Money fund yields, as measured by our Crane 100 Money Fund Index (7-Day Yield), surged higher again following the Fed's 75 bps hike, rising by 23 basis points to 1.57% in the week ended Friday, 7/29. Yields rose by 6 basis points the previous week and 6 basis points the week before that. On average, they're up from 1.18% on June 30 and almost triple their level of 0.58% on May 31. MMF yields are 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 keep jumping in coming days as MMF portfolios adjust to the new higher Fed funds target rate of 2.25-2.5%; they should be about 2.0% on average by the end of summer. Brokerage sweep rates also inched higher over the past week too, as UBS, E*Trade and Morgan Stanley tweaked their rates upwards. Our latest Brokerage Sweep Intelligence shows brokerages paying an average of 0.18% 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 1.44%, also up 21 bps in the week through Friday. The Crane Money Fund Average is up 97 bps from 0.47% at the beginning of June. Prime Inst MFs were up 23 bps to 1.64% in the latest week, and up 100 bps since the start of June (close to double from the month prior). Government Inst MFs rose by 22 bps to 1.51%, they are up 97 bps since the start of June. Treasury Inst MFs up 21 bps for the week at 1.51%, up 101 bps since the beginning of June. Treasury Retail MFs currently yield 1.25%, (up 21 bps for the week, and up 95 bps since June), Government Retail MFs yield 1.18% (up 20 bps for the week, and up 92 bps since June started), and Prime Retail MFs yield 1.45% (up 24 bps for the week, and up 97 bps from beginning of June), Tax-exempt MF 7-day yields rose by 31 bps to 0.68%, they are up 28 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 0.18%. 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 29, shows three changes over the previous week.
Our latest Brokerage Sweep Intelligence reports that UBS increased rates to 0.05% for all balances between $1K and $249K, to 0.10% for balances between $250K and $999K, to 0.40% for balances between $1 million and $1.9 million, to 1.05% for balances $5 million and over for the week ended July 29. The two other changes came from E*Trade and Morgan Stanley, which both increased rates for accounts over $500K. E*Trade increased to 0.05% for balances between $500K and $999K, and to 0.15% for balances of $1 million and more. Morgan Stanley increased to 0.05% for balances between $500K and $999K, to 0.15 for balances between $1 million and $1.9 million, and to 0.30% for balances of $2 million and more. Just three of 11 major brokerages still offer rates of 0.01% for balances of $100K (and most other tiers). These include: E*Trade, Merrill Lynch and Morgan Stanley.
According to Monday's Money Fund Intelligence Daily, with data as of Friday (7/29), just 38 funds (out of 818 total) still yield between 0.00% and 0.49% with assets of $6.7 billion, or 0.1% of total assets. There were 166 funds yielding between 0.50% and 0.99%, totaling $168.8B, or 3.4% of assets; 102 funds yield between 1.00% and 1.24% with $118.3 billion in assets, or 2.4%; 178 funds yield between 1.25% and 1.49% with $1.471 trillion in assets or 29.4%; 219 funds yielded between 1.50% and 1.74% with $1.517 trillion or 30.4%; and 115 funds yielded over 1.75% ($1.715 trillion, or 34.3%). (We likely saw the first fund yield over 2.0% Monday, so Tuesday's MFI Daily should show some funds over this level.)
In related news, a release entitled, "FDIC and Federal Reserve Board issue letter demanding Voyager Digital cease and desist from making false or misleading representations of deposit insurance status," explains, "The Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve Board today issued a joint letter demanding that the crypto brokerage firm Voyager Digital cease and desist from making false and misleading statements regarding its FDIC deposit insurance status and take immediate action to correct any such prior statements."
It explains, "According to the agencies, Voyager and certain officers and employees made various statements online, including on its website, mobile app, and social media accounts, stating or suggesting that: Voyager itself is FDIC-insured; Customers who invested with the Voyager cryptocurrency platform would receive FDIC insurance coverage for all funds provided to, and held by, Voyager, without reference to the insured depository institution account; and The FDIC would insure customers against the failure of Voyager itself."
The FDIC comments, "These representations are false and misleading. Based on the information gathered to date, it appears that these representations likely misled and were relied upon by customers who placed their funds with Voyager and do not have immediate access to their funds. The Federal Deposit Insurance Act, however, prohibits any person from representing or implying that an uninsured deposit is insured or from knowingly misrepresenting the extent and manner in which a deposit liability, obligation, certificate, or share is insured under that Act. The FDIC is authorized to enforce this prohibition against any person."
It tells us, "Voyager maintains a deposit account for the benefit of its customers at Metropolitan Commercial Bank, which is supervised by the Board. Voyager is not itself insured by the FDIC, though, and so customers who invested through its cryptocurrency platform would not receive insurance coverage in the event of Voyager's failure."
The release adds, "The FDIC deposit insurance program protects customers in the event of the failure of an FDIC-insured bank. To determine if an institution is FDIC-insured, you can ask a representative of the institution, look for the FDIC sign at the institution, or use the FDIC's BankFind tool. For more information about FDIC deposit insurance, please see the following FAQs."
See also, CBS News' "Feds tell crypto broker Voyager to stop claiming it's FDIC insured -- because it's not," which states, "Federal regulators have ordered cryptocurrency brokerage Voyager Digital to stop telling customers that their deposits are protected from losses by the Federal Deposit Insurance Corporation because that's not true, according to letters from regulators sent this week. Voyager has mentioned its federally insured status on its website, mobile app and social media accounts."
