Daily Links Archives: March, 2019

J.P. Morgan Securities writes on "The new new Libor? Unwrapping the Bank Yield Index." The "Short Duration Strategy brief explains, "On January 24, ICE Benchmark Administration (IBA)—the administrator for Libor—announced that it is working on its own potential alternative benchmark to Libor, known as the U.S. Dollar ICE Bank Yield Index (BYI). The new index is entirely transactions based, measuring the yields at which investors are willing to invest in unsecured short maturity bank debt issued by a subset of current USD Libor panelists willing to contribute data. Moreover, ICE has indicated that it would also incorporate other pricing data on secondary bank bond transactions from TRACE in order to increase transactions volumes. Under the proposed BYI methodology, a yield curve is fitted each day using these data, and then yields for the various BYI tenors are calculated using this curve. The result is a transaction-based Libor substitute that generally reflects wholesale unsecured bank funding costs." The update adds, "According to ICE, the BYI was designed to provide several important features of Libor, which SOFR currently doesn't offer, particularly for participants in lending and cash markets. ICE sought to create a rate that's representative of banks' arm's-length funding costs and generally moves in the same direction as the lender's own cost of funds. They also wanted a rate linked to the average cost of funds among a set of large banks, as opposed to a small group of lenders. Furthermore, the availability of forward-looking tenors provides certainty when setting rates at the outset of an accrual period, rather than relying on a trailing average of daily rate settings as with SOFR. More importantly, the BYI seeks to address some of the issues that have necessitated Libor's replacement in the first place, particularly with respect to the lack of primary transaction data on which banks can based their submissions. However, we find that there are potential issues with BYI."

Citi Research's latest "Short Duration Strategy" writes that "SIFMA humbles (us) yet again." Author Vikram Rai comments, "Just two weeks ago, we stated that 'a seasonal increase in SIFMA resets as we approach tax season is a foregone conclusion. But, what will be the magnitude of this increase is the interesting question.' Well, SIFMA has richened for two successive weeks since and has again reminded us that it has the power to surprise us and that nothing about the tax-exempt short term markets is a 'foregone conclusion'. So why has SIFMA richened?" Citi's piece explains, "This year, we are witnessing extremely strong demand for tax-exempt paper as many high net worth individuals have realized that they will face higher tax bills as a result of TCJA. This increase in demand, which we believe is somewhat permanent, has resulted in record municipal fund flows.... In our view, SIFMA has richened despite the fact that tax-exempt money funds are witnessing the seasonal tax season related outflows because: Municipal bond funds have temporarily parked some of their abundant cash in VRDNs as they look for entry points in a rich fixed-rate tax-exempt market. This is reflected in low dealer inventories, which is unusual when tax-exempt money funds are witnessing outflows. Thus, there is no upward pressure on SIFMA from the dealer side which is typically the cause for higher resets."

ICI's latest "Money Market Fund Assets" report shows assets down sharply in the latest week, following strong start to 2019. ICI's weekly series shows Retail MMFs inched higher by $2.72 billion, while Institutional MMFs plummeted by $49.93 billion. Total Government MMF assets, including Treasury funds, stood at $2.292 trillion (74.8% of all money funds), while Total Prime MMFs reached $633.0 billion (20.7%). Tax Exempt MMFs totaled $139.8 billion, or 4.6%. They write, "Total money market fund assets decreased by $47.21 billion to $3.06 trillion for the week ended Wednesday, March 20, the Investment Company Institute reported.... Among taxable money market funds, government funds decreased by $46.09 billion and prime funds decreased by $1.12 billion. Tax-exempt money market funds were unchanged." ICI states, "Assets of retail money market funds increased by $2.72 billion to $1.21 trillion. Among retail funds, government money market fund assets increased by $1.02 billion to $694.57 billion, prime money market fund assets increased by $1.79 billion to $382.18 billion, and tax-exempt fund assets decreased by $83 million to $130.13 billion." Retail assets account for over a third of total assets, or 39.4%, and Government Retail assets make up 57.6% of all Retail MMFs. The ICI release adds, "Assets of institutional money market funds decreased by $49.93 billion to $1.86 trillion. Among institutional funds, government money market fund assets decreased by $47.10 billion to $1.60 trillion, prime money market fund assets decreased by $2.91 billion to $250.81 billion, and tax-exempt fund assets increased by $84 million to $9.66 billion." Institutional assets accounted for 60.6% of all MMF assets, with Government Institutional assets making up 86.0% of all Institutional MMF totals.

Crane Data is making final preparations for our third annual Bond Fund Symposium, which takes place Monday and Tuesday, March 25-26, 2019 at the Loews Philadelphia Hotel in Philadelphia, Pa. We'll be sending the conference binder to attendees Thursday, and we've also posted the conference materials on our website at the bottom of our "Content Center and in our Bond Fund Symposium 2019 Download Center. (These are available to attendees to and Crane Data subscribers, and recordings of the show will be added next week.) Our second ultra-short event last year in Los Angeles attracted over 120 bond fund managers, marketers, fixed-income issuers, investors and service providers, and we expect our Philadelphia show to turn in similar numbers. See the agenda here and details below. (We're still taking registrations.) Bond Fund Symposium offers a concentrated and affordable educational experience, as well as an excellent and informal networking venue. Registration for BFS is $750; exhibit space is $2,000 (includes 2 tickets); and sponsorship opportunities are $3K, $4K, $5K, and $6K. Our mission is to deliver the best possible conference content at a reasonable price to bond fund professionals and investors. Portfolio managers, analysts, investors, issuers, service providers, and anyone interested in expanding their knowledge of bond funds and fixed-income investing will benefit from our comprehensive program. A block of rooms has been reserved at the Loews Philadelphia. We'd like to thank our sponsors -- Wells Fargo Securities, Fidelity Investments, Investortools, J.P. Morgan Asset Management, Fitch Ratings, Wells Fargo Asset Management, Invesco, S&P Global Ratings, DTCC and INTL FCStone -- for their support. E-mail us for more details. Crane Data is also making preparations and now accepting registrations for our "big show," `Money Fund Symposium, which will be held June 24-26, 2019, at the Renaissance Boston in Boston, Mass. See the latest agenda at www.moneyfundsymposium.com and let us know if you'd like more details on sponsoring this event. We have also set the dates and location for our next European Money Fund Symposium, which is scheduled for Sept. 23-24, 2019, in Dublin, Ireland. Watch for this agenda to go live in coming weeks.... We hope to see you in Philly, Boston or Dublin in 2019!

Website AdvisorHub posted an article entitled, "UBS Woos Cash with Sky-high 3% One-Year CD," which tells us, "UBS Wealth Management USA has stuck its tongue out at bank and other competitors with a 3% teaser rate on a one-year certificate of deposit, but some of its brokers are upset at the way it marketed the promotion. The Swiss-owned broker-dealer's rate on its proprietary CD tops all competitors, according to Bankrate Monitor, and is almost 50 basis points higher than the 7-day yield on top-returning money-market funds and 60 basis points above the 2.42% rate on a 3-year U.S. Treasury note as of Tuesday morning. UBS is offering the deal only to customers who have more than $10,000 in their household accounts, and the CDs must be funded with new money. Several brokers said the five-week promotional rate, which ends next week and requires a minimum investment of $10,000, is an attempt to increase net new assets, particularly in the first quarter when wealthy people often draw down their accounts to pay tax bills." The piece quotes Crane Data's Peter Crane, "Cash is becoming a battlefield among brokerages, because they've gone as low as they can with commissions and index funds.... Brokerages are looking at Goldman and all those fintech firms attacking their space, and saying, 'We've got to start losing money, too.'" It explains, "`He speculated that UBS's teaser rate may be responding to the high money-market rates that Goldman Sachs has been offering with its new Marcus consumer-banking push.... To be sure, broker-dealers have been generating wide profit spreads with revved-up programs that automatically sweep client cash into low-interest bank accounts. using the money to fund mortgages and other loans to their wealthy customers."

A press release entitled, "Moody's assigns a Aaa-mf rating to the UBS (Irl) Select Money Market Fund - US Treasury fund" tells us, "Moody's Investors Service, ("Moody's") assigned a Aaa-mf rating to the UBS (Irl) Select Money Market Fund - US Treasury. The money market fund seeks to earn maximum current income in US Dollar terms consistent with its objectives of liquidity and capital preservation. UBS Asset Management (Americas) Inc serves as investment adviser to the Fund." Moody's explains, "The Aaa-mf rating reflects the Fund's high scores across key rating factors including asset quality, fund liquidity and resilience to market risks. The Fund's credit quality is strong as it is primarily invested in US treasury debt and repurchase agreements collateralized by the same. Given the investment objective of the fund, we expect credit quality to remain strong. The Fund's ability to provide liquidity is also very strong and is demonstrated by the high level of overnight liquidity of 100%." They add, "The Fund limits its interest rate and spread risks by keeping its weighted average maturity (WAM) below 60 days. As of 31 January 2019, the Fund's WAM was 37 days and it exhibited very low exposure to market risk. UBS Asset Management is a leading global investment adviser with assets under management totaling $781 billion as of 31 December 2018."

Bankrate writes "The average American forgoes nearly $2,000 in interest via low-yield savings accounts." Their article explains, "The average savings account balance is $8,863, according to the Federal Reserve. If your savings is in a liquid bank account for many years -- kept there in case of an emergency -- then it should earn the highest yield. If $8,863 sits in the average-yielding 0.10 annual percentage yield (APY) savings account or money market account for 10 years, it will earn approximately $89 of interest based on daily compounding based on prevailing average rates. If that same amount is in a savings account or money market account earning 2 percent APY -- easily attainable if you shop around -- it will gain $1,941 in interest over 10 years." The piece adds, "People are routinely earning around the national average of 0.10 percent APY or far less. For instance, at Chase, the Chase Savings account earns 0.01 percent APY on all balances. Chase does also have a Premier Savings account that has relationship rates as high as 0.11 percent APY. But it requires a minimum balance of at least $250,000. There are several savings accounts over 2 percent APY that require little or no minimum balance."

ICI's latest "Money Market Fund Assets" report shows assets down fractionally in the latest week, following a huge jump the prior week. ICI's weekly series shows Retail MMFs inched down $0.03 billion, while Institutional MMFs dipped $0.72 billion. Total Government MMF assets, including Treasury funds, stood at $2.338 trillion (75.1% of all money funds), while Total Prime MMFs reached $634.1 billion (20.4%). Tax Exempt MMFs totaled $139.8 billion, or 4.5%. They write, "Total money market fund assets decreased by $749 million to $3.11 trillion for the week ended Wednesday, March 13, the Investment Company Institute reported.... Among taxable money market funds, government funds decreased by $723 million and prime funds increased by $119 million. Tax-exempt money market funds decreased by $144 million." ICI states, "Assets of retail money market funds decreased by $25 million to $1.20 trillion. Among retail funds, government money market fund assets decreased by $2.20 billion to $693.55 billion, prime money market fund assets increased by $2.34 billion to $380.39 billion, and tax-exempt fund assets decreased by $164 million to $130.22 billion." Retail assets account for over a third of total assets, or 38.7%, and Government Retail assets make up 57.6% of all Retail MMFs. The ICI release concludes, "Assets of institutional money market funds decreased by $723 million to $1.91 trillion. Among institutional funds, government money market fund assets increased by $1.48 billion to $1.64 trillion, prime money market fund assets decreased by $2.22 billion to $253.72 billion, and tax-exempt fund assets increased by $19 million to $9.57 billion." Institutional assets accounted for 61.3% of all MMF assets, with Government Institutional assets making up 86.2% of all Institutional MMF totals.

The Bond Buyer published "New life for money market mutual fund fix," which says, "A bill that issuers of municipal bonds say would both lower their borrowing costs and give them more investing flexibility is back on the table after failing to become law in the previous Congress. Earlier this week, Sen. Pat Toomey, R-Pa. introduced S.733, the Consumer Financial Choice and Capital Markets Protection Act, which is identical to a bill introduced in 2017. The bill would allow institutional money market funds to return to a fixed net asset value after a 2014 SEC rule change, which required those MMMFs to use a floating NAV." The piece quotes `GFOA's Emily Brock in a "GFOA letter in support of the bill," "S. 733 would restore the ability of state and local governments to use prime and municipal stable NAV funds for their essential and critical investment needs.... Forcing governments to find alternative investments to prime and municipal MMMFs creates additional risk for public funds by driving them to lower yielding government funds or potentially less suitable products.... Such options may not meet liquidity standards required by their governments to meet cash management policies and statutes." See also our June 27, 2018, "Link of the Day, "Bond Buyer on Senate's S.1117."

The Tahoe Daily Tribune recently featured a personal finance piece, "Market Pulse: Who is making money with your cash?" It explains, "Now that short-term interest rates are on the rise yields on money-market funds are moving up as well. They used to pay close to nothing, now the three-month Treasury bill yields 2.4 percent and the funds are near that level as well. Cash is no longer trash. Long-suffering individual investors earning almost nothing for years are looking forward to reaping the rewards in their money-market funds. Not so fast. For many years the incoming cash in brokerage firm accounts was "swept" into whichever money-market fund a client chose.... Then brokerage firms had a better idea, at least better for them. They could sweep a client's incoming cash (and in some cases the entire balance) into a deposit account at a bank they own and pay very little interest on it (now 0.3 percent). Their cost of funds would remain rock bottom while interest rates on short-term vehicles rise. What could be better? Merrill Lynch, Morgan Stanley, Charles Schwab, Ameritrade and others have gone this route. Vanguard and Fidelity have not." Adviser David Vomund writes, "Not all is lost. At some firms that now only sweep cash to a bank they own clients can "purchase" one of several money-market funds as they would buy any security. At Schwab there is no commission to do so. If any firm charges to purchase a money-market fund their commission must be very small, a token. Ask your firm."

Last week, S&P Global Ratings distributed a brief "ABCP Research Update," entitled, "SFIG Vegas 2019 Conference Review with a Focus on ABCP." They wrote, "We recently attended the Structured Finance Industry Group (SFIG) conference in Las Vegas (February 24-27) where we participated in an ABS/ABCP investor roundtable breakfast, spoke with market participants, and attended panels and lectures on a wide array of topics relevant to asset back commercial paper (ABCP). We summarize the key points for you below. Despite the difficulties of navigating a developing regulatory environment and increased capital thresholds, several ABCP conduit sponsors intend to grow their ABCP asset portfolios and corresponding ABCP issuance in 2019; Prime institutional money market funds are returning to the ABCP market after their ABCP investment fell drastically following money market reform in 2016. As the funds grow in size again, their holdings in outstanding ABCP have surged from approximately 5% of certain programs to over 20%; Despite the increase in prime institutional fund ABCP investment, the ABCP investor base has also diversified significantly over the past year; Conduit sponsors are addressing risk retention requirements in different ways. Some conduit sponsors are buying at least 5% of their conduit's ABCP, while others are holding at least 5% of their conduit's funded assets, and some have determined that, based on the 2018 LSTA court decision, their conduit is exempt from risk retention; and, Some investors are expressing interest in the potential use of environmental, social, and governance (ESG) scores in ABCP."

Crane Data's latest monthly Money Fund Portfolio Holdings statistics will be published Monday, March 11, and we'll be writing our normal monthly update on the Feb. 28 data for Tuesday's News. But we also generate a separate and broader Portfolio Holdings data set based on the SEC's Form N-MFP filings. (We continue to merge the two series, and the N-MFP version is now available via Holdings file listings to Money Fund Wisdom subscribers.) Our summary, with data as of Feb. 28, 2019, includes holdings information from 1,182 money funds (the same number as last month), representing assets of $3.439 trillion (up from $3.368 trillion). We review the latest data below. Our latest Form N-MFP Summary for All Funds (taxable and tax-exempt) shows Repurchase Agreement (Repo) holdings in money market funds totaling $1,092.9 billion (down from $1,097.8 billion on Jan. 31), or 31.8% of all assets. Treasury holdings total $918.0 billion (up from $851.7), or 26.7%, and Government Agency securities total $683.0 billion (up from $682.0 billion), or 19.9%. Commercial Paper (CP) totals $275.9 billion (up from $257.7 billion), or 8.0%, and Certificates of Deposit (CDs) total $232.6 billion (up from $225.4 billion), or 6.8%. The Other category (primarily Time Deposits) totals $131.2 billion (down from $146.8 billion), or 3.8%, and VRDNs account for $105.6 billion (down from $106.8 billion), or 3.1%. Broken out into the SEC's more detailed categories, the CP totals were comprised of: $167.8 billion, or 4.9%, in Financial Company Commercial Paper; $58.5 billion or 1.7%, in Asset Backed Commercial Paper; and, $49.6 billion, or 1.4%, in Non-Financial Company Commercial Paper. The Repo totals were made up of: U.S. Treasury Repo ($652.1B, or 19.0%), U.S. Govt Agency Repo ($403.9B, or 11.7%), and Other Repo ($36.9B, or 1.1%). The N-MFP Holdings summary for the 217 Prime Money Market Funds shows: CP holdings of $270.8 billion (up from $252.6 billion), or 30.8%; CD holdings of $232.6 billion (up from $225.4B), or 26.5%; Repo holdings of $144.5 billion (down from $148.1B), or 16.4%; Other (primarily Time Deposits) holdings of $87.0 billion (up from $86.4B), or 9.9%; Treasury holdings of $100.3 billion (up from $67.2B), or 11.4%; Government Agency holdings of $36.7 billion (down from $37.5B), or 4.2%; and VRDN holdings of $6.8B (unchanged), or 0.8%. The SEC's more detailed categories show CP in Prime MMFs made up of: $167.8 billion (up from $160.7 billion), or 19.1%, in Financial Company Commercial Paper; $58.5 billion, or 6.7%, in Asset Backed Commercial Paper; and, $44.5 billion, or 5.1%, in Non-Financial Company Commercial Paper. The Repo totals include: U.S. Treasury Repo ($55.4B, or 6.3%), U.S. Govt Agency Repo ($52.3B, or 5.9%), and Other Repo ($36.9B, or 4.2%).

ICI's latest "Money Market Fund Assets" report shows a huge jump in the latest week, the 4th increase in the past 5 weeks. ICI's weekly series shows Retail MMFs added $9.7 billion, while Institutional MMFs leapt by $24.2 billion. Total Government MMF assets, including Treasury funds, stood at $2.339 trillion (75.1% of all money funds), while Total Prime MMFs reached $634.0 billion (20.4%). Tax Exempt MMFs totaled $139.9 billion, or 4.5%. They write, "Total money market fund assets increased by $33.90 billion to $3.11 trillion for the week ended Wednesday, March 6, the Investment Company Institute reported.... Among taxable money market funds, government funds increased by $25.23 billion, prime funds increased by $7.05 billion, and tax-exempt money market funds increased by $1.62 billion." ICI states, "Assets of retail money market funds increased by $9.68 billion to $1.20 trillion. Among retail funds, government money market fund assets increased by $3.94 billion to $695.75 billion, prime money market fund assets increased by $4.38 billion to $378.05 billion, and tax-exempt fund assets increased by $1.37 billion to $130.38 billion." Retail assets account for over a third of total assets, or 38.7%, and Government Retail assets make up 57.8% of all Retail MMFs. The ICI release concludes, "Assets of institutional money market funds increased by $24.21 billion to $1.91 trillion. Among institutional funds, government money market fund assets increased by $21.29 billion to $1.64 trillion, prime money market fund assets increased by $2.67 billion to $255.93 billion, and tax-exempt fund assets increased by $252 million to $9.55 billion." Institutional assets accounted for 61.3% of all MMF assets, with Government Institutional assets making up 86.0% of all Institutional MMF totals.

A press release entitled, "Federal Reserve Board issues advance notice of proposed rulemaking seeking public comment on whether to amend Regulation D to lower certain interest rates paid on balances at Federal Reserve Banks," indicates that the Fed intends to prevent the idea of a "narrow bank," we learned from RBC Capital Markets' Mike Cloherty. He comments, "Narrow banks had received a great deal of press attention last fall, but to date none of them exists (no charters have been granted). The Fed seems to have been reluctant to approve this structure in part because it would greatly complicate the operational mechanics of monetary policy by creating much more volatility in reserve demand (and in bank deposits) and unpredictable shifts in intermediation. The narrow bank model had been to take deposits and leave 100% of the cash at the Fed, earning IOER. Depositors would receive IOER minus some fee." Cloherty adds, "This could have caused large swings in reserve demand (reserve demand will still be volatile without narrow banks) and large swings in bank deposits as cash flowed back and forth from a traditional bank to a narrow bank. The Fed has proposed changing its regulations so that narrow banks (which they call Pass-Through Investment Entities) would receive a lower IOER rate than normal banks. If the Fed had the ability to pay narrow banks a lower rate, it would be difficult for narrow banks to grow to a size where they would become disruptive to money markets or Fed policy. This question mark for the balance sheet size seems to have been erased." (See our Sept. 16, 2018 News, "Fed Delays IOER Bank.")

As spring approaches (promise!), the first leg of the annual Treasury and cash conference season again draws near. Crane Data, money fund providers, and various segments of the cash marketplace are preparing for a number of conferences over the coming months. Below, we review a couple that we'll be speaking at, attending, and/or hosting. First up is our Bond Fund Symposium, which will be March 25-26 in Philadelphia. Our third annual BFS will again focus on ultra-short bond funds. (Feel free to drop by the Loews Philadelphia Hotel.) In April, Crane Data will be exhibiting (and Peter Crane will be speaking) at the New England AFP 2018 Annual Conference event, which is April 24-25 in Boston. The NEAFP agenda is packed with money market fund content, including speakers from Citizens, BNY Mellon, Fidelity and HSBC. Also, in May, we'll be speaking at the SIFMA AMA Roundtable. This event, which attracts around 100 brokerage sweep providers and professionals, will be May 5-7 in Boca Raton, Fla. Our Peter Crane will speak on "Cash and Money Market Sweep Trends" with Eric Lansky of StoneCastle Cash Management. Crane will also host a "Bank Deposit Program Roundtable," which will feature Eric Edstrom of Charles Schwab, Doug Pagliaro of UMB, and Kevin Bannerton of Total Bank Solutions. The SIFMA AMA Roundtable involves Brokerage product and sweep professionals and is run in conjunction with the SIFMA Ops Conference. (Contact Crane Data or SIFMA's Charles DeSimone to ask about attending or to see the agenda.) Finally, we'll also be attending the Funds Management Group Treasury & Capital Markets Conference in Nashville, May 20-21, the New York Cash Exchange in NYC, May 28-29, and of course our big Money Fund Symposium in Boston, June 24-26.

An article, "Vanguard to End Cash-Management Service for Larger Customers," written by The Wall Street Journal, tell us, "Vanguard Group is shutting down a service for larger customers that paired a debit card with tools to help them manage cash. The feature let clients write checks and pay bills out of a Vanguard account. The service was launched as a way for the money-management behemoth to press deeper into the financial lives of individual investors. Vanguard is now ending the service on July 31, an acknowledgment the offering couldn't rival what banks provide. The firm told customers that VanguardAdvantage 'is no longer meeting the range of needs articulated by our clients,' according to a Feb. 28 letter reviewed by The Wall Street Journal." It adds, "The service being cut launched in 2002. It linked banklike features with Vanguard's brokerage accounts for bigger clients. Those customers could write checks, pay bills, and use a debit card to draw cash from an account with Vanguard in addition to tapping other services. Vanguard offered the service for an annual fee to those with between $500,000 and below $1 million invested with the firm. It was free for those with at least a million dollars invested with Vanguard. Less than 2% of eligible clients are using it, according to the firm. Of those people, only about half were active in the past three to six months. Vanguard decided to pull the plug recently after reviewing the service, said a person familiar with the matter. The firm is exploring other ways it can make cash-management services available to clients, the person said, but no decision is in the works."

Federated Investors' Deborah Cunningham writes "Stopping the pendulum's swing" in her latest monthly. She tells us, "Federal Reserve Chair Jerome Powell has been using the word 'patience' lately as if trying to quiet kids in the back seat of a car repeatedly asking, 'Are we there yet?' But his mantra is really more about him than investors -- an attempt to check the market volatility he largely created by vacillating in the fourth quarter of 2018. While inconsistency can spook investors, swinging like a pendulum from hawkish to dovish is actually worse because it suggests a reversal is coming. We think Powell wants to let time pass to calm the markets before making the next hike, which we still think will come later in 2019.... Not that we expect any surprises at the Federal Open Market Committee meeting this month. Powell already has mentioned that clarity on the future of the balance sheet runoff is forthcoming, so that will probably be announced. That's a central part of policymakers' desire to have the federal funds rate be the only policy tool the market considers. (It almost goes without saying that target range is not expected to move from 2.25% to 2.5% at this meeting.)" She adds, "Cash, then, is in a good place. If volatility returns, liquidity products stand to again reap haven-seeking money. If the economy firms, a potential hike likely would improve return. Don't forget: not even Warren Buffett has the patience of cash managers. We handled a half decade of zero rates, so waiting a little longer when we are enjoying returns at or above inflation suits us just fine. In practical terms, we are addressing this by staying short -- our version of keeping dry powder for when rates rise -- or buying variable-rate paper. Our position is that the flat money market yield curve is bound to steepen, leading us to keep the weighted average maturities (WAM) of our government funds at 25-35 days and prime and municipal funds at 30-40 days. Lastly, while the suspension of the debt ceiling ends this month, the Treasury Department has the means to operate until July and, if tax receipts are strong, these extraordinary measures could last until autumn, so no worries at this time. Over the month of February, 1-, 3- and 6-month London interbank offered rates (Libor) slipped, ending at 2.49%, 2.63% and 2.69, respectively."

ICI's latest "Money Market Fund Assets" report shows that money fund assets rose for the 15th time in the past 17 weeks. ICI's weekly series shows Retail MMFs dropped by $2.4 billion, while Institutional MMFs grew by $9.3 billion. Total Government MMF assets, including Treasury funds, stood at $2.314 trillion (75.1% of all money funds), while Total Prime MMFs reached $626.9 billion (20.4%). Tax Exempt MMFs totaled $138.3 billion, or 4.5%. They write, "Total money market fund assets increased by $6.91 billion to $3.08 trillion for the week ended Wednesday, Feb. 27, the Investment Company Institute reported.... Among taxable money market funds, government funds increased by $2.45 billion and prime funds increased by $4.89 billion. Tax-exempt money market funds decreased by $433 million." ICI states, "Assets of retail money market funds decreased by $2.36 billion to $1.19 trillion. Among retail funds, government money market fund assets decreased by $4.90 billion to $691.81 billion, prime money market fund assets increased by $2.45 billion to $373.67 billion, and tax-exempt fund assets increased by $103 million to $129.01 billion." Retail assets account for over a third of total assets, or 38.8%, and Government Retail assets make up 57.9% of all Retail MMFs. The release concludes, "Assets of institutional money market funds increased by $9.27 billion to $1.88 trillion. Among institutional funds, government money market fund assets increased by $7.35 billion to $1.62 trillion, prime money market fund assets increased by $2.45 billion to $253.27 billion, and tax-exempt fund assets decreased by $535 million to $9.30 billion." Institutional assets accounted for 61.2% of all MMF assets, with Government Institutional assets making up 86.1% of all Institutional MMF totals.