The European Central Bank published, "Euro area investment fund statistics: second quarter of 2023," which shows that total European money market mutual fund assets hit a record 1.5 trillion EUR in Q2'23. The statistical release says, "For shares/units issued by money market funds the outstanding amount was 18 billion EUR higher than in the first quarter. This increase was accounted for by 11 billion EUR in net issuance of shares/units and 8 billion EUR in other changes (including price changes). The annual growth rate of shares/units issued by money market funds, calculated on the basis of transactions, was 11.9% in the second quarter of 2023." (Note: Crane Data's separate Money Fund Intelligence International tracks $1.072 trillion of the MMFs in Europe. We don't cover a number of the French "Standard" MMFs, which invest in sectors prohibited by US MMFs. Note too: Register soon for our European Money Fund Symposium, which is Sept. 25-26, 2024 in Edinburgh.)
The ECB writes, "Within the assets of money market funds, the annual growth rate of debt securities holdings was 8.9% in the second quarter of 2023, with overall net purchases amounting to 66 billion EUR, which reflected net purchases of 57 billion EUR in debt securities issued by non-euro area residents and net purchases of 9 billion EUR in debt securities issued by euro area residents. For deposits and loan claims, the annual growth rate was 20.6% and transactions during the second quarter of 2023 amounted to -47 billion EUR."
Bloomberg also commented on money market funds in Europe recently with the commentary, "`European Banks Aren't Helping Your Savings." They state, "European banks are rightly being criticized for failing to pass on interest-rate increases to customers. But is it any wonder they're so unafraid of losing business? Compared to their US counterparts, European financial institutions often face less competition from alternative cash-like investments."
The piece explains, "Years of negative interest rates in the wake of the 2008 financial crisis resigned Europeans to not enjoying a return on their savings, and they're only slowly waking up to better opportunities for their more than 9 trillion EUR($9.8 trillion) of consumer deposits. The average interest rate on easily accessible household money is just 0.23%. In the US, investors have ploughed $1 trillion into money-market funds over the past year, lifting total assets to more than $5.5 trillion. More than one-third of that money is from retail customers who view these funds as safe and attractive substitutes for bank deposits."
Bloomberg adds, "European money-market funds have seen more modest inflows: Total assets amounted to just 1.5 trillion EUR ($1.6 trillion) at the end of March, and this is almost entirely corporate and institutional money. Less than half is denominated in euros, with the remainder split between sterling and US dollars.... Many Europeans don't have a brokerage account usually required to purchase a money-market fund, and they hold a higher share of their wealth in bank accounts than Americans."
They quote ING Groep NV Chief Executive Officer Steven van Rijswijk, "Money-market funds are a US phenomenon.... We don't have that here in Europe." The article adds, "'While money-market funds are available in Germany, they have never been successful in the retail market and are probably not widely known,' Deutsche Bank AG analysts wrote in an April note regarding the country's 'highly sticky' deposits."
Finally, the editorial says, "For the first time in a generation, Europeans can now earn a return on their savings, but they won't if customers do nothing. If more cash moved into some alternatives, Europe's banks might be inclined to pass interest-rate increases on to savers sooner."
In other news, money fund yields inched higher over the past week to 5.15% on average, their highest levels since 1999. They broke the 5.0% level for the first time since August 2007 four weeks ago <b:>`_. The Crane 100 Money Fund Index (7-Day Yield) rose by 1 basis point to 5.15% in the week ended Friday, 8/18, after increasing by 1 bp the previous week. We expect yields to inch higher in coming days as they finish digesting the Fed's July 26th 25 basis point hike.
Yields are up from 4.94% on June 30, 4.61% on March 31 and 4.05% on 12/31/22. Three-quarters of money market fund assets now yield 5.0% or higher. (They should get more company in coming days.) Assets of money market funds fell by $3.8 billion last week to $5.930 trillion according to Crane Data's Money Fund Intelligence Daily, and they have risen by $49.3 billion in the month of August (after rising $34.7 billion in July). Weighted average maturities were unchanged last week, and were mostly unchanged in July (at 24 days), after increasing by 3 days during June.
The broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 681), shows a 7-day yield of 5.04%, up 1 bp in the week through Friday. Prime Inst MFs were up 1 bp at 5.25% in the latest week. Government Inst MFs were unchanged at 5.10%. Treasury Inst MFs up 1 bps for the week at 5.08%. Treasury Retail MFs currently yield 4.86%, Government Retail MFs yield 4.81%, and Prime Retail MFs yield 5.06%, Tax-exempt MF 7-day yields were up 13 bps to 2.84%.
According to Monday's Money Fund Intelligence Daily, with data as of Friday (8/18), 83 money funds (out of 810 total) yield under 3.0% with $41.7 billion in assets, or 0.7%; 51 funds yield between 3.00% and 3.99% ($79.9 billion, or 1.3%), 237 funds yield between 4.0% and 4.99% ($1.293 trillion, or 21.8%) and 439 funds now yield 5.0% or more ($4.516 trillion, or 76.1%).
Our Brokerage Sweep Intelligence Index, an average of FDIC-insured cash options from major brokerages, was unchanged at 0.62% after rising 1 bp the week prior. The latest Brokerage Sweep Intelligence, with data as of Aug 18, shows that there was no changes over the past week. Three of the 11 major brokerages tracked by our BSI still offer rates of 0.01% for balances of $100K (and lower tiers). These include: E*Trade, Merrill Lynch and Morgan Stanley.
