Money fund yields inched higher in the latest week, but they're plateauing after jumping following the Fed's 75 bps hike in late July. Our Crane 100 Money Fund Index (7-Day Yield) rose 3 basis points to 1.97% the week ended Friday, 8/19. Yields rose by 5 basis points the previous week and 33 basis points the week before that. On average, they're up from 1.57% on July 29, up from 1.18% on June 30 and more than 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 remain flat at around 2.0% on average in coming weeks, though they should jump once again following the next Fed meeting on Sept. 21. Our broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 676), shows a 7-day yield of 1.86%, up 4 bps in the week through Friday. The Crane Money Fund Average is up 83 bps since beginning of July and up 139 bps from 0.47% at the beginning of June.
Prime Inst MFs were up 2 bps to 2.11% in the latest week, up 84 bps since the start of July and up 147 bps since the start of June (close to double from the month prior). Government Inst MFs rose by 2 bps to 1.90%, they are up 80 bps since start of July and up 136 bps since the start of June. Treasury Inst MFs up 4 bps for the week at 1.87%, up 83 bps since beginning of July and up 137 bps since the beginning of June. Treasury Retail MFs currently yield 1.62%, (up 5 bps for the week, up 82 bps since July and up 132 bps since June), Government Retail MFs yield 1.60% (up 3 bps for the week, up 81 bps since July started and up 134 bps since June started), and Prime Retail MFs yield 1.96% (up 3 bps for the week, up 89 bps from beginning of July and up 148 bps from beginning of June), Tax-exempt MF 7-day yields rose by 4 bps to 1.35%, they are up 79 bps since the start of July and up 95 bps since the start of June.
According to Monday's Money Fund Intelligence Daily, with data as of Friday (8/19), just 23 funds (out of 819 total) still yield between 0.00% and 0.99% with assets of $5.6 billion, or 0.1% of total assets; 163 funds yield between 1.00% and 1.49% with $161.1 billion in assets, or 3.2%; 171 funds yielded between 1.50% and 1.74% with $397.9 billion or 7.9%; 208 funds yielded between 1.75% and 1.99% ($1.820 trillion, or 36.3%); 195 funds yielded between 2.00% and 2.24% ($2.136 trillion, or 42.6%) and 59 funds yielded 2.25% or more ($491.2 billion, or 9.8%).
Brokerage sweep rates also crept higher over the past week, as Ameriprise Financial and TD Ameritrade tweaked their rates upwards. Our latest Brokerage Sweep Intelligence shows brokerages paying an average of 0.26% on FDIC insured deposits, up from 0.16% a month ago and up from 0.05% two months ago. Our Crane Brokerage Sweep Index, the average rate for brokerage sweep clients (almost all of which are swept into FDIC insured accounts; only Fidelity sweeps to a money market fund), unchanged this past week at 0.26%. 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 Aug. 19, shows two changes over the previous week.
BSI reports that Ameriprise Financial decreased rates to 0.10% for all balances between $1K and $249K, to 0.20% for balances between $250K and $999K, to 0.30% for balances between $1 million and $4.9 million, and to 0.45% for balances of $5 million and over for the week ended August 19. TD Ameritrade increased rates to 0.15% for all balances between $1k and over $5 million. 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.
In other news, Reuters writes, "Stablecoin Tether's reserves fell $16 billion in second quarter." They explain, "Tether, the world's largest stablecoin by market value, said on Friday it had reserves worth $66.4 billion at the end of June, down from $82.4 billion at the end of March, a fall which Tether said was due to fulfilling $16 billion worth of redemptions."
The article explains, "The reserves statement on Tether's website came a day after it said it had switched to accountancy firm BDO Italia to certify its reserves and would aim to release monthly reports by the end of the year. Tether's $66.4 billion reserve assets exceed its $66.2 billion liabilities, BDO Italia said in the statement."
Reuters quotes Joseph Edwards of Securitize Capital, "The report itself looks positive for Tether, because it reinforces that there's probably no bank run big enough to run them down to the parts of their treasury that might be questionable.... The questionable part of the report is switching auditor yet again, especially given that it's to a division with no existent presence in English-language markets. They're within their rights to do so, but it'll do little to silence critics."
The piece adds, "Tether said in emailed comments that BDO is a top-five firm and that working with BDO Italia 'aligns with our commitment to the Tether community to work with a larger and more experienced firm.' Its website shows it has published reports vouching for its reserves from at least five other firms since 2017."
Finally, they write, "The company's holdings of U.S. Treasury bills fell to $28.9 billion in the second quarter, the statement said, a $10.3 billion drop from the $39.2 billion it held in the first quarter. Commercial paper and certificates of deposit were down to $8.4 billion, showing an $11.7 billion drop. In July, Tether said it had slashed its commercial paper holdings as part of a plan to reduce exposure to riskier assets."
