Daily Links Archives: July, 2015

ICI's latest "Money Market Mutual Fund Assets" report shows assets down slightly in the latest week. It says, "Total money market fund assets decreased by $580 million to $2.65 trillion for the week ended Wednesday, July 29, the Investment Company Institute reported today. Among taxable money market funds, Treasury funds (including agency and repo) increased by $9.62 billion and prime funds decreased by $9.74 billion. Tax-exempt money market funds decreased by $460 million. Assets of retail money market funds increased by $90 million to $871.24 billion. Among retail funds, Treasury money market fund assets increased by $920 million to $196.80 billion, prime money market fund assets decreased by $180 million to $496.45 billion, and tax-exempt fund assets decreased by $650 million to $177.99 billion. Assets of institutional money market funds decreased by $670 million to $1.78 trillion. Among institutional funds, Treasury money market fund assets increased by $8.70 billion to $794.35 billion, prime money market fund assets decreased by $9.56 billion to $914.51 billion, and tax-exempt fund assets increased by $190 million to $67.90 billion." Year-to-date, money fund assets are down about $84 billion or 3.1%; month-to-date assets are up about $34 billion.

The Federal Reserve Board didn't raise interest rates at its Federal Open Market Committee meeting on July 29, but many believe signs still point to a September hike. The FOMC's statement says, "Information received since the Federal Open Market Committee met in June indicates that economic activity has been expanding moderately in recent months. Growth in household spending has been moderate and the housing sector has shown additional improvement; however, business fixed investment and net exports stayed soft. The labor market continued to improve, with solid job gains and declining unemployment. On balance, a range of labor market indicators suggests that underutilization of labor resources has diminished since early this year." It continues, "To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress -- both realized and expected -- toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run." The Wall Street Journal writes, "FOMC Closer to September Hike, Even If the Market Doesn't Think So." The Journal says, "As expected, the Federal Reserve's rate-setting committee didn't make any drastic action at the July meeting. It didn't make any moves, as a matter of fact. But in assessing the changes to the June statement compared to the April statement, a number of commentators concluded that the statement did in fact move the central bank closer to its first interest-rate increase in nearly a decade."

A press release entitled, "Federated Investors, Inc. Completes Transition of Shareholder Assets from Reich & Tang Money Market Funds," tells us, "Federated Investors, Inc. (NYSE: FII), one of the nation's largest investment managers, today completed the transition of shareholder assets from Reich & Tang's domestic and offshore money market funds. In connection with the transition, approximately $4 billion in shareholder accounts from six Reich & Tang money market funds were transitioned into Federated funds with similar investment strategies. With approximately $242 billion in money market assets under management as of June 30, 2015, Federated offers a variety of prime, government, municipal and non-U.S. liquidity management products. Federated is among the top 3 percent of money market managers and has been an industry leader in liquidity management for more than 40 years and offers a highly defined process of portfolio construction, intense credit review and experienced investment professionals." Joe Machi, director of alliances at Federated, comments, "Our history of completing these types of transactions and our wide range of liquidity management products make Federated an ideal home for these money market assets. We continue to assess acquisition and alliance opportunities with asset managers, banks, insurance companies and broker/dealers in the United States and around the world." (See also our March 12 LOTD, "Reich & Tang Announces Liquidation of Money Market Mutual Funds," our March 17 "News", "Federated In Talks with Reich & Tang Over MMF Assets," and our March 23 LOTD, "Federated to Acquire Touchstone Ohio Tax Free Money Market Fund Assets.

The Financial Times published, "RRPs for Life?," which features an interview with New York Fed President William Dudley. The article says, "The timing of the Fed's initial rate hike and the subsequent path of future hikes are prominent unknowns on the minds of market participants and commentators. But the question of mechanics -- how the Fed will raise rates -- also matters. Our colleague Sam Fleming recently interviewed New York Fed president Bill Dudley and asked him about the possibility of the Fed's maintaining a larger balance sheet indefinitely in conjunction with the use of its reverse repo facility. His answer suggested that the central bank remained undecided. Q: Do you think in the longer-term, the new normal for the Fed balance sheet in 2020 onwards would be a larger balance sheet than in the past? A: It is really premature to say. We are going to learn a lot about running monetary policy with a large balance sheet, using the overnight RRP and interest on excess reserves as our primary tools to affect the federal funds rate target. As we learn that that will probably affect our judgment about whether it would be better to go back to a corridor system, with a very small amount of reserves in the system, or whether it would be better to have a greater amount of reserves and rely on these interest rate instruments to guide the stance of monetary policy. `My personal opinion -- not the committee's opinion -- is [the] jury's out. We are going to learn a lot. Let's learn and then decide and not make any judgments today.... And the other question is how big is big enough. I would be shocked if we wanted to run a $4.5 trillion balance sheet. The question is how much excess reserves would you want in the system if you wanted to run with a system based on interest rates being your primary instrument of policy." The piece continued, "Janet Yellen herself has been less keen on using the RRPs indefinitely than Ben Bernanke would be, as she confirmed again during her most recent press [comments].... So, with respect to -- you asked first about overnight reverse repos. And we communicated in our minutes that the Committee has an intention to make sure that they are available -- overnight repos are available in large quantity at liftoff to ensure that we have a smooth liftoff, that there will be an elevated level of provision of overnight RRP. However, it is our expectation and plan that fairly quickly after liftoff we will reduce the level of the overnight RRP facility, and we have a variety of ways in which we can do that."

On the 1-year anniversary of the SEC's MMF reforms, ICI's Jane Heinrichs and Chris Plantier posted commentary on the Investment Company Institute's "Viewpoints" blog, entitled, "Ignore the IMF’s Uninformed Call for a Third Round of Reforms to U.S. Money Market Funds." They write, "A year ago today, the U.S. Securities and Exchange Commission (SEC) voted to adopt sweeping reforms to its rule governing money market funds. The vote capped nearly six years of work to craft a rule that would address issues revealed by the financial crisis while preserving the funds' value to investors, issuers, and the economy. The 2014 reforms built on a first round of reforms adopted in 2010 -- and will fundamentally alter prime and tax-exempt institutional money market funds when they are fully implemented next fall. Yet the International Monetary Fund (IMF) seems to think that the SEC hasn't gone far enough. In its recent Financial Sector Assessment Program report on the stability of the U.S. financial system, the IMF recommends that the SEC require all money market funds -- including government funds, not just institutional prime and institutional tax-exempt funds -- to float their net asset value (NAV). Just as with many of the proclamations on the fund industry in its most recent Global Financial Stability Report, the IMF offers no credible evidence to back up its recommendation. "[E]ven this seemingly safest of all short-term assets could give rise to redemption pressures," the IMF posits in its assessment, citing "a real prospect that some Treasury securities were not going to be redeemed on their due dates" during the United States' debt-ceiling crisis in October 2013. "With investors treating their units in the funds as money-like liabilities, together with a commitment to a constant NAV and with no mechanism to manage redemption risks, the scene could again be set for an investor run, albeit under quite different circumstances than in 2008." This "analysis" fails to acknowledge four important points: 1) Thanks to their abundant liquidity (a diversified mix of U.S. Treasury obligations of various maturities up to 397 days, U.S. government agency securities, and repurchase agreements backed by Treasuries or agencies), government money market funds easily accommodated redemptions during the two weeks leading up to the 2013 debt-ceiling resolution.... 2) These redemptions had nothing to do with a constant NAV. In both instances, they instead reflected a concern that Congress would allow the U.S. government to default on some of its maturing short-term debt.... 3) Although all money market funds must hold securities with low credit risk, government securities would see credit losses only if the federal government failed to repay its maturing debt in full or if it allowed a federal agency to default on its outstanding short-term debt. Both of these events are extremely unlikely -- and even if one did materialize, it would harm far more than money market funds. 4) During other periods of market stress, investors moved into government money market funds, not out of them -- and the funds' so-called shadow NAVs, or mark-to-market price per share, tended to rise, rather than fall.... The SEC's reforms were informed by sound research and reflect a nuanced understanding of the industry. If the IMF wishes to contribute meaningfully to the regulatory discourse as the industry moves to implement the reforms, following the SEC's approach would be a good place to start."

ICI's latest "Money Market Mutual Fund Assets" report shows assets up big in the latest week. It says, "Total money market fund assets increased by $16.19 billion to $2.65 trillion for the week ended Wednesday, July 22, the Investment Company Institute reported today. Among taxable money market funds, Treasury funds (including agency and repo) increased by $9.42 billion and prime funds increased by $7.52 billion. Tax-exempt money market funds decreased by $760 million. Assets of retail money market funds decreased by $530 million to $871.15 billion. Among retail funds, Treasury money market fund assets increased by $770 million to $195.88 billion, prime money market fund assets decreased by $1.16 billion to $496.63 billion, and tax-exempt fund assets decreased by $140 million to $178.64 billion. Assets of institutional money market funds increased by $16.72 billion to $1.78 trillion. Among institutional funds, Treasury money market fund assets increased by $8.66 billion to $785.65 billion, prime money market fund assets increased by $8.68 billion to $924.07 billion, and tax-exempt fund assets decreased by $620 million to $67.71 billion." Year-to-date, money fund assets are down $84 billion or 3.1%. Month-to-date assets are up $34 billion, and MMF assets have gone up 4 of the past 5 weeks. In other news, Federated Investors released its latest earnings and will hold its 2nd Quarter Earnings Call this morning, July 24, at 9:00 am. The release says, "President and Chief Executive Officer J. Christopher Donahue and Chief Financial Officer Thomas R. Donahue will host the call. Investors interested in listening to the conference call should dial 877-407-0782 ... or visit FederatedInvestors.com for real time Internet access. To listen via the Internet, go to the About Federated section of the website at least 15 minutes prior to register and join the call."

JP Morgan Securities' "Prime MMF Holdings Update for June commented recently on the surprising fact that issuers continue to provide short-term paper. They say, "It is notable that banks have so far been willing to meet the shift in demand from prime MMF with shorter dated supply. We think differences in regulatory implementation across different countries plays a role in this. The Basel III LCR and NSFR are designed to discourage banks' use of short term borrowing, yet these have not proven a uniform hindrance to new issuance in recent months. Two aspects of the regulatory environment may be at work. First, on a global basis the Basel LCR and NSFR are not scheduled to be in full effect until 2019 and 2018, respectively. However, individual countries are phasing in the rules at varying paces, and these implementation variations are the second aspect that may explain why supply in 30d and less remains robust. With international banks playing by different sets of rules, many Yankee banks continue to be able to issue sizable amounts of debt maturing inside of 30 days. However, there are limits to this, as the cliff-like drop off in time deposits at quarter-ends demonstrates. The time deposit cliff is itself a function of differences in regulatory implementation." JPM's update adds, "We expect this maturity shortening trend to persist, and for prime WAMs to drift lower. Managing around a Fed lift off will be a major factor driving WAMs -- using the last tightening cycle as a reference, in the 3 months leading up to the first rate hike, prime fund WAMs fell by 10 days from 52 to 42 days. MMF reform related outflows should also play a role in the months to come as cash begins to move out of the prime complex."

First American Funds Managing Director Lisa Isaacson published commentary on Form N-CR entitled, "The First Money Market Fund Reform Deliverable." She writes, "The SEC's stated objectives when they announced money market fund reform were to increase transparency, address susceptibility to runs and preserve the benefits of money market funds. The purpose of the July deliverable is to increase transparency of material events that may befall a fund. The requirement goes live July 14 and it calls for funds to file a new material events form, called Form N-CR, in certain well-defined instances. Form N-CR will be required to be filed by funds with the SEC and prominently displayed on fund websites when specific events occur. The events which will trigger the filing of the form are detailed below, with the final one not required to be reported until that piece of the reform becomes effective: Insolvency or default of a portfolio holding. For issuers or guarantors representing 0.50% or more of a fund's holdings, a default or insolvency becomes a reportable event. Several pieces of information about the holding(s) would be disclosed in this event, including the default date, the value of the holding, the percentage of the portfolio it represents and what fund management is planning to do to address the issue.... Financial support from a sponsor. The idea of support is not new to money market funds, nor is the reporting of it. Sponsor support has historically been given to allow a fund to continue accepting redemption requests at a $1.00 NAV. Under certain circumstances, a sponsor may step in if a portfolio security has lost value or liquidity in the market has been compromised. Support can take several forms, including purchasing a distressed security from a fund at par, making a capital contribution or executing a capital support agreement on behalf of the fund. The SEC sees all of these actions as a sponsor taking steps to stabilize or increase the value or liquidity of a fund's portfolio.... Declines in a fund's shadow price. The new reform calls for a Form N-CR to be filed if a fund's shadow price falls below $0.9975 per share regardless of whether a fund will be pricing at a stable or a floating NAV come October 2016. Funds with shadow prices below $0.9975 are moving the wrong way within the current penny-rounding rules, which allow a money market fund to strike a $1.00 NAV if the value of portfolio securities is at least $0.9950 (NAVs below $0.9950 are considered to have broken the buck).... Imposition or lifting of a liquidity fee or redemption gate. Part of the ultimate reform implementation calls for fund boards to be able to assess a liquidity fee or a redemption gate if a fund's weekly liquidity falls below 30%. Should a board determine one or both of these levers is in the best interest of shareholders, the SEC has mandated that communication of such action be made public within one day through a Form N-CR filing. As part of the explanation included in these filings, a fund board will be able to provide context around why the decision was made.... It is important to note that all money market funds -- whether they are retail or institutional -- are subject to the July Form N-CR deliverable."

The New York Federal Reserve published an article on its Liberty Street Economics blog, "Have Dealers' Strategies in the GCF Repo Market Changed? where researchers examine changes in the General Collateral Finance repo market. It says, "In a previous post, "Mapping and Sizing the U.S. Repo Market," our colleagues described the structure of the U.S. repurchase agreement (repo) market. In this post, we consider whether recent regulatory changes have changed the behavior of securities broker-dealers, who play a significant role in repo markets. We focus on the General Collateral Finance (GCF) Repo market, an interdealer market primarily using U.S. Treasury and agency securities as collateral. We find that some dealers use GCF Repo as a substantial source of funding for their inventories, while others primarily use GCF Repo to fine-tune their repo positions. Recent regulatory changes, such as the supplementary leverage ratio (SLR), may be contributing to reduced lending in the GCF Repo market." It concludes, "Recent regulatory changes make repo trading more expensive," "In addition to regular Basel III risk-based capital requirements, the SLR requires BHCs with more than $700 billion in assets or $10 trillion in managed assets in the United States to hold additional capital against all assets on their balance sheets. These rules increase the total cost of maintaining a large balance sheet for broker-dealers affiliated with BHCs. In order to meet the new capital requirements some BHC-affiliated dealers might choose to reduce their repo activity. While these regulatory changes do not seem to have changed dealers' GCF Repo strategies, they do seem to have reduced the amount of activity that dealers are willing to participate in. Similarly, the introduction of the Federal Reserve's overnight reverse repo facility in 2014 may also have had a negative effect on the volume of GCF Repo activity, as it provided an alternative to dealers lending cash."

The Investment Company Institute released its latest "Money Market Fund Holdings" summary (with data as of June 30, 2015), which tracks the aggregate daily and weekly liquid assets, regional exposure, and maturities (WAM and WAL) for Prime and Government money market funds. ICI's "Prime and Government Money Market Funds' Daily and Weekly Liquid Assets" table shows Prime Money Market Funds' Daily liquid assets at 26.4% as of June 30, up from 25.4% on May 31. Daily liquid assets were made up of: "All securities maturing within 1 day," which totaled 22.5% (vs. 21.2% last month) and "Other treasury securities," which added 3.9% (down from 4.3% last month). Prime funds' Weekly liquid assets totaled 39.6% (vs. 38.2% last month), which was made up of "All securities maturing within 5 days" (33.7% vs. 32.3% in May), Other treasury securities (3.6% vs. 4.2% in May), and Other agency securities (2.3% vs. 1.7% a month ago). (See also Crane Data's July 13 "News", "July MMF Portfolio Holdings Show Jump in Fed Repo, Drop in TDs, VRDNs.") The ICI holdings report says Government Money Market Funds' Daily liquid assets totaled 52.5% as of June 30 vs. 62.8% in May. All securities maturing within 1 day totaled 23.6% vs. 28.0% last month. Other treasury securities added 35.9% (vs. 34.8% in May). Weekly liquid assets totaled 82.2% (vs. 80.0%), which was comprised of All securities maturing within 5 days (40.1% vs. 39.5%), Other treasury securities (33.7% vs. 32.8%), and Other agency securities (8.4% vs. 7.7%). ICI's "Prime and Government Money Market Funds' Holdings, by Region of Issuer" table shows Prime Money Market Funds with 50.6% in the Americas (vs. 41.5% last month), 20.5% in Asia Pacific (vs. 19.5%), 28.6% in Europe (vs. 38.7%), and 0.4% in Other and Supranational (vs. 0.3% last month). Government Money Market Funds held 93.9% in the Americas (vs. 85.8% last month), 0.2% in Asia Pacific (vs. 0.4%), 5.9% in Europe (vs. 13.8%), and 0.1% in Supranational (vs. 0.1%). The table, "Prime and Government Money Market Funds' WAMs and WALs" shows Prime MMFs WAMs at 37 days as of June 30, down from 38 days last month. WALs were at 73 days, down from 75 days last month. Government MMFs' WAMs was at 39 days, down from 41 days last month, while WALs was at 75 days, down from 78 days. ICI's release explains, "Each month, ICI reports numbers based on the Securities and Exchange Commission's Form N-MFP data, which many fund sponsors provide directly to the Institute. ICI's data report for June covers funds holding 94 percent of taxable money market fund assets." Note: ICI publishes aggregates but doesn't publish individual fund holdings. Also, JP Morgan Securities released its "Prime MMF Holdings Update for June".

ICI's latest "Money Market Mutual Fund Assets" report shows assets decreasing slightly in the latest week. It says, "Total money market fund assets decreased by $1.35 billion to $2.63 trillion for the week ended Wednesday, July 15, the Investment Company Institute reported today. Among taxable money market funds, Treasury funds (including agency and repo) decreased by $1.97 billion and prime funds increased by $1.96 billion. Tax-exempt money market funds decreased by $1.34 billion. Assets of institutional money market funds decreased by $1.03 billion to $1.76 trillion. Among institutional funds, Treasury money market fund assets decreased by $2.06 billion to $776.99 billion, prime money market fund assets increased by $1.46 billion to $915.39 billion, and tax-exempt fund assets decreased by $430 million to $68.33 billion." Year-to-date, money fund assets are down about $100 billion or 3.6%. It was the first time in 5 weeks that MMF assets have declined, according to ICI. In other news, Plan Sponsor wrote, "'Safe' Investments Get More Participant Transfers in June." It says, "June was another light month of trading activity in defined contribution plans, according to the Aon Hewitt 401(k) Index.... However, for the month, the most popular asset classes for inflows were money market ($63 million), small U.S. equity ($56 million), and GIC/stable value funds ($41 million). The most common classes for outflows were company stock ($87 million), bond ($75 million), and specialty/sector ($28 million)." Specifically, according to the AON Index, 30% of the inflows were into money market funds -- the highest percentage of all asset classes.

Federal Reserve Board Chair Janet Yellen delivered her Semiannual Monetary Policy Report to the House Committee on Financial Services yesterday. On raising interest rates she said, "In its most recent statement, the FOMC again noted that it judged it would be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term. The Committee will determine the timing of the initial increase in the federal funds rate on a meeting-by-meeting basis, depending on its assessment of realized and expected progress toward its objectives of maximum employment and 2 percent inflation. If the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal funds rate target, thereby beginning to normalize the stance of monetary policy. Indeed, most participants in June projected that an increase in the federal funds target range would likely become appropriate before year-end <b:>`_. But let me emphasize again that these are projections based on the anticipated path of the economy, not statements of intent to raise rates at any particular time.... That said, the importance of the initial step to raise the federal funds rate target should not be overemphasized. What matters for financial conditions and the broader economy is the entire expected path of interest rates, not any particular move, including the initial increase, in the federal funds rate. Indeed, the stance of monetary policy will likely remain highly accommodative for quite some time after the first increase in the federal funds rate in order to support continued progress toward our objectives of maximum employment and 2 percent inflation." Also, Foreign Policy wrote about the Yellen testimony in an article entitled "U.S. Fed Chief to Puerto Rico: When It Comes to $72 Billion in Debt, You're on Your Own." It says, "Acosta Febo's comments did little to quell concerns that investors are going to take a hit on their bets in Puerto Rico. The island's bonds are popular with money market fund managers [sic] because they're free from federal tax.... This is potentially bad news for American investors. In 2013, about three-quarters of municipal bond mutual funds had exposure to Puerto Rican debt." [Note: We believe this last article erred and that almost no money market funds currently hold any Puerto Rico debt. Our latest Money Fund Portfolio Holdings (as of June 30) show just 3 funds with just over $16 million total in PR holdings, of which most is likely guaranteed by other entities.]

Bond Buyer reports "New Player Seeks to Revive VRDO Market." It says, "Clarity Bidrate Alternative Trading System, a division of Arbor Research & Trading, LLC, is signing up investors and lining up potential issuers for an attempt to "revolutionize and rejuvenate" the variable rate demand obligation market. "Our goals include deepening and broadening the market, a high degree of transparency, centralizing the market and using competitive pricing," Clarity's chief executive officer and president, Robert Novembre, said in an interview last month.... VRDOs are long term municipal bonds with floating interest rates that are reset periodically, typically weekly.... In 2008, however, the collapse of Lehman Brothers triggered a run on the securities. The average VRDO rate shot up to almost 8% from under 3%, as investors worried about whether banking institutions that provided liquidity facilities to back the securities would be able to meet their obligations, according to a June research report from the Federal Reserve Bank of Atlanta. Issuance of VRDOs has fallen to about $11 billion in 2014 from nearly $120 billion in 2008, according to the Municipal Securities Rulemaking Board. The par value of VRDOs outstanding has slipped to $207 billion from $222 billion in March 2014.... The system promotes transparency, offering real-time empirical data not available in today's market, pre-trade/execution information and competitive pricing, he said. The system seeks to level the playing field, promoting a deeper and wider investor base. By providing easy access and a place where investors and issuers can meet directly in an unbiased market not influenced by a middleman, the system should increase the potential for new issuance, Novembre said." Also, The Wall Street Journal reports, "J.P. Morgan's Profit Rises; Results Beat Expectations." It says, "The bank has also reached its goal of reducing certain deposits, known as non-operating deposits, by more than $100 billion, largely through its corporate and investment bank unit in addition to its commercial bank and asset management units, Ms. Lake said on a call with analysts."

Invesco recently posted two separate Money Market Reform Regulatory Updates. The first is "Implementation Time for Significant Event Reporting (Form N-CR)," while the other is "Reform Update: SEC Implementation Schedule." On Form N-CR, Invesco says, "As part of the new amendments to Rule 2a-7, which governs money market funds, approved in July 2014, the Securities and Exchange Commission (SEC) introduced new requirements for money market funds to report certain significant events on Form N-CR. The intent of this new form is to help the SEC enhance oversight of money market funds and provide important transparency to fund shareholders. The compliance data for Form N-CR and corresponding website disclosure is July 14, 2015. When certain specific events occur, money market funds are required to file a disclosure report to the SEC with certain information about the event. The initial report to the SEC needs to be submitted within one business day and an amended report needs to be submitted within four business days to include a brief description of the actions taken in response to the events." It also lists the events that would require disclosure: defaults and events of insolvency, financial support by sponsors or affiliates, declines in shadow price, imposition and filing of liquidity fee and redemption gates. The SEC implementation Schedule, includes a list of all the dates for the implementation of reforms, starting with Form N-CR in July 2015. In other news, SimCorp, a provider of investment management solutions, will host a one-hour webinar on Wednesday July 15 on "Money Market Reform: The implications for your firm and the available technology solutions to help you comply."

The Securities and Exchange Commission released its "Money Market Fund Statistics" report for May, which shows assets up and maturities shorter in May. The report, with data as of May 31, 2015, summarizes Form N-MFP data and which includes totals on assets, yields, liquidity, WAM, WAL, holdings, and other money market fund trends. The data is produced by the SEC's Division of Investment Management. Overall, total money market fund assets stood at $2.968 trillion at the end of May, up $32.2 billion from April 30, according to the SEC's broad total (which includes many private and internal funds not reported to ICI, Crane Data or other reporting agencies). Of the $2.968 trillion, $1.731 trillion was in Prime funds (up $26.6B from April 30), $983.9B was in Government/Treasury funds (up $4.5B), and $253.3 billion was in Tax-Exempt funds (up $1.1B). Total assets were down $113.0 billion year to date through May 31. Prime assets were down $41 billion year-to-date, while Government/Treasury MMF assets were down $54 billion year-to-date. Tax exempt assets were down $16.9 billion year-to-date. The number of money funds was 537, 5 less than last month. The Weighted Average Gross 7-Day Yield for Prime Funds on May 31 was 0.22% (unchanged), 0.10% for Government/Treasury funds (unchanged), and 0.13% for Tax-Exempt funds (up from 0.12%). The Weighted Average Net Prime Yield was 0.06% -- same as last month. The Weighted Average Prime Expense Ratio was 0.16% (unchanged). The Weighted Average Life, or WAL, was 74.4 days (down from 76.3 last month) for Prime funds, 78.2 days (down from 80.2 days last month) for Government/Treasury funds, and 28.3 days (down from 30.8 days) for Tax Exempt funds. The `Weighted Average Maturity, or WAM, was 38.5 days (down from 39.6) for Prime funds, 40.9 days (down from 42.8) for Govt/Treasury funds, and 26.7 days (down from 29.1) for Tax-Exempt funds. Total Daily Liquidity for Prime funds was 25.7% in May up from 24.6% last month. Total Weekly Liquidity was 39.8% (unchanged). In the category Prime MMF Holdings of Bank Related Securities by Country, Canada topped the list with $213.5 billion, followed by the US at $188.7 billion. Japan was third with $177.0 billion, followed by France with $164.5 billion, Sweden ($113.2B), the UK ($106.8B), Australia/New Zealand ($95.4B), The Netherlands ($60.8B), Switzerland ($52.3B), and Germany ($47.9B). The biggest gainers for the month were Sweden (up $11.1B), Canada (up $8.5B), and The Netherlands ($5.0B). The biggest drops came from US (down $8.3B), Switzerland (down $4.6B), and France ($2.9B). For Prime MMF Holdings of Bank-Related Securities by Region, Europe had $598.8 billion, while its subset, the Eurozone, had $287.7. The Americas was next with $405.0 billion, while Asia and Pacific had $298.5 billion. The Total Amortized Cost of Prime MMF Portfolios was $1.724 trillion as of May 31, 2015. That was made up of $576.5B in CDs, $344.7B in Government (including direct and repo), $452.6B in Non-Financial CP and Other Short term Securities, $259.0B in Financial Company CP, and $91.6B in ABCP. Also, the Proportion of Non-Government Securities in All Taxable Funds was 51.4% at month-end, up from 50.7% the previous month. All MMF Repo with Federal Reserve was $149.0 billion on May 31, up from $1212B . Finally, the Trend in Longer Maturity Securities in Prime MMFs said 40.7% were in maturities of 60 days and over, while 10.0% were in maturities of 180 days and over.

ICI's latest "Money Market Mutual Fund Assets" report shows assets increasing for the fourth straight week. It says, "Total money market fund assets increased by $19.18 billion to $2.63 trillion for the week ended Wednesday, July 8, the Investment Company Institute reported today. Among taxable money market funds, Treasury funds (including agency and repo) increased by $1.30 billion and prime funds increased by $13.28 billion. Tax-exempt money market funds increased by $4.61 billion. Assets of retail money market funds increased by $7.29 billion to $872.00 billion. Among retail funds, Treasury money market fund assets increased by $3.56 billion to $195.02 billion, prime money market fund assets increased by $1.12 billion to $497.29 billion, and tax-exempt fund assets increased by $2.61 billion to $179.69 billion. Assets of institutional money market funds increased by $11.89 billion to $1.76 trillion. Among institutional funds, Treasury money market fund assets decreased by $2.26 billion to $779.05 billion, prime money market fund assets increased by $12.16 billion to $913.93 billion, and tax-exempt fund assets increased by $2.00 billion to $68.76 billion." Year-to-date, money fund assets are down $99 billion or 3.6%. Money fund assets increased by $15.2 billion in June according to Crane Data's Money Fund Intelligence XLS, a surprisingly strong showing for what is traditionally one of the weakest months of the year. (Only March has averaged larger average outflows since 2008 -- $69 billion vs. $45 billion for June.) This marks the first time MMF assets have increased in June in 9 years (since 2007)!

The Federal Reserve Bank of New York recently posted an "Update on Tri-Party Repo Infrastructure Reform," which say, "Three years have passed since the Tri-party Repo Infrastructure Reform Task Force released its seven-point roadmap for reforms needed to (1) sharply reduce the market's reliance on discretionary extensions of intraday credit by the clearing banks and (2) foster improvements in market participants' liquidity and credit risk management practices. A great deal of progress has been made since the New York Fed's last public statement in February 2014. Earlier this spring, Bank of New York Mellon completed the final piece of its new settlement process for triparty repo, achieving a number of reform goals and serving to bring all triparty repo trades into alignment with the roadmap originally laid out by the Industry Task Force back in 2012. As a result, the share of triparty repo volume that is financed with intraday credit from a clearing bank has dropped markedly, from 100 percent as recently as 2012, to a level averaging 3 to 5 percent today (as compared with the Task Force's original target of no more than 10 percent).... However, one remaining element of the Task Force's reform roadmap, namely the full alignment of General Collateral Finance (GCF) repo settlement with the new triparty settlement process, is not yet complete." A press release entitled, "BNY Mellon Achieves Significant Milestone in Tri-Party Repo Risk Reduction Initiative,” also weighs in on tri-party repo reforms. It says, "BNY Mellon, a global leader in investment management and investment services, announced today it completed its tri-party repo risk reduction initiative in support of the recommendations of the Task Force for U.S. Tri-Party Repo Infrastructure Reform. As part of these efforts, BNY Mellon reduced the secured credit extended in the tri-party repo market by $1.44 trillion, or 97%, resulting in the practical elimination of such credit in its program, which was a critical Task Force goal outlined in 2012. This milestone marks the conclusion of a multi-year cooperative effort by BNY Mellon, its clients and other market participants to restructure the U.S. tri-party repo market. It also demonstrates the company's proven ability to use technology to respond to market challenges and anticipate client needs.... Moving forward, BNY Mellon will continue to invest in and enhance its tri-party repo capabilities, including working closely with market participants to improve the process for settling Interbank General Collateral Finance repo trades." Finally, the Federal Reserve also released its latest "Minutes" from the June 16-17 FOMC meeting.

Federated Investors' CIO of Global Money Markets, Deborah Cunningham recently posted her latest "Month in Cash" column, entitled, "Looking forward -- really! -- to the end of summer." She says, "For most of us, summer is a time to pull back from the hustle and bustle of life. No one -- especially school children and college students -- want to think about it ending. But this year, at least in the financial industry, we are looking forward to September. It is the month that the market expects the Federal Reserve will raise rates for the first time since 2008. For cash managers, that will bring on more celebratory fireworks than the Fourth of July. Anticipation for liftoff has ratcheted up following the June meeting of the Federal Open Market Committee (FOMC). Its statement and economic/rate projections point to a September hike, and also increased the likelihood of an additional rise in December. While this has been our base case for some time, with the housing market heating up, the labor market strengthening, consumer confidence climbing and the poor first quarter long forgotten, it is almost hard to imagine that the hikes wouldn't unfold this way. But inflation is still not quite where the Fed would like to see it, with PCE still below the two percent level. It is hanging in there: not getting worse, but not getting any better. However, at this point, it would take a substantial negative event to postpone the hike, and we don't believe that even a Greek default will do it. In any case, none of the global banks we deal with in the prime or municipal money market portfolios have any meaningful exposure to Greece, and therefore the portfolios won’t be impacted in any way, shape or form. As you know, while the Fed's maneuvers on the longer term are always in the back of our minds, they take a back seat to the daily trading we do with the central bank. Lately, that has become much easier as the Fed's staff has gotten better and better at running the operations. A year-and-a-half into the implementation of the reverse repo program, it finally is running smoothly, issuing enough collateral to keep rates above the floor. And since the Fed started adding term-repo issuances for quarter end, there's been less concern about supply now than there had been. While the Fed will have to navigate the reverse repo program when rates rise, it has $4 trillion on its balance sheet to use if it needs to control the rate more firmly." She continues, "If you have not already read our recent press release laying out our plans for some of our funds in response to the SEC's 2014 money fund rules, please follow this link to do so. Its main news is the announcement of which of our money market funds will classify as retail and thus not required to float their NAV. But it also outlines plans for a series of mergers for some of our prime, municipal and government money market funds. Our weighted average maturity (WAM) for June didn't change much with a range of 40-50 days for government and prime funds."

A press release entitled, "S&P Capital IQ Adds Intra-Day Pricing on Munis to its Roster of Pricing Products and Services" tells us, "S&P Capital IQ, a leading provider of financial research, data, analytics and securities pricing, announced the availability, starting today, of a new intra-day municipal bond pricing service designed to assist regulatory and industry efforts aimed at bringing about greater transparency to that market. Provided by Standard & Poor's Securities Evaluations Inc., a business unit of S&P Capital IQ specializing in multi asset class mark to market solutions, the new service will enable users to track pricing on over 3 million bonds throughout the trading day. This new service has been designed to support portfolio managers, advisors and back offices looking to develop solutions that address recent Securities & Exchange Commission (SEC) rules requiring institutional money market funds to calculate floating Net Asset Values. Under the existing model for end of day 4:00PM evaluations, floating NAV funds may no longer have the ability to offer same day settlement. The Commission's new rule encourages investment companies to generate multiple NAVs throughout the day, which aims to provide shareholders with intraday liquidity at prevailing market prices." "The intra-day pricing of money market funds seeks to better facilitate same day settlement of money market transactions," said Greg Carlin, Vice President, S&P Capital IQ. "In addition, we believe that the availability of intra-day pricing across all asset classes will improve pre-trade price transparency, best execution, compliance oversight, and trade processing. As important, because many day-to-day events have proven to have material impacts on the fixed income markets in recent times, we are finding that investors are seeking an intra-day 'compass' to be assured that their assumptions are intact."

ICI's latest "Money Market Mutual Fund Assets" report shows that assets were up sharply in the past week, even with quarter-end occuring on Tuesday. The report says, "Total money market fund assets increased by $12.95 billion to $2.61 trillion for the week ended Wednesday, July 1, the Investment Company Institute reported today. Among taxable money market funds, Treasury funds (including agency and repo) increased by $12.66 billion and prime funds decreased by $60 million. Tax-exempt money market funds increased by $360 million. Assets of retail money market funds decreased by $1.73 billion to $864.68 billion. Among retail funds, Treasury money market fund assets decreased by $1.14 billion to $191.46 billion, prime money market fund assets decreased by $60 million to $496.14 billion, and tax-exempt fund assets decreased by $540 million to $177.08 billion. Assets of institutional money market funds increased by $14.69 billion to $1.75 trillion. Among institutional funds, Treasury money market fund assets increased by $13.80 billion to $781.31 billion, prime money market fund assets were unchanged at $901.77 billion, and tax-exempt fund assets increased by $890 million to $66.76 billion." Month-to-date (since May 27) assets are flat, or up just $1 billion. MMF assets have gained each of the past three weeks, but year-to-date assets are down $118 billion or 4.3%.

Fund lineup tweaks, mergers and liquidations continue, as JP Morgan abandoned its "B" share classes and Federated prepares to liquidate a Euro MMF. JP Morgan filed with the SEC to convert its B shares in three funds -- JP Morgan Prime Money Market Fund, JP Morgan Liquid Assets Money Market Fund, and JP Morgan US Treasury Plus Money Market Fund -- into other share classes. The Prospectus Supplement SEC filing for J.P. Morgan Trust I and II says, "Accelerated Conversion of Class B Shares to Morgan Shares. The Board of Trustees of the J.P. Morgan Funds has approved the automatic conversion of the Funds' Class B Shares into Morgan Shares on or about June 19, 2015 (the “Conversion Date”), notwithstanding the conversion schedule set forth in each prospectus that indicates a later date. On the Conversion Date, all Class B Shares of the Funds will automatically convert to Morgan Shares of the same Fund. No contingent deferred sales charges will be assessed in connection with this automatic conversion. This automatic conversion is not expected to be a taxable event for federal income tax purposes or to result in the recognition of gain or loss by converting shareholders, although shareholders should consult their own tax advisors. As of the Conversion Date, all references to Class B Shares of the Funds in the Prospectus, Summary Prospectuses and Statement of Additional Information are hereby deleted." Also, a release entitled, "Fitch Withdraws Federated Short-Term Euro Prime Fund's 'AAAmmf' Rating," explains, "Fitch Ratings has withdrawn the Federated Short-Term Euro Prime Fund's 'AAAmmf' rating. The fund is managed by Federated Investors (UK) LLP. Fitch is withdrawing the rating as the fund will close (subject to FCA approval), liquidate all holdings and return the proceeds to investors. Accordingly, Fitch will no longer provide ratings or analytical coverage for the entity." In other news, Fed Governor Lael Brainard gave a speech on "Recent Changes in the Resilience of Market Liquidity." It says, "Recent events and commentary raise concerns about a possible deterioration in liquidity at times of market stress, particularly in fixed income markets."

The WSJ's CFO Journal writes "Corporate Impact From Greece Looks Tame, So Far". It says, "Months of warnings about debt defaults in Greece and Puerto Rico have allowed the vehicles where corporate finance chiefs store their cash time to shelter themselves from the immediate impact of crises in those regions. For example, cash isn't flowing out of money-market funds, which hold billions of corporate cash, according to Peter Crane, president of Crane Data, which tracks the industry. "It's relatively calm," he said. He noted that assets in money funds rose $1.9 billion on Friday to $2.522 trillion, suggesting that few corporate treasurers were pulling money out in advance of this weekend's talks. There's very little reason for them to. Money funds don't invest in low rated debt such as Greek or Puerto Rican bonds, he said. As money flows into high-quality assets such as U.S. Treasurys, money funds invested in those securities could see more inflows. Anthony Carfang, a partner at Treasury Strategies Inc., said that new banking regulatory rules could aid the funds. He explained that international bank rules are forcing banks to hold more in U.S. Treasurys, which could reduce the number of the bonds in circulation, as more investors seek the bonds as safe havens. Money funds, which are large holders of U.S. government bonds could therefore find it lucrative to lend out their holdings of bonds for investors who need the securities for the short term."