A press release entitled, "Ovata Capital Optimizes Cash Management with Hazeltree," tell us, "Hazeltree, a leading provider of treasury solutions, today announced the successful onboarding of Ovata Capital Management, a Hong Kong-​based hedge fund manager. Ovata is leveraging Hazeltree Cash Manager which is fully integrated with BNY Mellon'​s Liquidity DIRECT, an industry-​leading multi-​currency investment platform that enables clients to harness BNY Mellon'​s full suite of cash, treasury, collateral, financing, trading and custody services. The combined BNY Mellon-​Hazeltree solution helps Ovata streamline cash management processes and reduce counterparty and operational risks while improving liquidity and yield. Ovata Capital chose Hazeltree Cash Manager for its proven ability to easily aggregate and centralize cash balances across global counterparties; optimize cash usage and maximize yield while minimizing currency exposure; and seamlessly automate cash movements with Hazeltree'​s OneClick Post to its fully integrated wire management system." Nicholas Bloom, Ovata Capital'​s COO, comments, "As we launched our fund, we were impressed with Hazeltree'​s smooth and fast implementation process, its knowledgeable team, and the tight integration with BNY Mellon Liquidity DIRECT." Jonathan Spirgel, Head of Global Liquidity and Segregation Services at BNY Mellon Markets, adds, "We are pleased to offer Ovata our integrated solution which efficiently manages cash needs while investing balances to improve performance."

Citi Research writes "​Corporate cash unleashed?" in its latest "Short-​End Notes." Author Steve Kang comments, "With $​1.​5tn cash coming in on-​shore, investors have been asking the impact of repatriation on the front-​end rates. Weighing out both supply and demand factors for CPs, we expect a small tightening pressure on FRA/​OIS on this. On net however, we continue to expect FRA/​OIS to widen on the back of the reserve drainage. We also discuss the recent widening pressure on O/​N fed funds and other widening catalysts for the rest of this year." Citi'​s piece explains, "As of the beginning of this year, roughly $​1.​5tn offshore cash sitting overseas was "​deemed" repatriated. Investors have been asking the net impact of this on LIBOR/​CD/​CP rates. Though uncertainty remains, we expect a 2-​3bp richening in CD/​CP/​LIBOR against OIS and a bull steepening of the CP credit curve. These cash rich companies tend to have CD/​CPs both on their asset side and the liability side. On asset side, we expect an increase in front-​end and cash space in order to maintain flexibility for usage. On the liability side, we expect a decrease in non-​financial CD/​CPs as these tech companies redeem.... We expect a sizable paydown of CPs. These instruments are usually issued for cash management reasons thus flood of offshore cash would make rapidly maturing CD/​CPs a natural area to redeem, in our view.... Top 5 cash holders have majority of their portfolio is held at 1-​5y UST/​corp bonds and maintains 10%-​15% of their assets in cash-​cash like products like CD/​CP/​MMF/​Bills for liquidity purposes.... Extrapolating this to $​1.​5tn estimates, we roughly estimate $​150bn invested in CD/​CP/​MMF/​Bills." Finally, Citi adds, "We see three course of action for the tech companies – they can decrease their cash holdings as they use them OR increase their cash holdings to maintain flexibility for any near-​term usage OR keep it the same until the strategic review is done. We think the second and third scenario is more likely – increasing the cash-​like investments by 5% would increase the demand for CD/​CPs by [​approximately] $​25bn."

A press release entitled, "Fitch Assigns First-​Time Rating to Colorado Core LGIP" says, "Fitch Ratings has assigned an '​AAAf/​S1' International Fund Credit Quality Rating (​FCQR) and Fund Market Risk Sensitivity Rating to the Colorado Core Fund. The fund is offered by Colorado Surplus Asset Fund Trust (​CSAFE). Morgan Stanley Consulting Group, acting through its Zephyr Group, serves as investment advisor. The Colorado Core Fund is an ultra-​short-​duration local government investment pool (​LGIP) which seeks current income with the additional objective of capital preservation and liquidity. The fund calculates and publishes its shadow NAV daily using third-​party supplied, marked-​to-​market pricing. The fund rounds up its shadow NAV at two decimal places for the determination of transactional share price. The fund seeks to maintain a constant $​2.​00 transactional share price. Should its shadow NAV breach $​1.​995, the board may authorize the reduction and capitalization of interest income. The board may declare a breach of stable value should the fund'​s shadow NAV fall below $​1.​990 per share. The ratings assigned to the fund do not specifically address the ability of the manager to maintain a constant NAV. The fund is expected to be open to investors beginning early February 2018. Fitch'​s quantitative analysis was based on the fund'​s stated strategy and limitations, discussions with management, and expected portfolio composition."

Federated Investors, the 5th largest manager of money funds, released its Fourth Quarter Earnings late Thursday and hosts its latest Earnings Conference Call on Friday morning at 9:​00 a.​m Eastern. (​Watch for more from the earnings call in our News for Monday.) The release says, "Federated'​s money market assets were $​265.​2 billion at Dec. 31, 2017, up $​13.​0 billion or 5 percent from $​252.​2 billion at Dec. 31, 2016 and up $​21.​4 billion or 9 percent from $​243.​8 billion at Sept. 30, 2017. Money market mutual fund assets were $​185.​5 billion at Dec. 31, 2017, down $​20.​9 billion or 10 percent from $​206.​4 billion at Dec. 31, 2016 and up $​7.​6 billion or 4 percent from $​177.​9 billion at Sept. 30, 2017. Since Dec. 31, 2016, approximately $​21 billion in money market assets have transitioned from Federated funds to Federated separate accounts. Federated'​s money market separate account assets were $​79.​7 billion at Dec. 31, 2017, up $​33.​9 billion or 74 percent from $​45.​8 billion at Dec. 31, 2016 and up $​13.​7 billion or 21 percent from $​66.​0 billion at Sept. 30, 2017." The release adds, "Revenue decreased by $​11.​6 million or 4 percent primarily due to a change in a customer relationship and a change in the mix of average money market assets. The decrease in revenue was partially offset by a decrease in voluntary fee waivers related to certain money market funds in order for those funds to maintain positive or zero net yields (​voluntary yield-​related fee waivers) and an increase in revenue from higher average equity and fixed-​income assets. During Q4 2017, Federated derived 60 percent of its revenue from equity and fixed-​income assets (​43 percent from equity assets and 17 percent from fixed-​income assets) and 40 percent from money market assets.... Federated will host an earnings conference call at 9 a.​m. Eastern on Jan. 26, 2018. Investors are invited to listen to Federated'​s earnings teleconference by calling 877-​407-​0782."

First American Funds Jeff Plotnik wrote recently on, "The Dynamics of Quarter-​End Investing for Money Market Funds." He tells us, "If you are a frequent investor in money market funds, you may have noticed that making large deposits over quarter-​end periods can sometimes be a challenge. That challenge is a result of decreased supply from broker/​dealers and issuers of overnight investment products, combined with increased demand from money market fund managers and short-​term investors for those same investments. Those dynamics are the result of a stringent regulatory environment for many of the industry'​s issuers. Quarter ends are a key financial reporting date for banks, broker/​dealers and issuers of overnight investment products. Reported financial statements represent an overview of a company'​s financial health at quarter end. Firms manage their balance sheets to enhance certain capital/​leverage ratios and other key financial metrics that the regulators and the general public analyze to determine their financial strength. Ultimately, the exercise of quarter-​end balance sheet management will limit the short-​term investment options that money market fund managers utilize on a day-​to-​day basis. The quarter end dates that are significant for money market fund investing are the last business days of March, June, September and December, with June and December being the most challenging."

Charles Schwab Corporation'​s earnings release, entitled, "Schwab Fourth Quarter Net Income of $​597 Million Caps Record Year," as usual, briefly mentions money market funds and cash. It quotes CFO Peter Crawford, "Schwab'​s record 2017 financial results demonstrate the power of our financial formula working as designed: our robust business growth supported strong revenue growth through multiple sources.... We turned this growth into a 15% lift in revenues through record contributions from our two largest revenue sources. Net interest revenue rose 29% to $​4.​3 billion due to rising interest rates as well as growing client cash balances. Asset management and administration fees reached a record $​3.​4 billion, up 11% from 2016, driven by growing balances in advised solutions, mutual funds, and ETFs.... Effective balance sheet management remains core to supporting our success and our 2017 return on equity was 15%, the highest since 2009. Throughout last year, we were mindful of approaching the $​250 billion consolidated asset threshold and the related implications for heightened regulatory requirements. As we aimed for crossing the threshold in 2018, we limited bulk transfers of sweep balances from money market funds to Schwab Bank – which help us more effectively optimize the spread earned on client cash – to $​2.​0 billion, including approximately $​1.​1 billion in the fourth quarter. We also transferred $​2.​9 billion of Schwab One sweep balances, which were already on our balance sheet, to the Bank, including $​400 million in the fourth quarter. Another part of managing our approach to $​250 billion involved the utilization of Federal Home Loan Bank advances to provide temporary funding for Bank portfolio investments that will eventually be supported by bulk transfers. These borrowings, which totaled $​15 billion at year-​end, enabled us to strengthen net interest revenue by getting a head-​start on anticipated 2018 bulk transfers while controlling our approach to the threshold." Schwab'​s earnings showed zero "​fee waivers" for the 4th quarter of 2017 vs. $​31 million in 2016, and waivers of $​10 million in 2017 vs. waivers of $​224 million in 2016. Asset management and admin fees totaled $​863 million in Q4 vs. $​801 million the last quarter of 2016, and they totaled $​3.​392 billion in 2017 vs. $​3.​055 billion in 2016.

Capital Advisors writes "Central Bank Tightening, Tax Reform and Event Risk: Three Trends to Watch in 2018." They comment, "At the start of each year, we typically name three broad market trends or events that could potentially have the greatest impact on the short-​term debt market. For 2018, we think central bank tightening, tax reform and event risk will have the most impact on short-​term debt markets. We are generally sanguine about the interest rate and credit spread outlook. What is less clear is how investors will manage a market reversal. We think the demand for institutional cash portfolios to "​self-​insure" against liquidity events has increased. Treasury professionals should focus on risk diversification and liquidity stratification.... 2017 turned out to be an unexpectedly blissful year by some standards. A political novice occupying the White House did not lead to the financial market volatility many had predicted, in spite of his unconventional communication style. Britain will leave the European Union, but no other country followed suit. The debt ceiling came and went… and came again, but Treasury issuances were well received. Headline news was dotted with reports of partisan politics, slowing growth in China, terrorism, asset bubbles and rising corporate leverage. Nevertheless, risk assets, interest rates and market liquidity all seem to have held up well." The piece adds, "The closely-​watched repatriation tax law will subject foreign profits accumulated from 1986 to 2017 to a one-​time tax of 15.​5% for cash and liquid assets and 8.​0% for illiquid assets, higher than the initial Senate plan of 10% and 5%, respectively. Companies can either make payments immediately or defer them over a multi-​year period. On the tax front, the estimated $​2.​6 trillion total offshore profits may translate into tax bills of $​208-​390 billion. How companies pay these bills will influence their liquidity management and financing decisions, and by extension, debt supply and demand dynamics across global markets. While the full impact of cash reshuffling on a grand scale will take years to materialize, we have already observed some cash investors putting their investment decisions on hold pending strategic review."

Bloomberg writes "​House Panel Backs Bill to Scrap Floating Prices for Money Funds". The article explains, "The House Financial Services Committee has advanced a bill that would eliminate some of the strictures placed on the $​2.​8 trillion money market mutual fund industry in the wake of the financial crisis. The legislation, which was opposed by Fidelity Investments, Vanguard Group., BlackRock Inc. and other major asset managers, would repeal a 2014 requirement that the riskiest funds allow their share prices to float, rather than maintain a stable $​1 value. The panel'​s action clears the way for a House vote on the measure. Representative Keith Rothfus, a Pennsylvania Republican who sponsored the legislation, said it aims to fix a "​misguided Securities and Exchange Commission rule" that has disrupted markets and also caused municipal borrowing costs to rise. He said more than 60 lawmakers, both Democrats and Republicans, were co-​sponsors of the bill. While the prospects for passage in the Senate are dim, the 34-​21 committee vote is a victory for Federated Investors Inc., which has a large money fund business and has been fighting the SEC regulation for years. The Pittsburgh-​based firm joined with state treasurers, pension funds and other businesses to form the Coalition for Investor Choice to lobby for the bill." The piece adds, "​Other fund companies disputed the group’​s contention that the SEC rule was responsible for increased borrowing costs for cities and towns. In a paper distributed on Capitol Hill, Vanguard attributed the rise to the Federal Reserve'​s decision to boost interest rates. "​The coincidental timing of these increases and of money market reform has led to misidentification of the true causation of higher municipal yields," Vanguard wrote." (​See also our Jan. 18 News, "More Opposition to and Coverage of Stable NAV Bill; Bank Group Balks.")

Money fund assets declined slightly for the third week in a row, though Prime MMFs were roughly flat and Tax Exempt MMFs rose, according to the Investment Company Institute'​s latest "Money Market Fund Assets" report. ICI writes, "Total money market fund assets decreased by $​20.​12 billion to $​2.​82 trillion for the week ended Wednesday, January 17, the Investment Company Institute reported today. Among taxable money market funds, government funds decreased by $​21.​41 billion and prime funds decreased by $​112 million. Tax-​exempt money market funds increased by $​1.​40 billion." Total Government MMF assets, which include Treasury funds too, stand at $​2.​217 trillion (​78.​7% of all money funds), while Total Prime MMFs stand at $​462.​2 billion (​16.​4%). Tax Exempt MMFs total $​137.​2 billion, or 4.​9%. ICI explains, "Assets of retail money market funds decreased by $​2.​99 billion to $​1.​00 trillion. Among retail funds, government money market fund assets decreased by $​3.​48 billion to $​607.​21 billion, prime money market fund assets decreased by $​1.​04 billion to $​265.​11 billion, and tax-​exempt fund assets increased by $​1.​53 billion to $​130.​90 billion." Retail assets account for over a third of total assets, or 35.​6%, and Government Retail assets make up 60.​5% of all Retail MMFs. Their release adds, "Assets of institutional money market funds decreased by $​17.​13 billion to $​1.​81 trillion. Among institutional funds, government money market fund assets decreased by $​17.​93 billion to $​1.​61 trillion, prime money market fund assets increased by $​930 million to $​197.​12 billion, and tax-​exempt fund assets decreased by $​128 million to $​6.​25 billion." Institutional assets account for 64.​4% of all MMF assets, with Government Inst assets making up 88.​8% of all Institutional MMFs.

Fitch Ratings published a brief entitled, "French Money Market Funds in the Spotlight: Structural Differences Highlighted," which comments, "French money market funds (​MMFs) are all Variable Net Asset Value (​VNAV), which makes France the largest market in Europe for VNAV funds; 85% of French funds are standard MMFs, thereby located at the riskier end of the MMF spectrum in Europe.... Managers of French MMFs tend to use a wider range of instruments than their European peers. For instance, interest rate swaps are used to adjust the maturity profile of the funds. Some French MMFs buy assets denominated in foreign currency and hedge the exposure with forwards, as yield enhancement strategy." The update explains, "There has been a shift in assets under management (​AUM) from Short-​term MMFs to Standard MMFs in France, since mid-​2012 and the start of ECB'​s accommodative monetary policy. Standard MMFs AUM plateaued in 2017, following yields of Standard MMFs entering negative territory in summer 2016. Flow patterns show that French MMFs investors are typically more yield sensitive than other European investors." Finally, the piece adds, "Both short-​term and standard French MMFs now generate negative yields, albeit still above benchmarks. French Standard MMFs have outperformed Short-​term MMFs by a consistent margin over time, thanks to a combination of higher credit, market and liquidity risk. Higher liquidity levels expected on MMFs post-​regulatory reform will increase pressure on yields and may contribute to make Standard MMFs less attractive.... The Autorite des Marches Financiers (​AMF) defines all MMFs as cash & cash equivalent investments. This level of clarity in treatment is absent in other European jurisdictions. The AMF also allows some bond funds to be considered cash & cash equivalent, which may lead to flows out of Standard MMFs into these funds over time driven by yield differential.... French MMFs will be less affected than their peers by the changes in asset valuations and NAV calculations brought by MMF reform. The absence of constant net asset value (​CNAV) funds in France makes the transition more straightforward."

BlackRock Q4 Earnings Conference Call featured a couple of mentions of money funds and the recent acquisition of Cachematrix (​see our June 28 News, "BlackRock to Acquire Money Fund Trading Portal Tech Firm Cachematrix. (​See the Seeking Alpha transcript here.) On the call, CFO Gary Shedlin says, "We accelerated the expansion of our technology portfolio during 2017 with the acquisition of Cachematrix and minority investments in iCapital and Scalable Capital. Our investments in technology and data will enhance our ability to generate alpha and more efficiently serve clients, resulting in growth in both base fees and technology revenue." He adds, "Finally, BlackRock'​s cash management platform saw $​38 billion of net inflows or 9% organic growth for the year, reflecting continued market share gains and several large wins. The strong growth in cash management also reflects successful identification and integration of acquisitions to strengthen our platform and leverage our scale.... During 2017, our differentiated platform delivered 7% long-​term organic base fee growth, 9% organic asset growth in our cash platform, and 14% growth in our technology and risk management revenue." During the Q&​A, CEO Larry Fink commented, "​So I don'​t want to suggest it'​s one thing, but it'​s a multitude of all the things that we'​ve been investing in, working in, investing in that is creating a better, deeper or consistent dialog with more financial advisors. You mentioned Cachematrix. That'​s not a delivery system for ETFs, but it is a very strong delivery system for us to connect with banks and the bank channels for them to drive more cash and money market types of products into the BlackRock platform, and that'​s one of the reasons why we had accelerated growth in our cash management platform in 2017. And we expect a furthering of opportunities in our cash management business."

This weekend, Barron'​s features a "​Fund of Information" article, entitled, "Active Funds' Kings of Cash," contains a segment on money market funds. Reshma Kapadia writes, "[​M]​eager yields in short-​term bond funds and on cash ... have pushed investors further afield in their quest for income.... Investors have used short-​term bond funds to park cash, but money intended as dry powder for a market correction or needed within a year should be in more liquid options, such as money market funds, which are emerging from a decade-​long funk during which they paid next to nothing. The Fed'​s initial interest-​rate hikes didn'​t filter through to all money funds, in part because some firms were still recouping fees they had waived to keep yields positive.... But now, most of those fee waivers are gone, and the average yields for the 100 largest money-​market funds tracked by research firm Crane Data is 1.​12% and rising, versus just 0.​43% at the end of 2016. "​Nothing is worth doing unless you get at least 1% out if the shift," says Crane Data'​s Pete Crane. And that tipping point is here, with the yield expected to hit 1.​5% as the Fed raises rates further this year. As if often the case, some of the highest yields are in the institutional share classes, which can be accessible through advisors, but require higher minimum investments. Crane'​s retail picks include: Vanguard Federal Money Market (​VMFXX), which yields 1.​24%, Fidelity Government Cash Reserves (​FDRXX), 0.​99%, and Schwab Investor Money (​SWRXX), 1.​19%."

Wells Fargo Asset Management writes in its latest "Portfolio Manager Commentary" about the major themes of 2017. Authors Jeff Weaver, Laurie White, et. al. tell us, "​As prime funds entered 2017, their managers were still assessing the impact of the implementation of new money market regulations in October 2016, which had ultimately spurred a sector rotation of roughly $​1.​1 trillion out of prime and municipal funds and into government funds. As assets stabilized and managers could get back to managing, two themes dominated our year: rate movements by the Fed and asset growth in the prime sector.... For prime institutional money market funds, assets under management (​AUM) began 2017 at roughly $​120 billion and finished 2017 at $​322 billion! With relatively stable net asset values (​NAVs) and an attractive yield pickup over government funds, investors seem to be re-​examining the benefits of prime funds. Our prime fund'​s holdings had a weighted average life (​WAL) of roughly 20 days at year-​end 2016 and the WALs increased to roughly 60 days by year-​end 2017. In the post-​reform environment, we have continued to manage our prime funds with the same conservative discipline as before reforms, adhering to a philosophy of constructing a diversified portfolio of high-​quality, liquid assets to meet our clients' liquidity needs while offering an attractive risk-​adjusted yield." On Municipal funds (​and the recent yield spike), Wells adds, "Negative market sentiment carried over into the month of December, as the market was forced to contend with a perfect storm of record municipal supply, a looming FOMC rate hike, and abbreviated holiday trading sessions. While the final tax-​reform bill ultimately turned out to be less onerous than feared, the municipal bond-​making apparatus had already been set in motion. Ultimately, the total municipal volume for the month of December rose to a record $​62.​5 billion, up from $​20.​8 billion during the same time in 2016. Yields on overnight and weekly VRDNs and TOBs rapidly rose as the municipal market rapidly adjusted to accommodate burgeoning supply. SIFMA rose to a staggering 1.​71%, or 115% of 1-​week LIBOR, while yields on one year high-​grade notes reached a high of 1.​46% to finish out the year."

Website LiveMint writes, "Paytm launches investment arm, to invest $​10 million," which discusses the potential launch of a new money market fund in India. It says, "Paytm, run by One97 Communications Ltd, has set up a new entity called Paytm Money Ltd that will offer investment and wealth management products and will invest close to $​10 million upfront in the new entity. Paytm Money is the fourth product from One97'​s stable after Paytm Mall, Paytm Payments Bank and Paytm wallet; it will be available as a separate mobile application to users, said Vijay Shekhar Sharma, founder of One97 Communications. Paytm could also end up creating a money market fund in the long term just like Ant Financial in China, said Sharma. Alibaba'​s four-​year-​old Yu'​e Bao Fund is one of the biggest money market funds in the world." The piece adds, "Paytm, which also has a payment bank, could make money through the deposits customers keep in their wealth management accounts. Experts have raised concerns over the business model of payments banks and how it would be difficult for these banks to make money as they are not allowed to lend. Synergies between Paytm Money and bank could help solve that problem for Paytm. Paytm Money is in the process of seeking approval from the Securities and Exchange Board of India (​Sebi) to act as an investment advisor. To start with, it may offer mutual fund products to users.... Paytm counts SoftBank Group Corp., SAIF Partners, Alibaba Holding Ltd and Ant Financial Services Group as its investors."

Acacia Asset Management LLC filed new fund registrations for Acacia 10:​30am US Government 1-​Day Overnight Term Repo ETF and Acacia 10:​30am US Government 7-​Day Maximum Term Repo ETF." The principal investment strategy says, "The Fund seeks to achieve its investment objective by investing, by 10:​30 am ET each Business Day, on a daily basis, in repurchase agreements ("​Repos") with overnight maturity ("​overnight repos") that are fully collateralized by U.​S. Government Securities. Under normal market conditions, the Fund will invest at least 80% of the value of its net assets in overnight repos that are fully collateralized by U.​S. Government Securities. The Adviser deems an overnight repo to be "​fully collateralized" only if the Fund receives from its Financing Counterparty, for maintenance in the Fund'​s custody account(​s), U.​S. Government Securities or cash instruments ("​Collateral") having a market value equal to or greater than the Resale Price. The Adviser defines "​U.​S. Government Securities" as: Bills, bonds and notes that are under 10 years in maturity, and issued and guaranteed by the U.​S. Treasury ("​Treasuries"); Securities issued by any department, agency, instrumentality or establishment of the U.​S. government, which are guaranteed by the U.​S. government ("​Guaranteed Agency Securities"); Securities issued by any department, agency, instrumentality, establishment or Government Sponsored Entity ("​GSE") of the U.​S. government ("​Agency Securities"); and Mortgage-​backed securities, including trust receipts, fixed and adjustable rate pass-​throughs and strips, issued or guaranteed by the Federal National Mortgage Corporation, the Government National Mortgage Association or the Federal Home Loan Mortgage Corporation ("​Agency MBS")." It adds, "`​On any day the Fund has excess cash, the Fund may invest all or a portion of such excess cash in short duration fixed income exchange-​traded funds ("​ETFs") and money market funds that invest principally in Treasuries. The Fund may invest up to 20% of its net assets in such ETFs and money market funds and generally invests in ETFs and money market funds that are rated "​AAA" by at least one rating agency." The new funds will have an expense ratio of 0.​03% (​or 0.​15% before a 0.​12% fee waiver).

Late last week, Reuters wrote, "U.​S. tax-​free money fund interest rates rise above 1 pct - iMoneyNet." It says, "The average interest rate on U.​S. tax-​free money market funds broke the 1 percent barrier in the latest week, making it higher than the average rate offered by taxable money funds, the Money Fund Report said on Wednesday. The seven-​day simple yield on tax-​free and municipal money-​market funds averaged 1.​03 percent in the week ended Jan. 2, up from 0.​79 percent the previous week, according to the report, published by iMoneyNet. This was above the average seven-​day simple yield for taxable money funds iMoneynet tracks, which increased to 0.​92 percent from 0.​89 percent the week before." The brief adds, "Less than a handful of taxable and tax-​free money funds offered interest rates in the 1.​50 percent area in the latest week as short-​term U.​S. interest rates have been rising in anticipation of further rate hikes from the Federal Reserve in 2018. Meanwhile, total money fund assets grew for a second straight week. U.​S. money fund assets increased by $​4.​79 billion to $​2.​806 trillion in the week ended Jan 2. Taxable money market fund assets increased by $​4.​66 billion to $​2.​675 trillion, while tax-​free assets increased by $​130.​80 million to $​131.​06 billion." (Note: By Friday, Tax Exempt MMF yields had already begun declining. Our MFI Daily shows the average Tax Exempt MMF yielding 1.​03%, down 0.​06% from the prior day.)

A press release entitled, "INTL FCStone Financial Selects StoneCastle as its Exclusive Insured Cash Sweep Technology Solution" tells us, "StoneCastle Insured Cash Sweep, LLC, a subsidiary of StoneCastle Cash Management, LLC ... announced today that it has been selected to be the exclusive cash management provider for the broker-​dealer division of INTL FCStone Financial Inc.'​s ... correspondent clearing business. IFCF is a New York-​based independent clearing firm providing execution, clearing, and custody solutions for broker-​dealers, investment advisors, and foreign financial institutions.... According to Crane Data, FDIC insured cash accounts have grown to more than a trillion dollar market over the past several years and are frequently favored by brokerage and advisory clients compared to other cash vehicles, such as money market mutual funds. As investors attain greater wealth, they are constantly seeking differentiated ways to minimize their risk, particularly with their cash holdings." The release quotes Roger Shaffer, Managing Director of Correspondent Clearing, "​Since the acquisition of Sterne, Agee & Leach, Inc., we have worked to add new products, services, and capabilities in an effort to provide our correspondents the best available brokerage and wealth management tools. Our partnership with StoneCastle enables both US and non-​US investors to obtain FDIC insurance benefits on cash balances up to $​5,​000,​000 while earning a competitive return." StoneCastle Cash Management CEO Dan Farrell adds, "​The vision of the INTL FCStone organization is impressive. We are honored to be a partner in this vision and have our differentiated cash solutions, extensive bank network, and leading technology directly help contribute to IFCF'​s growth and the value offered to its clients." Finally, the release says, "StoneCastle provides insured deposit solutions to institutional clients, family offices, brokerages, clearing firms, registered investment advisers, and other financial intermediaries. Following its entry into the insured sweep space in early 2017, StoneCastle is successfully fulfilling its objective to be a differentiated force in the cash space for the benefit of its clients. The IFCF deal is StoneCastle'​s second announced deal in the past two months."

The Investment Company Institute'​s latest "Money Market Fund Assets" report shows overall assets dipping in the latest week, though Prime MMFs rose and Tax Exempt MMFs jumped. For 2017, MMF assets increased by $​113 billion, or 4.​1%, their biggest annual increase since 2009, and Prime MMFs increased by $​69.​1 billion, or 17.​8%. ICI writes, "Total money market fund assets decreased by $​7.​59 billion to $​2.​84 trillion for the week ended Wednesday, January 3, the Investment Company Institute reported today. Among taxable money market funds, government funds decreased by $​12.​98 billion and prime funds increased by $​2.​60 billion. Tax-​exempt money market funds increased by $​2.​79 billion." Total Government MMF assets, which include Treasury funds too, stand at $​2.​245 trillion (​79.​1% of all money funds), while Total Prime MMFs stand at $​459.​5 billion (​16.​2%). Tax Exempt MMFs total $​134.​0 billion, or 4.​7%. They explain, "Assets of retail money market funds increased by $​7.​56 billion to $​1.​01 trillion. Among retail funds, government money market fund assets increased by $​4.​20 billion to $​616.​20 billion, prime money market fund assets increased by $​912 million to $​269.​67 billion, and tax-​exempt fund assets increased by $​2.​45 billion to $​128.​09 billion." Retail assets account for over a third of total assets, or 35.​7%, and Government Retail assets make up 60.​8% of all Retail MMFs. ICI'​s release adds, "Assets of institutional money market funds decreased by $​15.​15 billion to $​1.​82 trillion. Among institutional funds, government money market fund assets decreased by $​17.​19 billion to $​1.​63 trillion, prime money market fund assets increased by $​1.​69 billion to $​189.​87 billion, and tax-​exempt fund assets increased by $​347 million to $​5.​94 billion." Institutional assets account for 64.​3% of all MMF assets, with Government Inst assets making up 89.​3% of all Institutional MMFs.

The latest "Minutes of the Federal Open Market Committee, December 12-​13, 2017," say, "Take-​up at the System'​s overnight reverse repurchase (​ON RRP) agreement facility dropped to relatively low levels over the period. In part, the decline appeared to reflect an increase in yields on alternative investments; Treasury bill yields, for example, had moved higher over recent weeks as the Treasury boosted net issuance of Treasury bills. The Open Market Desk continued to execute reinvestment operations for Treasury and agency securities in the SOMA in accordance with the procedure specified in the Committee'​s directive to the Desk. The deputy manager also provided an update on plans for the Federal Reserve Bank of New York, in conjunction with the Treasury'​s Office of Financial Research, to begin publishing reference interest rates for repurchase agreements involving Treasury securities by the middle of next year." The Minutes add, "Based on their current assessments, almost all participants expressed the view that it would be appropriate for the Committee to raise the target range for the federal funds rate 25 basis points at this meeting. These participants agreed that, even after an increase in the target range at this meeting, the stance of monetary policy would remain accommodative, supporting strong labor market conditions and a sustained return to 2 percent inflation.... Regarding the determination of the appropriate timing and size of future adjustments to the target range for the federal funds rate, participants reaffirmed the need to continue to assess realized and expected economic conditions. Most participants reiterated their support for continuing a gradual approach to raising the target range, noting that this approach helped to balance risks to the outlook for economic activity and inflation."

Dreyfus' latest "Tax Exempt Money Market Commentary," written by Director of Tax-​Exempt Money Market Fund Strategies Colleen Meehan, tells us, "This has been an interesting December in the tax-​exempt market. The normally quiet year-​end for new issuance was shaken as issuers rushed to market ahead of the potential tax overhaul which would inhibit many traditional financing vehicles in this sector of the fixed income market. This has put pressure on yields on the front end as longer fund managers purchased newly issued longer-​dated securities and sold securities in the front end to pay for them. This has provided us with opportunities ahead of the potential dearth of new supply as we enter the new year. The municipal yield curve has continued to flatten due to the market technicals. The Securities Industry and Financial Markets Association (​SIFMA) Index has moved higher ahead of the FOMC meeting and increased long-​term issuance. Demand continues to remain strong as funds are maintaining shorter weighted-​average maturities given the relatively flat yield curve and expected higher short-​term interest rates. The SIFMA Index is a weekly high grade market index comprised of seven-​day tax-​exempt variable-​rate demand notes produced by Bloomberg LLP. Careful and well-​researched credit selection remains crucial. Certain state general obligation bonds, essential service revenue bonds issued by water, sewer and electric enterprises, select local credits with strong financial positions and stable tax bases, and various health care and education issuers will remain securities with low credit risk."

Today, we look back 10 years ago when the Subprime Liquidity Crisis reached perhaps its most dangerous days (​with the exception of `​Sept. 2008 when Lehman went bankrupt and Reserve Primary Fund "​broke the buck") with two events -- the meltdown of Credit Suisse Prime Inst MMF and the false reporting of money funds "​breaking the buck". Our Dec. 29, 2007 "​Link of the Day" was entitled, "The Wall Street Journal writes "​How Turmoil Melted a Money Fund"." It "​discusses how Credit Suisse Prime Institutional Money Market Fund Prime grew from $​1 billion to $​25 billion and back down to $​10 billion. The [​WSJ] piece says, "While money funds at several U.​S. banks have been hit with similar losses, the Credit Suisse fund has suffered the most dramatic investor outflows. One reason: Other funds had more-​stable investor bases anchored by longtime individual customers." It quotes our Peter Crane, "Credit Suisse was the only money-​fund family to see significant outflows during the recent turmoil." Another Crane Data News piece from 10 years ago (Dec. 28, 2007) is titled, "FT.​com Erroneously Claims Money Funds Halt Redemptions, Break Buck." It says, "Since the credit crisis began in August, `​we'​ve repeatedly seen incorrect reporting on money market mutual funds. But a new FT.​com article takes the misinformation to a new level. In "Ailing fund bail-​outs hit $​3 billion," reporter Deborah Brewster claims, "Two other fund managers have suspended redemptions at money market funds." Speaking on "breaking the buck", she says "[​M]​any money funds have done so recently". These statements are both false. Like CNBC and WSJ, FT confuses enhanced cash vehicles with money funds. The article also mistakes total amounts purchased from funds with actual losses or "​bail-​outs", which are a mere fraction of the total securities purchased. We encourage readers to remain vigilant against such inaccuracies, and to complain about incorrect reporting. See ICI'​s "​Media Advisory: Reporting on Money Market Mutual Funds" which urges reporters to be clear on what is, and what isn'​t, a "​money market" or a "​cash" fund. Again, for the record, no money market, or "​cash" funds, have halted redemptions or broken the $​1.​00 NAV during the current crisis, contrary to some reports!"

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