Daily Links Archives: November, 2017

The Federal Reserve Bank of New York sent out a statement entitled, "Reverse repo counterparties list updated." It says, "Northern Institutional Funds Government Assets Portfolio merged into Northern Institutional Government Portfolio, effective close of business November 28." (See our Oct. 26 Link of the Day, "Northern Merging Govt MMFs.") Money funds on the Fed's RRP counterparty list now include: AB Government Money Market Portfolio; BlackRock Liquidity Funds: FedFund, T-Fund, TempCash, and TempFund; BlackRock Master Treasury Strategies Institutional Portfolio, Master Money LLC, Master Premier Government Institutional Portfolio, Money Market Master Portfolio, and Treasury Money Market Master Portfolio; American Funds U.S. Govt MMF; Schwab Advisor Cash Reserves, Cash Reserves, Govt MF, Money Market Fund, and Value Advantage MF; Columbia Short-Term Cash Fund; Deutsche Government Cash Mgmt Portfolio; DFA Short Term Investment Fund; Dreyfus Cash Management, Government Cash Mgmt, Inst Preferred Govt MMF, Treasury & Agency Cash Management, and General MMF; Edward Jones Money Market Fund; Federated Capital Reserves Fund, Government Obligations Fund, Government Obligations Tax-Managed Fund, Government Reserves Fund, Inst MM Management, Prime Cash Obligations Fund, Prime Obligations Fund, Prime Value Obligations Fund, Tax-Free Obligations Fund, Treasury Obligations Fund, and U.S. Treasury Cash Reserves; Fidelity Cash Central Fund, Securities Lending Cash Central Fund, Government Portfolio, Money Market Portfolio, Prime Money Market Portfolio, Treasury Portfolio, Government MMF, Money Market Fund, Treasury Money Market Fund, Govt Cash Reserves, and Govt MMF; Franklin MM Port; Goldman Sachs Financial Square Government Fund, Money Market Fund, Prime Obligations Fund, Treasury Obligations Fund, Treasury Solutions Fund, and Investor Tax-Exempt MMF; HSBC U.S. Govt MMF; Invesco Premier Port, STIT Govt and Agency Port, STIT Liquid Assets Port, and STIT Treasury Port; JPMorgan Liquid Assets MMF, Prime MMF, Tax Free MMF, U.S. Govt MMF, and U.S. Treasury Plus Money Market Fund; Western Asset Govt Port and Liquid Reserves Port; Morgan Stanley Active Assets Government Trust, Institutional Liquidity Funds Govt Port, Govt Securities Port, Prime Portfolio, and Treasury Port; Northern MMF, U.S. Govt MMF, Northern Inst Govt Port, Govt Select Port, and Treasury Port; PFM Funds Govt Select Series; PNC Government Money Market Fund; RBC Funds U.S. Govt MMF; SSgA Institutional Liquid Reserve Portfolio, Inst US Govt MMF, State Street Navigator Securities Lending Trust and Treasury Plus Money Market Portfolio; T. Rowe Price Cash Reserves Fund, Government Money Fund, Govt Reserve Fund, and U.S. Treasury Money Fund; UBS Govt Master Fund, Prime Master Fund, and Treasury Master Fund; First American Govt Obligations Fund, Prime Obligations Fund, and Treasury Obligations Fund; Vanguard Federal Money Market Fund, Market Liquidity Fund, and Prime Money Market Fund; Wells Fargo Cash Investment MMF, Govt MMF, Heritage MMF, Money Market Fund, and Treasury Plus MMF; and Wilmington U.S. Govt MMF.

Crane Data released its latest Weekly Money Fund Portfolio Holdings yesterday. (Please let us know if you'd like to see the full data set.) Our most recent weekly, a subset of our monthly Portfolio Holdings collection, contains fund data as of Nov. 24. The data includes information from 83 money funds, representing $1.266 trillion of the $2.963 trillion (42.7%) in total money fund holdings tracked by Crane Data. (For our monthly Holdings recap, see our Nov. 13 News, "Nov. Money Fund Portfolio Holdings: Treasuries Jump Again, CDs Higher.) Our latest Weekly MFPH Composition summary shows Government assets continue to dominate the holdings list with Repurchase Agreements (Repo) totaling $481.6 billion, or 38.0%, Treasury debt totaling $397.4 billion, or 31.4%, and Government Agency securities totaling $268.4 billion, or 21.2%. Commercial Paper (CP) totaled $41.0 billion, or 3.2%, and Certificates of Deposit (CDs) totaled $33.8 billion, or 2.7%. A total of $29.0 billion or 2.3%, was listed in the Other category (primarily Time Deposits), and VRDNs accounted for $14.7 billion, or 1.2%. The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $397.4 billion, Federal Home Loan Bank with $193.6 billion, BNP Paribas with $77.4 billion, Credit Agricole with $42.3 billion, Federal Farm Credit Bank with $39.3 billion, Wells Fargo with $29.5 billion, Societe Generale with $28.9 billion, RBC with $27.7 billion, Federal Home Loan Mortgage Co with $26.1 billion, and Natixis with $23.3 billion. The Ten Largest Funds tracked in our Weekly include: Fidelity Inv MM: Govt Port ($96.8B), Goldman Sachs FS Govt ($88.4B), BlackRock Lq FedFund ($83.4B), Wells Fargo Govt MMkt ($71.8B), Dreyfus Govt Cash Mgmt ($70.9B), Federated Govt Oblg ($68.4B), BlackRock Lq T-Fund ($56.8B), State Street Inst US Govt ($49.2B), Goldman Sachs FS Trs Instruments ($45.7B), and Morgan Stanley Inst Liq Govt ($44.1B).

In other news, the U.S. Treasury's Office of Financial Research published an "Update on Bilateral Repo Collection." The commentary, "delivered at the meeting on November 16, 2017, of the principals of the Financial Stability Oversight Council (FSOC or Council)" by Stacey Schreft, says, "For several years, the Council has called for better insight and transparency into markets for securities financing transactions. As you know, these wholesale funding markets are critical to the functioning of the financial system. Four-and-a-half years ago, Dick [Berner] promised the Council that we would address gaps in data for such securities financing transactions. With the New York Fed, we did a pilot collection that informed how we would fill one such gap, in bilateral repo transactions. Last September, Dick consulted with the Council on our plans for a permanent repo data collection." The OFR update adds, "We intend to collect data in two stages. The first will focus on cleared repo transactions. In the second, we will collect data on uncleared bilateral repo transactions. We intend to issue a Notice of Proposed Rulemaking on a cleared repo collection in the first half of 2018." They explain, "From the data pilot, we estimate that bilateral repo activity constitutes about half of the repo funding of major dealers, and the majority of the funding that dealers provide to others. Monitoring the tenor, haircuts, and rates in such repos across a broad range of collateral will help us understand the functioning of and spot stress in asset and funding markets." The OFR update continues, "[T]he interest rate information that we collect on cleared repo transactions is critical for the production of the Secured Overnight Financing Rate (SOFR) selected by the Alternative Reference Rate Committee on June 22 as an alternative to LIBOR. The cleared repo data will be used immediately in the publication of the SOFR. And subsequently collecting data on uncleared bilateral repo transactions will ensure the availability of comprehensive data for rate production as markets evolve.... [B]y shedding light more broadly on the specifics of repo funding, these collections will support other FSOC initiatives, such as understanding dynamics that affect liquidity in Treasury market."

Crane Data reminds readers new to the money fund space to make plans soon for our "`basic training" event, Money Fund University. Our 8th annual MFU returns to the Boston Hyatt Regency in Boston, Mass., January 18-19, 2018. Crane's Money Fund University is designed for those new to the money market fund industry or those in need of a concentrated refresher on the basics. The event also focuses on hot topics like money market regulations, money fund alternatives, offshore markets, and other recent industry trends. The affordable educational conference (see the agenda here or e-mail us to request our brochure) features a faculty of the money fund industry's top lawyers, strategists, and portfolio managers. Money Fund University offers attendees a 2-day course on money market mutual funds, educating attendees on the history of money funds, the Fed, Rule 2a-7, ratings, rankings, money market instruments such as commercial paper, CDs, CP, ABC, repo, plus portfolio construction. At our upcoming Boston event, we will also take a look at ultra-short bond funds and Europeans MMF regulations. New portfolio managers, analysts, investors, issuers, service providers, and anyone interested in expanding their knowledge of "cash" investing will benefit from our comprehensive program. Even experienced professionals may enjoy a refresher course and the opportunity to interact with peers in an informal setting. Attendee registration for Crane's Money Fund University is just $500, exhibit space is $2,000, and sponsorship opportunities are $3K, $4K, and $5K. A block of rooms has been reserved at the Hyatt Regency Boston. We'd like to thank our MFU sponsors –- Dreyfus/BNY Mellon CIS, Federated Investors, Fidelity Investments, Fitch Ratings, J.P. Morgan Asset Management, S&P Global, First American Funds/US Bank, and Dechert -- for their support, and we look forward to seeing you in Boston in January. E-mail Pete Crane (pete@cranedata.com) for the latest brochure or visit www.moneyfunduniversity.com to register or for more details. Finally, Crane Data is also preparing the preliminary agendas for its next Bond Fund Symposium (March 22-23, 2018, at the Los Angeles Intercontinental), and our "big show," Money Fund Symposium, which will be held June 25-27, 2018, at the Pittsburgh Westin. We're also starting to make plans for next year's European Money Fund Symposium, which will be Sept. 21-22, 2018 at the London Tower Bridge Hilton.

The Investment Company Institute's latest "Money Market Fund Assets" report shows that overall money fund assets rebounded strongly in the latest week and Prime money market funds rose for the third week in a row. Prime MMFs have risen by $40.6 billion, or 9.3%, over the past 20 weeks, and they've risen by $86.3 billion, or 23.3%, year-to-date. ICI writes, "Total money market fund assets increased by $21.90 billion to $2.76 trillion for the six-day period ended Tuesday, November 21, the Investment Company Institute reported today. Among taxable money market funds, government funds increased by $18.63 billion and prime funds increased by $3.14 billion. Tax-exempt money market funds increased by $126 million." Total Government MMF assets, which include Treasury funds too, stand at $2.175 trillion (78.8% of all money funds), while Total Prime MMFs stand at $456.0 billion (16.5% of total MMFs). Tax Exempt MMFs total $129.3 billion, or 4.7%. They explain, "Assets of retail money market funds increased by $4.67 billion to $990.12 billion. Among retail funds, government money market fund assets increased by $3.43 billion to $601.11 billion, prime money market fund assets increased by $1.07 billion to $265.38 billion, and tax-exempt fund assets increased by $166 million to $123.64 billion." Retail assets account for over a third of total assets, or 35.9%, and Government Retail assets make up 60.7% of all Retail MMFs. ICI's release adds, "Assets of institutional money market funds increased by $17.23 billion to $1.77 trillion. Among institutional funds, government money market fund assets increased by $15.20 billion to $1.57 trillion, prime money market fund assets increased by $2.07 billion to $190.66 billion, and tax-exempt fund assets decreased by $40 million to $5.68 billion." Institutional assets account for 64.0% of all MMF assets, with Government Inst assets making up 88.9% of all Institutional MMFs.

Crane Data released its latest Weekly Money Fund Portfolio Holdings and its latest monthly Bond Fund Portfolio Holdings yesterday. Our new collection of securities held by bond mutual funds includes data on Ultra-Short and Conservative Ultra-Short bond funds, as well as Short-Term bonds. (Please let us know if you'd like to see our latest data set.) Our most recent weekly money fund holdings, which track a subset of our monthly Portfolio Holdings collection (with data as of Nov. 17), includes information from 70 money funds, representing $1.100 trillion of the $2.963 trillion (37.1%) in total money fund holdings tracked by Crane Data. (For our monthly Holdings recap, see our Nov. 13 News, "Nov. Money Fund Portfolio Holdings: Treasuries Jump Again, CDs Higher.) Our latest Weekly MFPH Composition summary shows Government assets continue to dominate the holdings list with Repurchase Agreements (Repo) totaling $420.0 billion, or 38.2%, Treasury debt totaling $358.4 billion or 32.6%, and Government Agency securities totaling $227.5 billion, or 20.7%. Commercial Paper (CP) totaled $33.9 billion, or 3.1%, and Certificates of Deposit (CDs) totaled $28.7 billion, or 2.6%. A total of $21.4 billion or 2.0%, was listed in the Other category (primarily Time Deposits), and VRDNs accounted for $10.5 billion, or 0.95%. The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $358.4 billion, Federal Home Loan Bank with $166.5 billion, BNP Paribas with $67.6 billion, Credit Agricole with $37.1 billion, Federal Farm Credit Bank with $31.3 billion, Societe Generale with $26.1 billion, Wells Fargo with $24.9 billion, Nomura with $24.5 billion, RBC with $23.7 billion, and Federal Home Loan Mortgage Co with $22.2 billion. The Ten Largest Funds tracked in our Weekly include: Fidelity Inv MM: Govt Port ($99.6B), Goldman Sachs FS Govt ($86.0B), BlackRock Lq FedFund ($83.0B), Wells Fargo Govt MMkt ($72.9B), Dreyfus Govt Cash Mgmt ($68.6B), BlackRock Lq T-Fund ($56.1B), State Street Inst US Govt ($50.4B), Goldman Sachs FS Trs Instruments ($45.2B), Morgan Stanley Inst Liq Govt ($43.2B), and Dreyfus Treas Sec Cash Mg ($33.2B).

A filing for the RBC U.S. Government Money Market Fund tells us that, "Effective immediately, RBC Select Class Shares and RBC Reserve Class Shares of the Fund are no longer offered and purchases of RBC Select Class Shares and RBC Reserve Class Shares will no longer be accepted. All references to RBC Select Class Shares and RBC Reserve Class Shares are hereby removed from the Prospectus and SAI. Supplement dated November 9, 2017 to the Fund's Prospectus and Statement of Additional Information ('SAI') dated January 9, 2017 (as may be supplemented from time to time). This Supplement provides additional information beyond that contained in the Prospectus and SAI and should be read in conjunction with the Prospectus and SAI." (For more recent closings and liquidations, see our Oct. 25 News, "Schwab Simplifies MMF Lineup, Lowers Minimums; Federated Muni Exits, our Sept. 18 News, "Fidelity, Dreyfus Merge Some Funds, Classes; MFI International Holdings, and a recent Dreyfus CA AMT Muni Cash Mgmt filing.) In other news, the U.S. Treasury's Office of Financial Research (OFR) updated its Money Market Fund Monitor with data as of Oct. 31, 2017.

A press release entitled, "ESMA publishes final report on Money Market Funds rules tells us, "The European Securities and Markets Authority (ESMA) has published a final report on the Money Market Funds Regulation (MMFR). The final report contains final versions of the technical advice, draft implementing technical standards (ITS), and guidelines on stress test scenarios carried out by MMF managers under the MMFR. The key requirements relate to asset liquidity and credit quality, the establishment of a reporting template and stress test scenarios carried out by MMF managers. These represent the detailed rules required for the implementation of the new European Union regulatory framework aimed at ensuring the stability and integrity of money market funds. The key requirements under the different policy tools include: Technical Advice - the liquidity and credit quality requirements applicable to assets received as part of a reverse repurchase agreement; the criteria for the validation of the credit quality assessment methodologies and the criteria for quantification of the credit risk and the relative risk of default of an issuer and of the instrument in which the MMF invests, as well as the criteria to establish qualitative indicators on the issuer of the instrument; Implementing Technical Standards - the development of a reporting template containing all the information managers of MMFs are required to send to the competent authority of the MMF, including on the characteristics, portfolio indicators, assets, and liabilities of the MMF. This information will be submitted to national competent authorities (NCAs) and then transmitted to ESMA; and, Guidelines - guidelines on common reference parameters of the scenarios to be included in the stress tests that managers of MMFs are required to conduct. This takes into account such factors as hypothetical changes in the level of liquidity of the assets held in the portfolio of the MMF, movements of interest rates and exchange rates or levels of redemption."

The Investment Company Institute's latest "Money Market Fund Assets" report shows that overall money fund assets dipped but that Prime money market funds rose for the second week in a row. Prime MMFs have risen by $37.5 billion, or 9.0%, over the past 19 weeks, and they've risen by $83.2 billion, or 22.5%, year-to-date. ICI writes, "Total money market fund assets decreased by $1.41 billion to $2.74 trillion for the week ended Wednesday, November 15, the Investment Company Institute reported today. Among taxable money market funds, government funds decreased by $4.81 billion and prime funds increased by $3.30 billion. Tax-exempt money market funds increased by $96 million." Total Government MMF assets, which include Treasury funds too, stand at $2.157 trillion (78.8% of all money funds), while Total Prime MMFs stand at $452.9 billion (16.5% of total MMFs). Tax Exempt MMFs total $129.2 billion, or 4.7%. They explain, "Assets of retail money market funds increased by $2.89 billion to $985.45 billion. Among retail funds, government money market fund assets increased by $2.11 billion to $597.67 billion, prime money market fund assets increased by $277 million to $264.31 billion, and tax-exempt fund assets increased by $497 million to $123.47 billion." Retail assets account for over a third of total assets, or 36.0%, and Government Retail assets make up 60.6% of all Retail MMFs. ICI's release adds, "Assets of institutional money market funds decreased by $4.29 billion to $1.75 trillion. Among institutional funds, government money market fund assets decreased by $6.92 billion to $1.56 trillion, prime money market fund assets increased by $3.03 billion to $188.59 billion, and tax-exempt fund assets decreased by $401 million to $5.72 billion." Institutional assets account for 64.0% of all MMF assets, with Government Inst assets making up 88.9% of all Institutional MMFs.

Mutual fund reporter ignites published the article, "Bill to Undo SEC's Money Fund Reforms Gathers Steam." It tells us, "A House bill that would undo the SEC's 2014 money market fund reforms has gained 53 co-sponsors since it was introduced six months ago. While most of the co-sponsors of The Consumer Financial Choice and Capital Markets Protection Act are Republicans, about 20 are Democrats. Rep. Keith Rothfus (R-Pa.) sponsored the proposed legislation, which would rescind the SEC rule that took effect last October and required institutional prime and municipal funds to use a floating net asset value. Such funds would be allowed to once again adopt a stable NAV, if desired, under the proposal. Earlier this month, a subcommittee of the House Financial Services Committee held a hearing on the bill, during which Investment Company Institute CEO Paul Schott Stevens testified that the trade group's members hold "strongly differing" views on it." The piece explains, "Some members believe it would "restore investor choice and increase low-cost financing in the capital markets for business and municipal issuers without amending Rule 2a-7," Stevens said. Others do not support the bill because "further changes run the risk of making the product more confusing and less attractive," he said. The ICI declined to take a position due to these different stances, he told lawmakers. Federated Investors appears to be the only asset manager that has lobbied for the bill, according to data compiled by the Center for Responsive Politics." Ignites notes, "The bill would also prohibit federal bailouts of money market funds. That provision may be part of what's hurting the bill's support in the industry, says Peter Crane, CEO of Crane Data. That sounds like a good idea, but the history of money market fund events has shown that bailouts are a good thing. After the Reserve Primary Fund broke the buck in September 2008, the Treasury said it would provide a backstop to money funds." (See our May 24 News, "Stable NAV Bill Re-Introduced in House; Amortized Cost for Inst Funds?")

BlackRock published a blog entry entitled, "Put Your Cash to Work." Fixed Income Product Strategist Karen Schenone writes, "Americans like cash. A lot. There is $2.7 trillion in money market funds alone, plus another $9.1 trillion in bank deposits, like checking accounts and certificate of deposits (CDs).... Americans have about 58% of their investable assets in cash or cash equivalents, based on our investor survey. They do so for a variety of reasons, and some of them make sense, like monthly expenses, emergencies and upcoming events. But when 11% of those surveyed say they 'just like to have it there,' the comfort associated with cash seems out of place. The survey shows also that about 20% of the cash is earmarked for investing purposes - either as 'dry powder' to invest later or as long-term savings. However, if you have a time horizon of greater than six months, chances are that cash money may work against you." The piece explains, "Here are two steps to start putting your cash to work. Step 1: Segment your cash needs. How much do you need for monthly expenses, emergencies or upcoming events? Keep that amount in cash equivalents, like a money market fund or FDIC insured bank deposit. Consider putting the remainder in the market. Step 2: Invest in a way that reflects who you are.... If you want to get your cash off the sidelines but aren't ready to commit to something long term, consider a short-term bond exchange-traded fund (ETF)." BlackRock's piece adds, "Short-term bonds tend to be less vulnerable to rising rates than longer-term bonds while typically providing a higher yield than cash. There's a variety of funds to choose from: iShares Floating Rate Note ETF (FLOT) and iShares Short Maturity Bond ETF (NEAR) hold investment grade floating and fixed rate bonds, respectively. For taxable accounts, investors can consider iShares Short Maturity Municipal Bond ETF (MEAR), whose income is generally exempt from federal income tax. These funds can be used to potentially add more income ... while helping you step out of cash and meet short- or long-term investment goals."

Citi Research published a piece entitled, "When the Disco Stops." It says, "Since the money market reform in 2016, the 2a7 community has been refinancing 50% of FHLBs debt via discount notes and FRNs. We expect two exogenous shocks in 2018 for short term markets - Fed normalization and bill supply. These could have implications for FHLBs issuance behavior next year. Given FHLBs central role in financial plumbing, we expect impact on a wide range of funding rates including CP, LIBOR and fed funds.... Upon bill issuance early next year, agency discos and FRNs are bound to cheapen up in tandem, which could reduce the margins for FHLBs." Author Steve Kang notes, "FHLB was a blessing only available for US banks (especially larger ones). The outbound foreign banks (such as the Japanese), who had dollar funding needs to escape limited domestic yields, had to rely on more flight-prone and LCR-unfriendly funding sources such as CD/CPs. As money market funds drained these deposits from foreign banks, XCCY and LIBOR basis widened, which would be a proxy for foreign funding rates. On the flip side, government funds received $1tn outflows of prime and took down large amount of GSE discount notes/FRNs as it offered nominal yield pickup over T-bills(3M tenor is currently offering -2bp yield pickup). As of now, 2a7 community is financing more than 50% of total FHLB debt ... and advances continue to increase. We now review the FHLBs role in term and o/n funding markets." See also, our `Nov. 2 News, "OFR Paper Examines MMF Reforms, Shift to Govt, Holdings of FHLB Debt.") In other news, The Federal Reserve Bank of New York again updated its "Reverse repo counterparties list. Their statement says, "Credit Suisse AG, New York Branch is no longer a reverse repo counterparty, effective November 13, 2017."

Wells Fargo Asset Management's latest "Portfolio Manager Commentary comments, "The Fed reported that the amount of commercial paper outstanding (not seasonally adjusted) rebounded this month from the usual quarter-end dip experienced in September. The total outstanding amount again topped $1 trillion after surpassing that mark at the end of August and falling back under at the end of September. Comparing October's outstandings to those at the end of August, nonfinancial paper and financial paper, both domestic and foreign, are up 3.8% and 1.8%, respectively. This increase in supply has been matched by a $12 billion increase in demand from prime institutional money fund assets during October (as reported by Crane Data) so that effect on rates has been neutral. Rather, rates have been driven higher, as evidenced by the change in LIBOR (London Interbank Offered Rate) levels, in anticipation of the Fed tightening in December. As the December 13 FOMC date rolled into the term of three months, the rate of yield increase accelerated, with benchmark three-month LIBOR rising 1 bp between August and September, compared with 5 bps during October. If three-month LIBOR lands again at 1.50% on December 13, like it got to 1.25% on June 14, the date of the last tightening, we believe there is the possibility of an increase of about 2 bps per week until the meeting." The update also comments, "The gradual pace of Fed tightening has enabled prime money market funds to opportunistically extend weighted average maturities (WAMs) and weighted average lives (WALs) to take advantage of what yield pickup there is from extension out the curve. While the average maturity for institutional prime funds has hovered in the mid-20s for the past several months, our funds' WAMs have been slightly lower at around 20 days recently (with WALs closer to 60 days) in an effort to maintain increased amounts of liquidity and to be in a position to more quickly capture the effects of future rate hikes. In this environment we continue to construct what we believe are high-quality portfolios that are focused on liquidity while opportunistically purchasing floating-rate notes to incrementally increase yields." Wells' piece adds, "Yields in the municipal money market space remained steady during October as moderate asset growth in municipal money market fund assets fostered support for the short end of the curve. In the overnight sector, yields on variable-rate demand notes (VRDNs) and tender option bonds (TOBs) followed typical reinvestment demand patterns, resetting in a narrow band between 0.85% and 0.95% during the month. In the weekly sector, the Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Index fell slightly from the multiyear high of 0.94% reached on September 27 but remained in a comfortable range of 0.91% to 0.92% for the month.... Despite the modest increase in rates on the long end, the municipal money market yield curve remains flat on a relative basis versus taxable securities."

The Investment Company Institute's latest "Money Market Fund Assets" report shows that Prime money market funds rebounded strongly after dipping for two weeks in a row. They've still risen by $79.9 billion, or 21.7%, year-to-date. ICI writes, "Total money market fund assets increased by $10.56 billion to $2.74 trillion for the week ended Wednesday, November 8, the Investment Company Institute reported today. Among taxable money market funds, government funds increased by $4.17 billion and prime funds increased by $5.59 billion. Tax-exempt money market funds increased by $794 million." Total Government MMF assets, which include Treasury funds too, stand at $2.162 trillion (78.9% of a1l money funds), while Total Prime MMFs stand at $449.6 billion (16.4%). Tax Exempt MMFs total $129.1 billion, or 4.7%. They explain, "Assets of retail money market funds increased by $917 million to $982.65 billion. Among retail funds, government money market fund assets decreased by $692 million to $595.65 billion, prime money market fund assets increased by $713 million to $264.03 billion, and tax-exempt fund assets increased by $897 million to $122.97 billion." Retail assets account for over a third of total assets, or 35.9%, and Government Retail assets make up 60.6% of all Retail MMFs. ICI's release adds, "Assets of institutional money market funds increased by $9.64 billion to $1.76 trillion. Among institutional funds, government money market fund assets increased by $4.86 billion to $1.57 trillion, prime money market fund assets increased by $4.88 billion to $185.56 billion, and tax-exempt fund assets decreased by $103 million to $6.12 billion." Institutional assets account for 64.1% of all MMF assets, with Government Inst assets making up 89.1% of all Institutional MMFs.

RBC Capital Markets Michael Cloherty sent out a bulletin yesterday, entitled, "US Interest Rate Focus LIBOR: Beyond the ARRC Conference." He says, "The Alternative Rates Reference Committee released a very aggressive timeline for moving from LIBOR to SOFR. The scramble is due to LIBOR's reliance on volunteers. Individual benefits from volunteering are minimal, but the communal benefits of having LIBOR have allowed $160T of USD exposure to develop. However, volunteering entails individual risks that have become obvious in recent years, particularly as underlying reference transactions become rare. The FCA can force banks to remain on the LIBOR panel for a maximum of two years. To ensure that LIBOR exists for longer, the FCA agreed to relinquish that authority if panel banks keep contributing through Q4 2021. Some believe that banks will remain on the LIBOR panel because the costs of replacing LIBOR are massive. Many large banks are not on the LIBOR panel, and they face the same choice as panel banks: they could join the panel to reduce the risk that LIBOR disappears. If banks are willing to absorb this risk to ensure LIBOR survival, these non-panel banks should be scrambling to join the panel. Instead, it seems individual incentives differ so dramatically from the communal incentives that LIBOR beyond 2021 is highly uncertain." In other news, The Federal Reserve Bank of New York recently updated its "Reverse repo counterparties list. A statement says, "Active Assets Government Trust, managed by Morgan Stanley Investment Management Inc., has been added to the list of reverse repo counterparties, effective November 6, 2017."

Crane Data continues preparations for its "basic training" event, Money Fund University, which will take place January 18-19, 2018 at the Boston Hyatt Regency. Crane's Money Fund University is designed for those new to the money market fund industry or those in need of a concentrated refresher on the basics. The event also covers hot topics like money market regulations, money fund alternatives, offshore markets, and other recent industry trends. The affordable ($500) educational conference (see the latest agenda here or e-mail us to request our brochure) features a faculty of the money fund industry's top lawyers, strategists, and portfolio managers. Money Fund University offers attendees a 2-day course on money market mutual funds, educating attendees on the history of money funds, the Fed, interest rates, ratings, rankings, money market instruments such as commercial paper, CDs and repo, plus portfolio construction and credit analysis. We will also take a look at pending European money market fund regulations, and ultra-short bond funds and money fund alternatives. New portfolio managers, analysts, investors, issuers, service providers, and anyone interested in expanding their knowledge of "cash" investing should benefit from our comprehensive program. Even experienced professionals may enjoy a refresher course and the opportunity to interact with peers in an informal setting. Attendee registration for Crane's Money Fund University is just $500, exhibit space is $2,000, and sponsorship opportunities are $3K, $4K, and $5K. A block of rooms has been reserved at the Hyatt Regency Boston. We'd like to thank our past and pending MFU sponsors -- INTL FCStone, Fitch Ratings, Dreyfus/BNY Mellon CIS, BlackRock, J.P. Morgan Asset Management, S&P Global Ratings, Dechert LLP, Fidelity, Federated, SSGA, First American Funds/US Bank, and J.M. Lummis -- for their support, and we look forward to seeing you in Boston in January. Crane Data is also preparing the preliminary agendas for its next Bond Fund Symposium (March 22-23, 2018, at the Los Angeles Intercontinental), and our "big show," Money Fund Symposium, which will be held June 25-27, 2018, at the Pittsburgh Westin.

We learned from Strategic Insight's SimFundFiling that Fidelity Investments has filed (a N1-A new fund registration) to launch an institutional municipal money market fund, Fidelity SAI Municipal Money Market. They write that the new fund "will have a floating NAV and will be offered exclusively to certain clients of the advisor or its affiliates." (SAI stands for Strategic Advisers, Inc.) The filing says of the fund's "Investment Objective," "The fund seeks as high a level of interest income exempt from federal income tax as is consistent with liquidity and stability of principal." The fund's "Principal Investment Strategies" include: "Normally investing in municipal money market securities; Normally investing at least 80% of assets in municipal securities whose interest is exempt from federal income tax; Potentially investing up to 20% of assets in securities subject to state and/or federal income tax; Potentially investing more than 25% of total assets in municipal securities that finance similar types of projects; and, Investing in compliance with industry-standard regulatory requirements for money market funds for the quality, maturity, liquidity, and diversification of investments." They add, "Although the fund is a money market fund, it will price and transact at a "floating" net asset value (NAV) that will fluctuate based on changes in the value of the fund's investments." Currently, Crane Data tracks just 11 Tax Exempt Institutional money fund portfolios (23 counting all share classes) run by just 10 managers totaling $10.1 billion. (Fidelity has two, but these are available internally only to other Fidelity mutual funds. See our December 2015 Money Fund Intelligence article, "Tax Exempt MFs Hit; Will Any Go Inst?" for more.)

Global Capital's writes, "Slight growth in US prime money market funds not yet significant." It says, "Flexible investors are returning small amounts of money into prime funds after the mass exodus experienced after money fund reform, according to Moody's report. However, a managing director at Barclays believes this is not yet a significant trend. At the moment, some of the more flexible investors have been migrating a little bit of their cash into prime funds, said Joe Abate, managing director, fixed income research at Barclays. However, despite the suggestion by Moody's of significant growth, Abate remains skeptical. At the moment, there isn't a big yield differential between prime and the government market, said Abate.... Some of what is going on is that the investor base which would normally be in a prime fund, and who shifted into government only funds following money fund reform, may now be coming back in. However, he sees this as a slow process: To get approval to invest in a prime fund takes time.... He therefore advised against putting too much stock in recent reports of an increase in prime funds, as the result depends on how much data are measured."

The Investment Company Institute's latest "Money Market Fund Assets" report shows that Prime money market funds dipped for their second week in a row, but they've still risen by $74.3 billion, or 20.1%, year-to-date. ICI writes, "Total money market fund assets decreased by $17.90 billion to $2.73 trillion for the week ended Wednesday, November 1st, the Investment Company Institute reported today. Among taxable money market funds, government funds decreased by $16.31 billion and prime funds decreased by $1.36 billion. Tax-exempt money market funds increased by $219 million." Total Government MMF assets, which include Treasury funds too, stand at $2.157 trillion (79.1% of all money funds), while Total Prime MMFs stand at $444.0 billion (16.3%). Tax Exempt MMFs total $128.3 billion, or 4.7%. They explain, "Assets of retail money market funds increased by $642 million to $981.74 billion. Among retail funds, government money market fund assets increased by $493 million to $596.34 billion, prime money market fund assets increased by $1.06 billion to $263.32 billion, and tax-exempt fund assets decreased by $78 million to $122.08 billion." Retail assets account for over a third of total assets, or 36.0%, and Government Retail assets make up 60.7% of all Retail MMFs. ICI's release adds, "Assets of institutional money market funds decreased by $18.54 billion to $1.75 trillion. Among institutional funds, government money market fund assets decreased by $15.82 billion to $1.56 trillion, prime money market fund assets decreased by $2.42 billion to $180.68 billion, and tax-exempt fund assets decreased by $297 million to $6.22 billion." Institutional assets account for 64.0% of all MMF assets, with Government Inst assets making up 89.3% of all Institutional MMFs. Note that money fund assets normally drop on weeks including a month-end or tax payment date.

The Association For Finance Professionals' latest "AFP Corporate Cash Indicators for October 2017" says, "During the third quarter, U.S. businesses accumulated cash and short‐term investment holdings at a significant pace. The quarter‐over‐quarter index increased 9 points to plus 25, and the year‐over‐year indicator increased by two points to plus 20. These readings signal deep skepticism about the economy and significant caution among treasury and finance professionals. Entering the third quarter, organizations indicated they would accumulate cash, which they did, but once again did so at a much higher rate than anticipated. This is the highest reading for this index observed since the first time the data was collected in January 2011. This group anticipates cash accumulation will continue to accelerate through fourth quarter; the forward looking indicator measuring expectations for changes in cash holdings in the current quarter increased five points from a reading of plus 8 to plus 13. 42 percent of organizations held larger cash and short‐term investment balances at the end of Q3 2017 than they did at the end of Q2 2017, while 17 percent reduced cash holdings in the past three months.... 31 percent of organizations anticipate expanding cash and short‐term investment balances over the next three months, while 18 percent plan to reduce these balances." See also, the Federal Reserve's latest FOMC Statement.

WSJ.com writes about rising bank rates again in "A Surprising Shakeout Among Banks as Rates Rise." Subtitled, "Ordinary giants like Bank of America are slower to raise deposit rates, but this time is different," the article explains, "When the Federal Reserve began raising interest rates, every bank was a winner. As the Fed prepares for its fifth rate boost, some banks are benefiting more than others. When rates start to rise, banks are typically in no rush to raise their deposit rates. After several increases, banks have to pay out more to depositors or risk seeing them leave in search of higher yields. We have hit that point now, but it is playing out in a surprising way, according to analysts at Keefe, Bruyette & Woods. So far this year, the average cost of interest-bearing deposits at big banks like Bank of America and J.P. Morgan Chase has gone up by 0.18 percentage point, compared with a 0.10 increase at large regional lenders like SunTrust Banks, KBW calculates.... Ordinarily giants like Bank of America are slower to raise rates, thanks to their strong brand and market positions. The difference this time is these banks have been pushing to serve wealthier clients who are more likely to move money around in search of higher yields.... Bank-deposit costs may get more in sync as rates keep going higher, but for now investors need to focus on the differences." (See also, our Oct. 25 Link of the Day, "Banks Pay Up on Deposits Says WSJ.")