Money fund yields were higher yet again last week as our Crane 100 Money Fund Index (7-Day Yield) rose 3 more basis points to 3.57% in the week ended Friday, 11/25. Yields rose by 5 basis points the previous week and are up from 2.88% on Oct. 31 and 2.66% on Sept. 30. Yields should continue to inch higher as they digest the remainder of the Fed's Nov. 2 75 bps rate hike, and they should approach 4.0% by year end, if, as expected, the Fed hikes rates again (probably by 50 bps) on Dec. 14. The top-yielding money market funds are already touching 4.0% (see our "Highest-Yielding Money Funds" table above). (Note: We're still taking registrations for our upcoming Money Fund University, which will be Dec. 15-16 in Boston. Please join us, and feel free to stop by Crane Data's Holiday Cocktail Party at MFU on Dec. 15 from 5-7pm!)
Our broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 677), shows a 7-day yield of 3.44%, up 3 bps in the week through Friday. Prime Inst MFs were up 3 bps to 3.72% in the latest week. Government Inst MFs rose by 3 bps to 3.43%. Treasury Inst MFs up 5 bps for the week at 3.45%. Treasury Retail MFs currently yield 3.26%, Government Retail MFs yield 3.22%, and Prime Retail MFs yield 3.56%, Tax-exempt MF 7-day yields were down at 1.52%.
According to Monday's Money Fund Intelligence Daily, with data as of Friday (11/25), just 136 funds (out of 816 total) still yield between below 2.0%, with assets of $115.6 billion, or 2.3% of total assets; 64 funds yielded between 2.00% and 2.99% with $68.4 billion, or 1.3%; 616 funds yield 3.00% or more ($4.896 trillion, or 96.4%), and 9 funds have now officially broken over the 4.0% yield barrier.
Brokerage sweep rates saw no changes over the past week. 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 0.40% but is up from 0.34% at the start of November. The latest Brokerage Sweep Intelligence, with data as of Nov. 25, shows no rate changes over the previous week. Just 3 of 11 major brokerages still offer rates of 0.01% for balances of $100K (and lower tiers). These include: E*Trade, Merrill Lynch and Morgan Stanley.
In other news, Federated Hermes' features Money Market CIO Deborah Cunningham in a brief video entitled, "Back in Style." She is asked, "Has the Fed's quantitative tightening program impacted the liquidity space?" Cunningham responds, "The quantitative program by the Fed has definitely started to add securities back into the marketplace. The liquidity team that we manage here, however, focuses on short term treasury securities, those being basically treasury bills, treasury bonds, treasury notes that are less than a year in duration, and that's not where the quantitative tightening focus has been from the Federal Reserve."
She continues, "What they have instead focused on are longer- and medium-term treasury securities. Where that has been a little bit helpful has been in the repurchase agreement market. Repos are transactions that we use within our money market products, and when there's more collateral out there to back these repurchase agreements, like there is from the quantitative tightening perspective with longer dated treasury and agency securities, that's a little bit of a benefit. But it is not as much of a benefit as it would be if the securities that were being put back into the marketplace were on a direct ownership basis, eligible for money market funds."
Finally, a recent Dreyfus posting, entitled, "Meet the Manager with Brian Wiese," summarizes, "Dreyfus' senior portfolio manager and trader shares who and what were his major career influences, the impact the great financial crisis had on him as well as the highlight of his career so far."
Wiese says, "When I first started my career in 1995 at AIG SunAmeria Asset Management, the youngest person on the desk was usually responsible for the least risky assets. As the young person on the desk, I began at the short end of the curve (yields less than one year) and originally intended to migrate out to riskier, longer duration assets. At the time though, the market was migrating toward short duration assets and the influx of clients demanded a dedicated manager. I embraced the opportunity, which led to a fulfilling career managing short duration assets."
He explains, "I stayed with AIG until 2006, at which time I moved to BNY Mellon as a senior portfolio manager and trader for their securities (sec) lending cash collateral reinvestment portfolios. When I made the migration to sec finance, preservation of capital was still a major focus, but it introduced a layer of risk and complexity to my investment expertise that I welcomed. I spent 16 years in sec finance at BNY Mellon, when the opportunity to come to work for Dreyfus came up, I was excited because it was clear that leadership is thinking about liquidity solutions holistically."
Wiese adds, "After the great financial crisis (GFC) in 2008, you began to see more tenured and high quality management teams at the front end. The view that the most inexperienced person on the desk should be responsible for the shortest duration investments has been dispelled, and rightfully so. Clients and the investment industry in general are more aware of the risks because the notional values are so large. Clients now demand investment professionals who have managed funds through different market cycles. Some people in the industry today have never seen a rising rate environment and I think that's something that differentiates our team and is a huge value add to clients."
