The March issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Tuesday morning, features the articles: "Treasury MMFs Brace for Debt Ceiling Faceoff, Supply Shock," which reviews the risk to Treasury funds; "BlackRock's Matt Clay on European MMF Landscape," which quotes from a recent ICD webinar; and, "Federated 10-K Sheds Light on Regulatory Environment," which excerpts from Federated Hermes' annual report. We also sent out our MFI XLS spreadsheet Tuesday a.m., and we've updated our Money Fund Wisdom database with 2/28/23 data. Our March Money Fund Portfolio Holdings are scheduled to ship on Thursday, March 9, and our March Bond Fund Intelligence is scheduled to go out on Tuesday, March 14.
MFI's "Treasury MMFs Brace" article says, "While record asset levels and yields moving towards 5.0% are the big stories for money funds so far in 2023, many have begun to focus on the looming Treasury debt ceiling battle. Fitch Ratings tells us in the release, 'U.S. Debt Ceiling Uncertainty a Risk for Treasury Money Market Funds,' 'A default by the U.S. Treasury could pose liquidity and headline risks and ratings pressure for U.S. Treasury-only money market funds (MMFs), but would not necessarily result in downgrades, with considerations including the size of any exposure to defaulted securities and alternative sources of fund liquidity.'"
The piece continues, "They explain, 'The U.S. government debt limit was reached on Jan. 19, 2023. However, the Treasury Department is using 'extraordinary measures' to avoid defaulting on obligations.... The Congressional Budget Office has calculated the x-date will fall sometime between July and September 2023, though it cautioned that extraordinary measures could be exhausted sooner, and the Treasury could run out of funds before July.'"
Our BlackRock "profile" piece states, "Online money market funds trading portals ICD recently hosted a webinar entitled, 'Economic Update: Cash Investment Forecast for the Year Ahead,' featuring BlackRock Cash Management Head of International Portfolio Management Matt Clay. Clay and ICD host Luke Newman discussed a number of issues involving short-term investment trends in U.S. dollar, euro and sterling currencies. Newman says, 'I'm going to start off with a brief intro in terms of `what ICD saw in 2022, in terms of flows into the money market funds.... I'll then pass it over to BlackRock, who will be providing an economic update, an outlook at the macro level, and then talking more specifically around cash and the impact of monetary policy in general on short-term investment trends.'"
It continues, "He explains, 'We wanted to share some of the trends that we saw at ICD last year. So, we start in 2022 with low interest rates in the three main currencies, having been in a low interest rate environment for some time. Over the course of a year, we started seeing these rates rise which generated significant interest in money market funds.... For the first half of the year, assets in these funds were averaging just over the $65 billion mark. As central banks started increasing rates, you can see that assets significantly increased, peaking near to $95 billion at the end of last year. That's close to a 50% increase when compared to the first half of the year. This graph doesn't show the start of this year, but the trend has continued. So, in summary, as interest rates rise, so has the interest in money market funds.'"
Our "Federated 10-K" piece states, "Federated Hermes filed its latest '10-K Annual Report' with the SEC recently, and the 109-page document contains a wealth of information on money market mutual funds. On 'Distribution Channels,' it says, 'Federated Hermes' distribution strategy is to provide investment management products and services to more than 11,000 institutions and intermediaries, including, among others, banks, broker/dealers, registered investment advisors, government entities, corporations, insurance companies, foundations and endowments.... [I]nvestment products ... are offered and distributed in three markets.... U.S. financial intermediary (63%); U.S. institutional (28%); and international (9%).'"
MFI states, "They write, 'Financial intermediaries use Federated Hermes' products to meet the needs of their customers, who are often retail investors.... As of Dec. 31, 2022, managed assets in the U.S. financial intermediary market included $317.9 billion in money market assets.... Federated Hermes offers and distributes its products and strategies to a wide variety of domestic institutional customers including, among others, government entities, not-for-profit entities, corporations, corporate and public pension funds, foundations, endowments and non-Federated Hermes investment companies or other funds. As of Dec. 31, 2022, managed assets in the U.S. institutional market included $144.0 billion in money market assets.... [M]anaged assets in the international market included ... $15.0 billion in money market assets.'"
MFI also includes the News brief, "MMF Assets Surge to Record $5.3T," which says, "Assets jumped $56.0 billion in February to a record $5.261 trillion, according to MFI XLS, and assets jumped another $17.3 billion the first 3 days in March to $5.270 trillion, according to MFI Daily. See our sidebar on page 7 for more."
Another News brief, "Yields Up Another Quarter in Feb.," tells us, "Money fund yields moved 24 bps higher on average last month in direct response to the Fed's 25 basis point hike on Feb. 1. Our Crane 100 Money Fund Index (7-Day Yield) rose 24 basis points to 4.39% in the month ended 2/28. Money fund yields have risen from 4.05% on 12/31/22. Yields should remain flat over the next 3 weeks, but they should jump again following the Fed's next meeting on March 22 (if they hike rates again as expected)."
A sidebar, "SEC: Private Liquidity Funds," states, "The SEC released its latest quarterly 'Private Funds Statistics' report recently, which summarizes Form PF reporting and includes some data on 'Liquidity Funds,' or pools which are similar to but not money market funds. The publication shows overall Liquidity fund assets were higher in the latest reported quarter (Q2'22) at $328 billion (up from $313 billion in Q1'22 and up from $319 billion in Q2'21)."
Our March MFI XLS, with February 28 data, shows total assets increased $56.0 billion to $5.261 trillion, after increasing $22.5 billion in January, $70.2 billion in December and $55.4 billion in November. MMFs rose $42.2 billion in October, $1.7 billion in September, $2.3 billion in August, $26.0 billion in July and $31.9 billion in June. They decreased $10.7 billion in May and $74.3 billion in April. MMFs increased $24.1 billion in March, but decreased $34.6 billion last February.
Our broad Crane Money Fund Average 7-Day Yield was up 23 bps to 4.25%, and our Crane 100 Money Fund Index (the 100 largest taxable funds) was up 24 bps to 4.39% in February. On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA and the Crane 100 both were both higher at 4.56% and 4.51%, respectively. Charged Expenses averaged 0.38% and 0.26% for the Crane MFA and the Crane 100. (We'll revise expenses on Wednesday once we upload the SEC's Form N-MFP data for 2/28/23.) The average WAM (weighted average maturity) for the Crane MFA was 17 days (unchanged from previous month) while the Crane 100 WAM remained the same at 14 days. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
