Fitch Ratings published "Local Government Investment Pools:2Q22," which shows LGIP assets tracked by Fitch breaking over $500 billion for the first time ever. They write, "Fitch Ratings' two local government investment pool (LGIP) indices experienced aggregate asset increases in the second quarter of 2022 (2Q22). This marks the third consecutive quarter of gains. Combined assets for the Fitch Liquidity LGIP Index and the Fitch Short-Term LGIP Index were $504 billion at the end of 2Q22, representing increases of $39 billion qoq and $81 billion yoy." (Note: We're still taking registrations to our upcoming European Money Fund Symposium, which is Sept. 27-28 in Paris, France. We hope to see you there!)
The update tells us, "Fitch expects pool managers to continue a low weighted average maturity (WAM), defensive position to maintain competitive yields and navigate the Fed's tightening monetary policy. The market is still pricing in additional rate hikes at the Fed's next two meetings, with some market participants expecting rate cuts as soon as early 2023. Both Fitch indices ended 2Q22 with improved average yield and lower maturity profiles, responding quickly to Fed rate hikes."
It says, "The Fitch Liquidity LGIP Index and the Fitch Short-Term LGIP Index ended the quarter with average net yields of 1.27% and 1.18%. The WAM of the Fitch Liquidity LGIP Index decreased to 28 days, down six days qoq but still higher than money market funds at 16 days, while the duration of the Fitch Short-Term LGIP Index ticked down to 0.94 years, a small decrease from 1.1 years at the end of 1Q22."
The Q2 brief adds, "The Fitch Liquidity LGIP Index decreased exposures to treasuries and increased exposure to agency and repos by -7%, 5%, and 3%, respectively. Short-term treasury bill yields have remained below the Fed Funds Rates as demand has outpaced supply. Additional Federal Home Loan Bank issuance in 2Q22 and competitive repo rates presented managers with more attractive opportunities."
In other news, money fund yields inched higher again in the latest week, but they should remain flat until the Fed's Sept. 21 meeting. Our Crane 100 Money Fund Index (7-Day Yield) rose 2 basis points to 1.99% the week ended Friday, 8/26. Yields rose by 3 basis points the previous week, 5 bps the week before that, 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, but they should jump once again if the Fed hikes by another 75 basis points as expected on their next meeting Sept. 21. Our broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 680), shows a 7-day yield of 1.88%, up 2 bps in the week through Friday. The Crane Money Fund Average is up 85 bps since beginning of July and up 141 bps from 0.47% at the beginning of June.
Prime Inst MFs were up 2 bps to 2.13% in the latest week, up 86 bps since the start of July and up 149 bps since the start of June (close to double from the month prior). Government Inst MFs rose by 2 bps to 1.92%, they are up 82 bps since start of July and up 138 bps since the start of June. Treasury Inst MFs up 4 bps for the week at 1.91%, up 87 bps since beginning of July and up 141 bps since the beginning of June.
Treasury Retail MFs currently yield 1.66%, (up 4 bps for the week, up 86 bps since July and up 136 bps since June), Government Retail MFs yield 1.62% (up 2 bps for the week, up 83 bps since July started and up 136 bps since June started), and Prime Retail MFs yield 1.98% (up 2 bps for the week, up 91 bps from beginning of July and up 150 bps from beginning of June), Tax-exempt MF 7-day yields fell by 9 bps to 1.26%, they are up 70 bps since the start of July and up 88 bps since the start of June.
According to Monday's Money Fund Intelligence Daily, with data as of Friday (8/26), just 25 funds (out of 823 total) still yield between 0.00% and 0.99% with assets of $4.5 billion, or 0.1% of total assets; 178 funds yield between 1.00% and 1.49% with $185.7 billion in assets, or 3.7%; 144 funds yielded between 1.50% and 1.74% with $319.7 billion or 6.4%; 194 funds yielded between 1.75% and 1.99% ($1.574 trillion, or 31.3%); 209 funds yielded between 2.00% and 2.24% ($2.427 trillion, or 48.2%) and 73 funds yielded 2.25% or more ($523.3 billion, or 10.4%).
Brokerage sweep rates were flat over the past week following last week (when 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), was 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. 26, shows no changes over the previous week.
Last week, BSI reported 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.
