Money fund yields were slightly higher last week after jumping last month following the Fed's 25 basis point hike on Feb. 1. Our Crane 100 Money Fund Index (7-Day Yield) was up 2 bps at 4.42% in the week ended Friday, 3/17. Yields were unchanged the previous week and they're up from 4.15% on Jan. 31, 2023. Money fund yields have risen from 4.05% on 12/31/22, from 3.59% on Nov. 30, from 2.88% on Oct. 31 and from 2.66% on Sept. 30. Yields should be flat in coming days, and it's now unclear whether the Fed will hike rates again at its next meeting on March 22. The top-yielding money market funds remain flat at just over 4.70%. (Note: We look forward to seeing those of you attending our Bond Fund Symposium later this week (3/23-24) in Boston! Attendees and subscribers may access the conference binder, Powerpoints and recordings (afterwards) via our "Bond Fund Symposium 2023 Download Center.")
The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 687), shows a 7-day yield of 4.31%, up 1 bp in the week through Friday. Prime Inst MFs were up 1 bp at 4.51% in the latest week. Government Inst MFs rose by 2 bps to 4.38%. Treasury Inst MFs up 1 bp for the week at 4.35%. Treasury Retail MFs currently yield 4.12%, Government Retail MFs yield 4.09%, and Prime Retail MFs yield 4.34%, Tax-exempt MF 7-day yields were up at 2.15%.
According to Monday's Money Fund Intelligence Daily, with data as of Friday (3/17), just 30 money funds (out of 823 total) yield between 0.00% and 1.99% with $5.5 billion, or 0.1%; 107 funds yield between 2.00% and 2.99% with $109.3 billion, or 2.0%; 91 funds yield between 3.00% and 3.99% ($73.9 billion, or 1.4%), and 595 funds yield 4.0% or more ($5.231 trillion, or 96.5%).
Our Brokerage Sweep Intelligence Index, an average of FDIC-insured cash options from major brokerages, was unchanged at 0.54% after decreasing 1 bp two weeks prior. The latest Brokerage Sweep Intelligence, with data as of March 17, shows that there was no changes over the past 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, surprisingly, neither ICI's Eric Pan nor the SEC's William Birththistle discussed pending money market mutual fund reforms at this week's 2023 ICI Investment Management Conference. ICI's President & CEO Pan said Monday, "It's always a pleasure to address members of the most important industry in finance. And it's a privilege to be joined today and tomorrow by so many leaders from the Securities and Exchange Commission. At this conference, we'll hear from Commissioner Mark Uyeda and SEC staff from the Divisions of Investment Management, Enforcement, and Examinations. And of course, as soon as I'm done speaking, we'll hear from the Director of the Division of Investment Management, William Birdthistle. I know one of the highlights of this conference is hearing directly from the regulators, and we're all excited for Director Birdthistle's remarks."
He tells us, "Mutual funds are at the heart of this [economic] progress. `They are the original and greatest democratizing force in the investing space, and to this day, they give people unprecedented access to the capital markets. All told, more than 100 million Americans, most of them middle-class, depend on mutual funds to achieve their savings goals, from education to homeownership. And as we all know, mutual funds are especially important for retirement. For the great majority of Americans, the mutual fund is the cornerstone of their secure financial future."
Pan explains, "I do worry, however. It sometimes appears that policymakers favor a bank-centric prudential regulatory view toward the capital markets, which translates into looking for ways to eliminate as much risk as possible from the financial system. But this approach is inconsistent with the historical regulatory approach that has worked so well for so long. Consider, for example, the US regulatory regime's traditional reliance on regulatory tools like disclosure, which explicitly recognizes the risks inherent in investing."
He comments, "Applying a bank prudential regulatory lens to our capital markets will harm far more people than it helps. Different levels of risk and risk pricing are implicit within investment markets, and trying to eliminate risk will stifle the progress that investors deserve and what our capital markets depend on. More to the point, it will limit access to returns generated by mutual funds, holding back the progress we hope to deliver for an even greater share of Americans. The fact is that countries in Europe and Asia often look to the US for inspiration. They envy our vibrant capital markets and look to move their own economies away from relying so much on bank financing. They dream of giving their citizens the same level of investment opportunities that the average American enjoys today."
Pan states, "That's why I'm so concerned that regulators are at risk of limiting Americans' investment options. And, to this end, I have serious concerns with the pace and scale of the SEC's current agenda. The Commission has issued a slew of rule proposals on a wide range of topics where much more work needs to be done to understand their cumulative effect on the markets and investors. Many of the rules also seem to be fall into the category of solutions in search of articulated problems."
He adds, "Other proposals raise similar concerns. Yet the most worrisome of all is the SEC's latest proposal on mandatory swing pricing, hard close and liquidity risk management. The proposal is breathtaking in scope, and it's no exaggeration to say that it represents the most significant transformation of the mutual fund industry in generations. First, in our opinion, the SEC did not adequately explain and quantify the problem it's trying to solve.... On that note, our second concern is that the SEC is not accounting for the sizeable compliance costs this mandate will impose.... Our third concern is centered on dilution."
Pan concludes, "But the SEC's current approach stands in contrast to its history. Let me be clear: ICI has always been, and always will be, a strong supporter of thoughtful, measured policy. It's in our DNA. We have an 80-plus-year track record of supporting regulations that improve the market and protect investors. We also have a duty to share our perspective and expertise to move policies in a better direction." (See also Birdthistle's "Remarks at the ICI Investment Management Conference.")
