Money fund yields continued creeping higher again in the latest week, with our Crane 100 Money Fund Index (7-Day Yield) rising 3 basis points to 2.02% in the week ended Friday, 9/2. Yields rose by 2 basis points the previous week, 3 bps the week before that, and 5 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). (Note: With just 3 weeks to go until our European Money Fund Symposium, which is Sept. 27-28 in Paris, France, we're encouraging anyone interested to register ASAP!)
Yields should remain flat at just over 2.0% on average in coming weeks, but they should jump once again after the Fed hikes (likely by another 75 bps) at their Sept. 21 meeting. Our broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 679), shows a 7-day yield of 1.91%, up 3 bps in the week through Friday. The Crane Money Fund Average is up 88 bps since beginning of July and up 144 bps from 0.47% at the beginning of June.
Prime Inst MFs were up 1 bp to 2.14% in the latest week, up 87 bps since the start of July and up 150 bps since the start of June (close to double from the month prior). Government Inst MFs rose by 2 bps to 1.94%, they are up 84 bps since start of July and up 140 bps since the start of June. Treasury Inst MFs up 6 bps for the week at 1.97%, up 93 bps since beginning of July and up 147 bps since the beginning of June.
Treasury Retail MFs currently yield 1.72%, (up 6 bps for the week, up 92 bps since July and up 142 bps since June), Government Retail MFs yield 1.65% (up 3 bps for the week, up 86 bps since July started and up 139 bps since June started), and Prime Retail MFs yield 1.99% (up 1 bp for the week, up 92 bps from beginning of July and up 151 bps from beginning of June), Tax-exempt MF 7-day yields fell by 14 bps to 1.12%, they are up 56 bps since the start of July and up 74 bps since the start of June.
According to Monday's Money Fund Intelligence Daily, with data as of Friday (9/2), just 40 funds (out of 822 total) still yield between 0.00% and 0.99% with assets of $10.2 billion, or 0.2% of total assets; 180 funds yield between 1.00% and 1.49% with $203.1 billion in assets, or 4.1%; 102 funds yielded between 1.50% and 1.74% with $156.2 billion or 3.1%; 180 funds yielded between 1.75% and 1.99% ($1.347 trillion, or 26.9%); 232 funds yielded between 2.00% and 2.24% ($2.432 trillion, or 48.5%) and 88 funds yielded 2.25% or more ($865.4 billion, or 17.3%).
Brokerage sweep rates were mostly flat again over the past week. Our latest Brokerage Sweep Intelligence shows brokerages paying an average of 0.26% on FDIC insured deposits, up from 0.16% two months ago and up from 0.05% three 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 Sept. 2, shows just one rate change over the previous week.
Last week, RW Baird increased rates to 0.72% for all balances between $1K and $249K, to 0.82% for balances between $250K and $999K, to 1.07% for balances between $1 million and $1.9 million, and to 1.41% for balances of $5 million and over for the week ended September 2. 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 related news, The Wall Street Journal writes on "Inflation's Silver Lining: You Can Make Money on Your Savings Again." Subtitled, "Fed rate increases mean consumer banks such as Marcus and Ally are paying more on savings accounts and CDs," the piece says, "Higher interest rates mean rising borrowing costs for consumers. But they are finally able to earn some money on their savings in return."
It explains, "The Federal Reserve has raised interest rates several times since March in its bid to fight high inflation and has signaled more increases are likely. Banks, in response, have gradually increased the rates they pay to consumers on products like certificates of deposit and savings accounts, which plunged early in the pandemic. The average annual percentage yield on a one-year CD reached 0.46% in August, according to the Federal Deposit Insurance Corp. That is up from 0.15% since March. Likewise, the average rate on savings accounts rose to 0.13%, up from 0.06% in March."
The Journal tells us, "Online banks such as Ally Financial Inc. and Capital One Financial Corp. have been the early movers. They have raised CD rates, on average, by 0.43 percentage point and savings rates by 0.38 percentage point over the past month, analysts at Goldman Sachs Group Inc. said in a research note Monday. Goldman’s online bank, known as Marcus, recently offered 1.7% annually on its savings account, up from 0.5% in April."
They comment, "While online banks are boosting rates, bigger players such as JPMorgan Chase & Co. and Bank of America Corp. have barely budged. Large banks are typically slow to increase those rates, because their extensive branch networks and large marketing budgets mean they usually have plenty of deposits on hand. Pandemic stimulus further drove up deposits at the biggest banks."
Finally, the WSJ adds, "Still, the larger banks could boost their own rates in the months ahead because demand for loans is strong and further tightening is expected from the Fed, Goldman Sachs analyst Richard Ramsden said.... Deposits at commercial banks have held steady this year, but could decline if consumers find higher-yielding alternatives to park their money, he added. Meanwhile, [Adam] Stockton from Curinos said, 'We expect to see more rate competition filtering through the fourth quarter and intensifying in the first half of the next year.'"
