again as expected. Brokerage sweep rates also inched higher over the past week, as Fidelity again tweaked their rates upwards. Our latest Brokerage Sweep Intelligence shows brokerages paying an average of 0.17% on FDIC insured deposits, up from 0.04% a month ago and 0.01% two months ago. We review the latest money fund and brokerage sweep yields below.
Our broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 671), shows a 7-day yield of 1.23%, also up 6 bps in the week through Friday. The Crane Money Fund Average is up 76 bps from 0.47% at the beginning of June. Prime Inst MFs were up 3 bps to 1.41% in the latest week, and up 77 bps since the start of June (close to double from the month prior). Government Inst MFs rose by 5 bps to 1.29%, they are up 75 bps since the start of June. Treasury Inst MFs up 10 bps for the week at 1.30%, up 80 bps since the beginning of June. Treasury Retail MFs currently yield 1.04%, (up 10 bps for the week, and up 74 bps since June), Government Retail MFs yield 0.98% (up 4 bps for the week, and up 72 bps since June started), and Prime Retail MFs yield 1.21% (up 3 bps for the week, and up 73 bps from beginning of June), Tax-exempt MF 7-day yields dropped by 2 bps to 0.37%, they were down 3 bps since the start of 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 up a basis point to 0.17%. This follows increases over the past couple of months 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 July 22, show just one change over the previous week.
Our latest Brokerage Sweep Intelligence reports that `Fidelity increased rates to 0.82% for all balances between $1K and $5 million and over for the week ended July 22. 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 (7/22), just 21 funds (out of 818 total) still yield 0.00% or 0.01% with assets of $4.1 billion, or 0.1% 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 91 funds yielding between 0.02% and 0.49%, totaling $32.8B, or 0.7% of assets; 169 funds yield between 0.50% and 0.99% with $228.5 billion in assets, or 4.6%; 162 funds yield between 1.00% and 1.24% with $878.1 billion in assets or 17.6%; 259 funds yielded between 1.25% and 1.49% with $2.549 trillion or 51.0%; and 116 funds yielded over 1.50% ($1.305 trillion, or 26.1%).
In related news, a new Financial Institution Letter, entitled, "FDIC Updates on Brokered Deposits," explains, "The Federal Deposit Insurance Corporation (FDIC) is issuing a statement, adding a new Question and Answer (Q&A), and updating public information on the Banker Resource Center Brokered Deposits Page, to remind FDIC-insured depository institutions (IDIs) that deposits swept from broker dealers with a primary purpose exception to unaffiliated IDIs must be reported as brokered if there are any additional third parties involved that qualify as a deposit broker, as defined by Section 337.6 -- Brokered Deposits, of the FDIC's Rules and Regulations."
Highlights of the update include: "A Statement, new Q&A (D.10) in the Questions and Answers Related to Brokered Deposit Rule, and an update to the Public Report of Entities Submitting Notices for a Primary Purpose Exception asterisk note, are being issued to remind IDIs that: An IDI receiving sweep deposits from an unaffiliated broker dealer with a primary purpose exception for that business line should be aware of any additional third parties involved in the deposit placement arrangement that qualify as a deposit broker; If an additional third party is involved that would qualify as a deposit broker, for example, the third party is engaging in matchmaking activities, then the sweep deposits received from the broker dealer must be reported as brokered deposits on the IDI's quarterly filings of the Consolidated Report of Condition and Income (Call Report), even if the broker dealer has a primary purpose exception for the relevant business line."
The highlights continue, "In conjunction with new Q&A D.10, IDIs should review Q&A C.6 for an example of services that constitute matchmaking activities when provided by a third party to a broker-dealer in an unaffiliated sweep program; and The IDI is responsible for accurately reporting deposits on its Call Report. However, the FDIC will not require an IDI to refile Call Reports that predate the issuance of the attached Statement, if, after good faith efforts, certain deposits were not previously reported as brokered by the IDI due to a misunderstanding of how the facilitation aspect of the deposit broker definition applies when additional third parties are involved."
The new "Questions and Answers Related to Brokered Deposits Rule – As of July 15, 2022," tells us, "Below are answers to a collection of questions about the FDIC's brokered deposits rule. Any determination about whether an entity meets the deposit broker definition or one of the exceptions to the definition is based upon the facts and circumstances of each particular deposit placement arrangement. These questions and answers will be periodically updated on the FDIC's website."
Discussing "Exclusive Deposit Placement Arrangements," the FDIC asks, "1. If an insured depository institution (IDI) has separate affiliates that each sweep funds to that IDI (and do not sweep to any other IDI), would each of the affiliates be considered to have an 'exclusive deposit placement arrangement' with the one IDI?" They answer, "Yes, if each affiliate is placing funds at only one IDI, then each affiliate does not meet the 'deposit broker' definition. However, if the affiliates were each sweeping deposits to a different IDI, the IDIs should be aware that, as the FDIC noted in the preamble of the rule, 'a person that creates or utilizes multiple entities that each place deposits with one IDI to evade the rule, while still maintaining a relationship with one or more of such entities, will collectively be viewed as one 'person' and thus qualify as a deposit broker.' 86 Fed. Reg. 6745 (January 22, 2021)."
