Daily Links Archives: March, 2020

A message sent by Fidelity tells investors, "This is a notification that effective close of business on March 31, 2020, Fidelity Treasury Only Money Market Fund, FIMM Treasury Only Portfolio and FIMM Treasury Portfolio will be closed to new investors (soft close). See below for further information. Please be advised that these funds should be automatically updated on all applicable ... files. Please update your systems and applications accordingly." The funds include: FIMM Treasury Only Portfolio: Class I (FSIXX), Class II (FOXXX), Class III (FOIXX), Class IV (FOPXX), Institutional Class (FRSXX) and Select Class (FTYXX); Treasury Only Money Market (FDLXX), FIMM Treasury Portfolio: Class I (FISXX), Class II (FCEXX), Class III (FCSXX), Class IV (FTVXX), Institutional Class (FRBXX) and Select Class (FTUXX). We'll be watching for other funds to limit the massive inflows to delay the dawn of negative yields in coming days. For more, see these Crane Data News articles: More on Ultra-Low Treasury Rates, Fee Waivers and Negative Yields (1/7/09), Flurry of Fund Filings on Treasury Funds Closings, Waivers, Insurance (1/14/09), MarketWatch Writes Treasury Money-Market Funds Shutting The Door (1/27/09), Vanguard Merges Treasury Money Funds, Closes Federal Money Market (6/3/09) and Schwab Q and A on Closing of U.S. Treasury Money Fund to Sweeps (10/6/11).

A press release entitled, "So Far, Funds Are Maintaining Stable Net Asset Values Amid Increased Redemptions And Liquidity Pressures" explains, "S&P Global Ratings provides fund ratings on stable and floating NAV money market funds (MMFs), including prime institutional MMFs and local government investment pools (LGIPs) based on our Principal Stability Fund Rating (PSFR) Methodology. An S&P Global Ratings PSFR, also known as a "money market fund rating," is a forward-looking opinion about a fixed-income fund's capacity to maintain stable principal (net asset value [NAV]) and to limit exposure to principal losses due to credit risk." The release continues, "The current market volatility, largely propelled by the global COVID-19 outbreak, has accelerated redemptions from prime institutional MMFs above normal redemption patterns, causing potential liquidity concerns and adding strain to these fund managers' ability to maintain regulatory thresholds. The subsequent impact from MMFs meeting increasing redemption activity and seeking to raise cash by selling assets in a stressed market has led to some NAVs falling 10 basis points (bps) to 15 bps below par. From our surveillance of fund NAVs as of March 20, 2020, these MMFs have maintained NAVs of at least 0.9975, the lowest deviation point for a 'AAAm' rating. If NAVs fall below 0.9985, our criteria then require daily portfolio pricing and stress testing. Furthermore, if NAVs fall below 0.9975, we would likely place the fund ratings on CreditWatch with negative implications, and our criteria would allow a maximum five-business-day cure period to restore the NAV to at least 0.9975. During the cure period, we would take into consideration a fund sponsor's plan to support the pressured NAV." It adds, "S&P Global Ratings recognizes U.S.-domiciled registered 2a-7 fund sponsors and, to a lesser extent, LGIPs, have access to a set of tools that can be deployed to maintain a respective fund's NAV. Examples of these tools include Federal Reserve created backstops, such as the new Money Market Mutual Fund Liquidity Facility (MMLF), as well as parental capital support, credit support agreements, letters of credit, and reserve and escrow accounts. In the case of EU-domiciled MMFs, EU MMF regulations prohibit external support, directly and indirectly, thereby serving to restrict an MMF's available tool usage that would result in guaranteeing the liquidity of the MMF or stabilizing the NAV." Lastly, S&P writes, "While we are aware that some fund sponsors have begun to use these tools to support the NAVs of their fund, our PSFR methodology does not include a fund sponsor's willingness or ability to support the fund's NAV as an explicit rating factor. Rather, a fund's ability to sustain its NAV above the 'AAAm' PSFR NAV minimum deviation of 0.9975 and to limit exposure to principal losses due to credit risk are key factors we monitor. So far, we have not taken any rating actions on PSFRs, and we are closely monitoring development under an enhanced, often daily, surveillance."

Now that the danger of a money fund "breaking the buck" or a run on Prime assets has passed (knock on wood), attention in the cash sector is turning to the next potential threat -- negative yields. Earlier this week, Invesco Fixed Income's Laurie Brignac and Rob Corner wrote, "Negative Rates: Could it happen in the US?" They explain, "Questions about the possibility of negative rates in the US have arisen due to the quick and pivotal actions of the US Federal Reserve (Fed) prompted by the economic impact of COVID-19 and subsequent sharp decline in US Treasury yields. We believe the probability of the Fed adopting a negative interest rate policy (NIRP) regime is highly unlikely in the near-term.... Perception of the Fed moving to negative interest rates would cause confusion and even more market upheaval. The Fed has said it's unlikely and raised questions about adverse effects.... `Last, a switch by the Fed to a negative interest rate regime would likely significantly impact the US money market fund industry, which is an outcome we believe policy makers do not want."

Invesco's note continues, "Negative yielding, short-term US Treasury securities have occurred historically in the US, very briefly, at key month and quarter-end dates but have not been pervasive in the US markets. More recently, however, we have seen US Treasury securities offered at negative yields across much of the short-term maturity spectrum. We believe the Fed and US Treasury could actively intervene to avoid negative rates from persisting at the short end of the yield curve."

They explain, "The US money market fund industry has already operate efficiently in a zero, or near zero, interest rate environment through waivers and expense reductions. Invesco successfully navigated this environment from 2009 to 2015. If negative rates we to occur and persist and gross yields on money market funds fell below zero, money market funds could implement, with guidance and approval from the Securities and Exchange Commission (SEC), reverse stock splits or reverse distribution mechanisms (RDM) such as share cancellation. Although the SEC has not provided guidance with regards to RDM, Invesco is prepared to adopt this method in the US if negative rates become a reality."

Invesco's piece adds, "We believe an industry shift to RDMs would not happen quickly. Regulatory guidance and disclosures would need to be communicated, systems may need to be updated and clients would need an advance notice period for an orderly transition. Under this regime, money market funds would continue to transact at a $1.00, using RDMs like share cancellation. In our opinion, this scenario is extremely unlikely as we belief it is a path that policy makers do not want to walk."

In mid-March, J.P. Morgan Securities also commented on negative yields in their "Short-Term Fixed Income" and asked, "What happens at zero?" They explain, "We think negative policy rates are unlikely, even in a very weak environment. Not only because there is some question as to whether the Federal Reserve Act even permits the Fed to charge interest on reserves, but also because Congress and the public would surely push back against negative interest rates."

The piece states, "In December 2008, the Fed lowered policy rates to the effective lower bound of 0.00%-0.25%, setting IOER at 0.25%. The decision to move to a range was in large part due to uncertainties around money market functioning at very low levels. However, in the following seven years that the Fed kept rates at the lower bound, domestic money market functioning was generally orderly. To be sure, the decision on the part of MMF managers to waive MMF fees helped significantly. Even as MMF gross yields plummeted to the single digits, MMFs still eked out barely noticeable net positive returns to shareholders.... Managers effectively absorbed the costs of running a MMF to avoid negative yields, and kept cash within the MMF industry. We suspect MMFs will look to waive fees again this time around, and thus give the Fed some comfort that the money markets will continue to function even if IOER falls to zero."

JPM adds, "That said, it's worth noting that the money market industry has changed considerably since rates were previously at the zero lower bound. More specifically, $1tn of cash has moved from prime to government MMFs as a result of MMF reform in 2016. More recently, cash has continued to pile into MMFs, particularly into government MMFs, as markets de-risk and the inversion of the yield curve has prompted investors to stay very short duration.... This means there is significantly more demand for T-bills and Treasury repo now than ever before."

Finally, they tell us, "[C]an MMFs go negative? In Europe, where negative rates have become the norm, MMFs have successfully coped with negative yields by employing a reverse distribution mechanism (RDM). This method allows MMFs to pass on negative interest rates to underlying shareholders by cancelling shares instead of directly charging shareholders. The assets of the cancelled shares are then split among the remaining ones, ensuring that the value per share remains at par or stable, and doesn't break the buck. The tool has proven successful in maintaining cash in EUR-denominated MMFs prior to European MMF reform. Presumably, US MMFs could employ a similar strategy for government MMFs but given the significant market size differences, it may be easier said than done. Not to mention, this is probably something that the SEC, the regulator for MMFs, would likely need to opine on."

In other news, money market mutual fund assets again surged to record levels in the past week, though the inflows didn't match the previous week's massive $285.7 billion inflow. (It was the second largest inflow ever though.) ICI's latest weekly "Money Market Fund Assets" report explains, "Total money market fund assets increased by $175.29 billion to $4.40 trillion for the week ended Wednesday, April 1, the Investment Company Institute reported.... Among taxable money market funds, government funds increased by $173.75 billion and prime funds decreased by $4.69 billion. Tax-exempt money market funds increased by $6.24 billion."

ICI's stats show Institutional MMFs rising $162.7 billion and Retail MMFs increasing $12.6 billion. Total Government MMF assets, including Treasury funds, were $3.613 trillion (82.2% of all money funds), while Total Prime MMFs were $654.3 billion (14.9%). Tax Exempt MMFs totaled $129.9 billion, 3.0%. Money fund assets are up $765 billion, or 21.1%, year-to-date in 2020, and they've increased for 8 weeks in a row and in 12 out of the last 15 weeks. Over the past 52 weeks, ICI's money fund asset series has increased by $1.290 trillion, or 41.5%, with Retail MMFs rising by $305 billion (25.0%) and Inst MMFs rising by $985 billion (52.2%).

They explain, "Assets of retail money market funds increased by $12.60 billion to $1.52 trillion. Among retail funds, government money market fund assets increased by $12.93 billion to $976.29 billion, prime money market fund assets decreased by $4.82 billion to $430.84 billion, and tax-exempt fund assets increased by $4.49 billion to $116.88 billion." Retail assets account for over a third of total assets, or 34.7%, and Government Retail assets make up 64.1% of all Retail MMFs.

ICI adds, "Assets of institutional money market funds increased by $162.69 billion to $2.87 trillion. Among institutional funds, government money market fund assets increased by $160.81 billion to $2.64 trillion, prime money market fund assets increased by $131 million to $223.47 billion, and tax-exempt fund assets increased by $1.74 billion to $13.06 billion." Institutional assets accounted for 65.3% of all MMF assets, with Government Institutional assets making up 91.8% of all Institutional MMF totals.

Online money market trading "portal" ICD hosted a webinar on "Money Market Funds in Times of Uncertainty" featuring Invesco CIO & Head of Global Liquidity Laurie Brignac. She comments, "Only about two weeks ago ... you really started to see things seize up.... The magnitude of change day to day in terms of equity and Treasury markets were just mind boggling and the balance sheets of the dealers started to fill up, so we knew the markets were going to start seizing.... As a money fund manager, you're holding extremely high-quality assets and you can't get a bid on 1-month commercial paper? And so that's when cooler heads have to prevail. The Fed had to come in with massive intervention including facilities to help the funding markets.... The good news is [with] some of these facilities that they're rolling out, we're not talking about buying distressed assets like we were in 2008." When asked about regulations, Brignac adds, "When Lehman happened, as an industry, the Prime money market funds were much larger. We had a lot more commercial paper. Now we're smaller. We own more CDs. We own more floating rate securities. This is important in terms of how quickly the market is reacting to the liquidity facilities now versus 2008." She also comments, "I think it's important to note that the two money market funds that sold securities back to their sponsors, I think that was 100 percent a timing issue because the Money Market Liquidity Facility had not been announced and/or wasn't up and running.... We shouldn't really see any more announcements like that.... I do want to just highlight again, what we're seeing in the markets is 100 percent a liquidity issue. There are no credit concerns here.... It's not like money market funds weren't doing what they're supposed to do, or that there were any rogue advisors." Brignac explains, "I think that the money fund reforms have done a lot of good. I think transparency was probably the best thing, because I'm sure those of you that were around in '08 remember there was a lot of scratching of heads over what exposures people had, and really what was the status of their investments. Now, it's just so incredibly transparent, you know what you own.... I think the discussion around the fees and gates ... just because you go below 30 percent weekly liquidity does not mean you're going to have an automatic gate. As a matter of fact, with markets functioning with high quality assets, and if you can provide liquidity, why wouldn't you continue to provide liquidity? I think where gates are important is when there's a wholesale run on a product or if you have a credit issue. I think that's when those would make sense. I don't know any adviser out there that, even getting below 30 percent ... would really actively put on a gate unless there was some other issue involved."

Reuters posted the article, "Money fund turmoil spotlights New Jersey portfolio's 'shadow price'." They write, "A New Jersey municipal money-market fund run by BNY Mellon Corp is still paying investors $1.00 a share, even though the mark-to-market price of the fund recently dropped to $0.9968 per share, analysts said on Tuesday. It is not unusual for money-market fund prices to fluctuate from their $1-per-share stable net asset value (NAV). But the $51 million General New Jersey Municipal Money Market Fund is the only money fund, as of Tuesday, that had to disclose a material decline in its market value NAV, according to disclosures with the U.S. Securities and Exchange Commission (SEC)." (A separate disclosure shows that BNY Mellon "topped off" the tiny fund's NAV with a mere $89,000 contribution, so the NAV is now back at $1.0000.) The article quotes, "Coronavirus-led turmoil in debt markets is putting extra downward pressure on money fund mark-to-market values, or shadow prices, said Pete Crane, president of money fund research firm Crane Data LLC." It adds, "After the 2007-2009 financial crisis, the SEC put in rules that require funds to disclose a relatively big downward move in shadow price. It serves as a pre-notification that a fund is potentially heading in the direction of breaking the buck, even though it has not. The disclosure is triggered if a shadow price falls below $0.9975 a share." The article emphasizes, "The shadow price NAV of the General New Jersey Municipal Money Market Fund, for example, deviated enough from its $1.00 stable NAV that it required BNY Mellon on Monday to file a material event disclosure with the SEC. The fund's shadow NAV fell as low as $0.9968 per share on Friday. The market NAV has since recovered to $0.9987. But the fund was never breaking the buck, Crane and other analysts in the industry said." Reuters adds, "As long as a money fund's per-share shadow price remains in the range of $0.9950 to $1.1050, the fund can price its portfolio at a stable $1 NAV."

Please note that due to the coronavirus pandemic and widespread corporate travel bans, Crane Data has moved the dates for its "big show" Money Fund Symposium from June to August. Crane's Money Fund Symposium is now scheduled for August 24-26, 2020, at the Hyatt Regency Minneapolis. (It had been scheduled for June 24-26.) We'll continue to watch events carefully in coming weeks, and we'll be prepared to move again (perhaps to Nov. 18-20), to cancel, and/or to webcast if the pandemic persists. In the meantime, our planning goes on. The latest agenda is available and registrations are still being taken at: www.moneyfundsymposium.com. (Registrations for the June show will be transferred to the new August dates, and June hotel reservations will be cancelled if you've already made plans.) We've also set the dates and location for our next European Money Fund Symposium, which is scheduled for Sept. 17-18, 2020, in Paris, France. But we'll be watching travel restrictions to Europe closely in coming months (and may have to shift or cancel this too). (We'll give full refunds or credits for any events that are cancelled or that registered attendees can't make it to.) Let us know if you'd like more details on any of our events, and we hope to see you in Minneapolis later this summer! Finally, mark your calendars for next year's Money Fund University, which will be Jan. 21-22, 2021, in Pittsburgh, Pa, and our next Bond Fund Symposium, which is scheduled for March 25-26, 2021 in Newport Beach, Calif. Watch for details in coming months, and let us know if you're interested in sponsoring or speaking, and contact us if you have any feedback or questions. Attendees to MFU and Crane Data subscribers may access the latest recordings, Powerpoints and binder materials here: https://cranedata.com/publications/mfuniversity-2020.

An AFP article entitled, "Echoing 2008, Fed Takes Action to Shore Up MMFs," explains, "In the wake of the coronavirus crisis, both the Federal Reserve Board and the Department of the Treasury have taken steps to shore up money market funds. The actions come after a recent strain on prime funds has investors panicking. These actions by the Fed and the Treasury are largely due to prime funds seeing major outflows this week, losing more than 10% of their total portfolio assets." They write, "Prime funds are already a shadow of their former selves; the implementation of a floating net asset value (NAV) in 2016 caused many investors to exit prime funds entirely. Some have come back in the past few years, though this latest shakeup may keep investment in prime funds depressed for years to come." AFP quotes our Peter Crane, "We've seen noticeable outflows from prime money market funds, which are the credit or general-purpose type that buy commercial paper.... Over the past week, we've seen $85 billion come out of prime. They're still just above $1 trillion in size, so as a percentage basis, it's not life-threatening. But those steady outflows, coupled with the freezing of the commercial paper markets, are starting to threaten money funds from multiple angles." It continues, "Crane added that had the Fed and Treasury not stepped in, eventually, the outflows would have triggered gates and fees on some funds and may have even forced some funds to 'break the buck' like the Reserve Primary Fund did in 2008. 'As we saw in 2008, the Fed and now the Treasury thought a better scenario was to support the market before a full-scale run develops,' he said." The article adds, "There have been 'massive flows' into government funds this week, Crane explained, but he doesn't expect that to continue. Government funds have their own issues, such as yields that are pinned close to zero and could even go negative in certain cases." Finally, the article concludes, "For treasury professionals having flashbacks to 2008, Crane pointed out that the market has changed substantially since then; first of all, it's a smaller overall issue because the markets for both commercial paper and prime funds are half the size that they were in 2008. Second, the investment portfolios are drastically different than they were back then." Crane adds, "Almost every investor in prime money funds also has a government fund and uses government funds for their transactional functions, payroll, etc.... So prime is sort of the second-tier of liquidity or even third-tier liquidity on top of that. And while the gates and fees have never been triggered and never been tested, if a gate did come up, it presumably wouldn't be critical for any of those big investors because they've already got a big pool in a more liquid government fund."

The Wall Street Journal writes "Treasury Department Asks Congress to Let It Backstop Money Markets," which recaps Wednesday's news about a pending Treasury Money Market Fund Guarantee program. The piece says, "The Trump administration is asking Congress for authority to develop guarantee programs for the $4 trillion money-market mutual-fund industry, as part of its broader effort to calm turmoil sparked by the novel coronavirus epidemic. The effort would require Congress to suspend restrictions on the Exchange Stabilization Fund, according to a memo viewed by The Wall Street Journal. Its use to backstop money funds during the 2008 crisis contributed to a popular uproar over Wall Street bailouts and prompted Congress to forbid such guarantees in the future." It continues, "The Investment Company Institute, the trade group representing mutual funds, said in a statement that it hadn't sought the proposal but supports it. 'This authority, even if it is not utilized, should be available to address market dislocations and protect investors,' said Paul Schott Stevens, the group's president and CEO.... The landscape of money funds has changed dramatically since the 2008 crisis, with more money now parked in stable options that mostly hold short-term Treasury debt and other government securities. Funds that invest in riskier, short-dated commercial paper hold about $1 trillion in assets, according to Crane Data LLC, publisher of Money Fund Intelligence." The Journal adds, "'Any government backstop would have to consider whether to guarantee funds that buy commercial debt, known as prime funds, which are allowed to freeze redemptions or impose fees on withdrawals,' said Peter Crane, president of Crane Data. Prime funds are a source of lending to corporate America, but they can stop buying debt and even sell assets when investors speed up withdrawals. Investors pulled about $66 billion from those funds in the past week, Crane Data show, while money has flowed into funds that hold government debt." They quote our Crane, "Prime institutional funds could withstand a few more days of this type of pounding without serious repercussions but if it got worse, you are going to start to see things get into the danger zone."

Ratings agency Moody's Investors Service published a brief entitled, "Money Market Funds – Global: Outlook changed to negative from stable because of unprecedented market volatility," which tells us, "Unprecedented market volatility and economic uncertainty amid the coronavirus pandemic is fueling a flight to safety among investors. This flight to safety has led to elevated redemptions from US prime institutional market funds and large inflows into US government and Treasury money market funds (MMFs). The liquidity and net asset values (NAVs) of rated US government MMFs and European MMFs remain resilient to these market shocks, but we are changing our outlook on the global money market fund industry to negative from stable to reflect the considerable stress on US prime funds' liquidity and NAV from coronavirus related market dislocation." They explain, "Over the last few days, the US prime institutional money market fund segment has lost more than 10% of total portfolio assets. This sharp rise in daily outflow rates has reduced funds' liquidity levels and placed downward pressure on funds' NAVs. Leading into this period of market disruption, prime funds' weekly liquidity levels had been comfortably in excess of Rule 2a-7's 30% weekly liquidity requirement; however, elevated outflows have meaningfully reduced these cushions. Despite the pressures on fund liquidity levels, US institutional prime money market fund duration and credit profiles remain solid. Funds' average weighted average maturities remain relatively short at 34 days and credit quality remains strong. Additionally, the US Treasury is reported to be considering asking Congress to temporarily suspend restrictions on its Exchange Stabilization Fund so that it can work on a potential guarantee program for the US money market mutual fund industry as part of a broader fiscal stimulus package, which should shore up investor confidence in the prime money market fund sector." Finally, Moody's comments, "The risk of funds' imposing liquidity fees or gates has risen over the last week and will remain elevated based on our expectation that stress in money markets is likely to persist. We are monitoring funds' weekly liquidity levels and mark-to-market NAVs on a daily basis to assess the relative risk of liquidity events within our prime money market fund universe. The Fed has put into effect a number of large operations in the last several days to improve liquidity and alleviate stress in the short-term market. Yesterday, the Fed reestablished the Commercial Paper Funding Facility, first established in 2008 during the global financial crisis. This version of the facility has some differences from the 2008 version, notably the terms of eligibility and pricing, which may affect utilization rates and effectiveness. Nonetheless, the facility, together with the Fed's other actions, are positive for the commercial paper market."

Crane Data also published its latest Weekly Money Fund Portfolio Holdings statistics, which track a shifting subset of our monthly Portfolio Holdings collection, yesterday. The most recent cut (with data as of Mar. 13) includes Holdings information from 78 money funds (up 26 from two weeks ago), which represent $1.859 trillion (up from $1.225 trillion) of the $3.835 trillion (31.9%) in total money fund assets tracked by Crane Data. (Note that our Weekly MFPH are e-mail only and aren't available on the website.) Our latest Weekly MFPH Composition summary again shows Government assets dominating the holdings list with Repurchase Agreements (Repo) totaling $654.8 billion (up from $461.6 billion two weeks ago), or 35.2%, Treasury totaling $609.3 billion (up from $332.7 billion two weeks ago), or 32.8% and Government Agency securities totaling $354.2 billion (up from $237.2 billion), or 19.1%. Certificates of Deposit (CDs) totaled $92.1 billion (up from $80.1 billion), or 5.0%, and Commercial Paper (CP) totaled $78.7 billion (up from $62.7 billion), or 4.2%. A total of $38.6 billion or 2.1%, was listed in the Other category (primarily Time Deposits), and VRDNs accounted for $31.1 billion, or 1.7%. The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $609.3 billion (32.8% of total holdings), Federal Home Loan Bank with $239.7B (12.9%), Fixed Income Clearing Co with $110.4B (5.9%), BNP Paribas with $70.9B (3.8%), Federal Farm Credit Bank with $57.6B (3.1%), RBC with $54.3B (2.9%), Federal Home Loan Mortgage Corp with $37.8B (2.0%), JP Morgan with $36.7B (2.0%), Mitsubishi UFJ Financial Group Inc with $32.8B (1.8%) and Credit Agricole with $32.7B (1.8%). The Ten Largest Funds tracked in our latest Weekly include: JP Morgan US Govt ($147.1B), Fidelity Inv MM: Govt Port ($145.5B), BlackRock Lq FedFund ($127.8B), Goldman Sachs FS Govt ($118.2B), Wells Fargo Govt MM ($93.2B), BlackRock Lq T-Fund ($82.1B), Goldman Sachs FS Treas Instruments ($76.8B), JP Morgan 100% US Treas MMkt ($76.7B), Fidelity Inv MM: MM Port ($75.8B) and Morgan Stanley Inst Liq Govt ($71.2B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary, or our Bond Fund Portfolio Holdings data series.)

The Financial Times writes "Investors call for Fed help in 'frozen' commercial paper market." They tell us, "The US Federal Reserve is coming under pressure to unblock a vital short-term funding market used by companies, as borrowing costs soar to the highest levels since the Lehman crisis. The US commercial paper market, where companies raise cash by issuing short-term debt, has seized up since the coronavirus outbreak tore into the financial system. Banks have stepped back, anticipating that issuers will rush to secure cash just as money-market funds -- a big buyer of CP -- sell assets to brace themselves for redemptions, according to Bank of America analysts." They quote BofA's Mark Cabana, "It's a big deal. The CP market is essentially frozen. Everyone wants to shore up cash. Coronavirus is a big concern and it is creating big one-way flows in markets that banks are struggling to deal with. The Fed needs to come in and be the buyer." The FT piece also quotes BlackRock's Rick Rieder, "It was the one thing they left out and it is absolutely critical that they get at that.... That requires more work and a discussion with the Treasury. My sense is that when [Fed chairman Jay Powell] said they are not done and are working on other things, that is front and centre." The FT article adds, "Some analysts and investors expect the Fed to dust off a funding facility created in October 2008 to buy commercial paper during the last financial crisis." Finally, they quote Federated Hermes' Deborah Cunningham, "We think the Fed will pull out some of its old facilities to help confirm liquidity in the commercial paper markets.... I expect that to happen soon."

Reuters writes "Fed may announce commercial paper facilities Sunday -BofA," which tells us, "The Federal Reserve may announce measures on Sunday night aimed at bolstering liquidity in the commercial paper market, used by companies for short-term loans, analysts at Bank of America wrote. The bank's analysts said they believe the Fed will announce a Commercial Paper Funding Facility, an operation previously used in 2008 in which the Fed buys commercial paper from issuers directly, and a Commercial Paper Dealer Purchase Facility in which the Fed would buy commercial paper from dealers directly. The measures, if taken, would be aimed at buffering the market ahead of potentially large outflows from money market funds in coming days, analysts at the bank wrote." They quote the BofA report, "We believe it imperative the Fed roll out these facilities on Sunday night given the looming expected prime (money market fund) outflows and necessity of their ability to sell (commercial paper) in order to raise cash.... If the Fed waits too long the (money market fund) outflow pressure could mount and the risk of a large scale (money market fund) run could increase." The Reuters piece adds, "Investors are demanding the highest premium since March 2009 to hold riskier commercial paper versus the safer equivalent, according to Refinitiv Eikon data. The spread between the overnight AA-rated paper of nonfinancial companies versus riskier overnight P2 paper rose to 73 basis points on Thursday, the most recent data available from the Federal Reserve." (Note: Crane Data's latest Money Fund Portfolio Holdings show that Commercial Paper makes up just $324.1 billion or 8.5% of the assets in Taxable money market funds.) See also Bloomberg's "Key Source of Corporate Cash Seizing Up Amid Credit Market Rout".

The ICI's latest weekly "Money Market Fund Assets" show that money fund assets skyrocketed in the latest week. It explains, "Total money market fund assets increased by $93.95 billion to $3.78 trillion for the week ended Wednesday, March 11, the Investment Company Institute reported today. Among taxable money market funds, government funds increased by $94.33 billion and prime funds decreased by $547 million. Tax-exempt money market funds increased by $164 million." ICI's weekly series shows Institutional MMFs rising $86.0 billion and Retail MMFs increasing $8.0 billion. Total Government MMF assets, including Treasury funds, were $2.845 trillion (75.3% of all money funds), while Total Prime MMFs were $798.1 billion (21.1%). Tax Exempt MMFs totaled $134.5 billion, 3.6%. Money fund assets are up $145 billion, or 4.0%, year-to-date in 2020, and they've increased in 14 out of the last 18 weeks. Over the past 52 weeks, ICI's money fund asset series has increased by $665 billion, or 21.4%, with Retail MMFs rising by $228 billion (19.0%) and Inst MMFs rising by $437 billion (22.9%). ICI explains, "Assets of retail money market funds increased by $7.99 billion to $1.43 trillion. Among retail funds, government money market fund assets increased by $9.69 billion to $833.47 billion, prime money market fund assets decreased by $1.86 billion to $477.31 billion, and tax-exempt fund assets increased by $153 million to $121.62 billion." Retail assets account for over a third of total assets, or 37.9%, and Government Retail assets make up 58.2% of all Retail MMFs. The release adds, "Assets of institutional money market funds increased by $85.96 billion to $2.34 trillion. Among institutional funds, government money market fund assets increased by $84.64 billion to $2.01 trillion, prime money market fund assets increased by $1.31 billion to $320.78 billion, and tax-exempt fund assets increased by $11 million to $12.88 billion." Institutional assets accounted for 62.1% of all MMF assets, with Government Institutional assets making up 85.8% of all Institutional MMF totals.

A Prospectus Supplement filing for the Funds for Institutions Series, which includes BlackRock Premier Government Institutional Fund, BlackRock Select Treasury Strategies Institutional Fund and FFI Government Fund, tells us, "On November 12, 2019, the Board of Trustees of Funds For Institutions Series, on behalf of each Fund, approved a proposal to liquidate and terminate each Fund subject to a Plan of Liquidation and Termination. The Plan of Liquidation and Termination will be presented to the shareholders of each Fund and must be approved by the requisite number of shares of each Fund before a liquidation and termination of a Fund can occur." The filing continues, "Joint special meetings of shareholders of each Fund to consider the Plan of Liquidation and Termination are expected to be held on February 10, 2020. The record date for the joint special meetings is December 13, 2019. If approved by shareholders of a Fund, the liquidation date for such Fund is expected to be on or around February 13, 2020. The approval of the Plan of Liquidation and Termination with respect to each Fund is not contingent upon the approval of the Plan of Liquidation and Termination with respect to any other fund." Finally, it states, "Additionally, effective November 22, 2019, BlackRock Advisors, LLC ... will waive or reimburse all operating expenses of each Fund, including all management fees, administration fees and miscellaneous other expenses (excluding dividend expense, interest expense and acquired fund fees and expenses), as applicable. This waiver/reimbursement is voluntary and can be discontinued by BlackRock at any time without notice."

A press release entitled, "BlackRock Readies First Environmentally Aware Money Market Fund Dedicated for Individual Investors," explains, "BlackRock Cash Management has filed an amendment to the registration statement for the BlackRock Money Market Portfolio to convert it to the BlackRock Wealth Liquid Environmentally Aware Fund ('WeLEAF' or 'the Fund'), the first environmentally aware money market product dedicated for the U.S. wealth market. WeLEAF will expand BlackRock's nearly $8 billion suite of environmentally aware cash products, offering retail clients the option to align their cash investments with their sustainability objectives." The release continues, "WeLEAF, a retail prime money market fund, will seek to invest, under normal market conditions, at least 80% of the value of its net assets, plus the amount of any borrowings for investment purposes, in securities whose issuer or guarantor, in the opinion of BlackRock, at the time of purchase, meets the Fund's environmental criteria. Under the Fund’s investment policies, an issuer or guarantor may meet such criteria if it, at the time of the Fund's investment, has better than average performance in environmental practices. The Fund may also invest in green bonds where, in the opinion of BlackRock, the use of proceeds from their sale will be used to finance projects intended to generate an environmental benefit. WeLEAF will not invest in securities issued or guaranteed by entities that derive more than 5% of their revenue from fossil fuels mining, exploration or refinement, or from thermal coal or nuclear energy-based power generation." BlackRock's Thomas Callahan comments, "We have received overwhelming support from clients large and small since the launch of our Liquid Environmentally Aware Fund ('LEAF') series of sustainable money funds.... Client interest in our LEAF series has revealed tremendous demand for sustainable liquidity management. WeLEAF was designed to answer the call of our Private Wealth distribution partners, who are seeking a money market fund product that appeals to the growing segment of their clients that care deeply about sustainability and climate risk." The release tells us, "In addition to using at least 5% of its net revenue from management fees it earns through WeLEAF to purchase and retire carbon credits either directly or through a third-party organization, BlackRock also has a licensing agreement with World Wildlife Fund (WWF), a leading environmental nonprofit dedicated to environmental and wildlife protection. As part of the agreement, BlackRock contributes annually to WWF to help further its global conservation efforts." (For more on ESG and Social Money Market Funds, see our March 2 News articles: Federated's Cunningham on Coronavirus; ICD Hosts Another ESG Webinar.)

Federated Hermes' Deborah Cunningham writes "Money market plumbing in sound shape," which says, "With the volatility and aggressive central bank rate action this week due to the coronavirus, it is natural for investors to question the state of liquidity in the markets. The answer is that the overnight and short-liquidity markets are well-funded and running smoothly. The latest evidence of this came today when the Federal Reserve increased the amount of its overnight lending through the repo market by $50 billion, from $100 billion to $150 billion. The Fed also announced increases of the amounts offered for 2-week operations taking place Tuesday and Thursday to $45 billion." She explains, "Far from being a sign of panic seen in the equity markets, these maneuvers show that the Fed has the tools and has learned how to use them to avoid market dislocations. The banking system is far more robust than in earlier crisis and the Fed is experienced with daily operations, especially since it revived them since the repo spike in September. Like in September, the Fed's continuing injection of funds into the overnight market is not due to a credit event. Banks and corporations likely will be affected economically by the virus, but that is a long-term consideration. In the short end, high-quality banks and corporations are having no trouble getting funding, and both fixed- and floating-rate paper are able to be placed. That speaks further to the fact that this is not a credit event but one pushed by fear and a rush to the safest vehicles out there. The plumbing of the short-end of the market is in sound shape." She adds, "Investors are, of course, searching for havens now, as is the case in any time of concern. With bond yields plummeting, money market funds can fill that role. Historically, they serve as places of stability, with attractive returns relative to other cash options, while allowing for same-day withdrawals to facilitate opportunistic trading." See also the Federal Reserve Bank of New York's, "Statement Regarding Repurchase Operations."

Invesco sponsored a recent "AFP Conversations" podcast featuring Invesco's Laurie Brignac and Marques Mercier, entitled, "Repurchase Agreements: What Treasurers Need to Know. The session description tells us, "The repo market is vital to the entire financial system. So when it falls into trouble, the impact can be massive. That was the fear in September 2019. The Fed ultimately stepped in to stabilize things, but questions remain. Will this keep happening? And how might this impact corporate treasury and finance professionals?" Brignac comments, "Repos are quite important to the overall funding markets. It's important for ... the issuers or the borrowers that are borrowing the cash. But, it's also a really important source of overnight trade for those of us that have excess cash and want to put money to work on an overnight or a term basis in what is a secured, safe vehicle." Mercier explains, "For Invesco, we utilize repo as our primary cash management tool, and that's pretty standard across the money fund industry as a whole. So, essentially lending cash to security dealers and they're giving us collateral that we take ownership of. In the terms of the trade, whether it's overnight or a term trade, we're in full possession of the collateral and own the collateral and on the predetermined terms of the trade, we'll give the collateral back to the security dealer ... and get our cash return with the prearranged interest rate that we agreed upon." Brignac adds, "I think it's also really important to think about the markets in general. If you think about a money market fund, or a corporate treasurer for that matter, that has cash to invest ... they've got cash they want to put to work overnight, what securities options are out there? You can maybe do an overnight time deposit with a bank, but funds or certain cash providers may not be able to take credit exposure, if you will. What's nice about that is there isn't overnight U.S. treasury options. So, overnight repo, it's backed by U.S. Treasuries, can kind of serve as a substitute for like an overnight treasury bill. So, if you're doing repo with a high quality counterparty you are giving them cash, they're giving you Treasuries at a certain margin with a certain rate, so it is really ... the cash management tool of choice when it comes to overnight funding for the banks and the dealers. But, also for an overnight investment, for those of us that wake up every morning with excess cash."

The ICI's latest weekly "Money Market Fund Assets" show that money fund assets jumped in the latest week. It explains, "Total money market fund assets increased by $49.26 billion to $3.68 trillion for the week ended Wednesday, March 4, the Investment Company Institute reported today. Among taxable money market funds, government funds increased by $53.28 billion and prime funds decreased by $3.26 billion. Tax-exempt money market funds decreased by $759 million." ICI's weekly series shows Institutional MMFs rising $19.4 billion and Retail MMFs increasing $29.9 billion. Total Government MMF assets, including Treasury funds, were $2.750 trillion (74.7% of all money funds), while Total Prime MMFs were $798.6 billion (21.7%). Tax Exempt MMFs totaled $134.3 billion, 3.6%. Money fund assets are up year-to-date in 2020 (up $51B, or 1.4%), they've increased in 13 out of the last 17 weeks. Note that almost all major brokerages now "sweep" cash to bank deposits and not to money market funds, so stock market selling should show up initially in banks and not MMFs (it may then be shifted to higher-yielding MMFs). Over the past 52 weeks, ICI's money fund asset series has increased by $571 billion, or 18.3%, with Retail MMFs rising by $220 billion (18.3%) and Inst MMFs rising by $350 billion (18.4%). ICI explains, "Assets of retail money market funds increased by $29.87 billion to $1.42 trillion. Among retail funds, government money market fund assets increased by $31.58 billion to $823.77 billion, prime money market fund assets increased by $389 million to $479.18 billion, and tax-exempt fund assets decreased by $2.10 billion to $121.47 billion." Retail assets account for over a third of total assets, or 38.7%, and Government Retail assets make up 57.9% of all Retail MMFs. The release adds, "Assets of institutional money market funds increased by $19.39 billion to $2.26 trillion. Among institutional funds, government money market fund assets increased by $21.70 billion to $1.93 trillion, prime money market fund assets decreased by $3.65 billion to $319.46 billion, and tax-exempt fund assets increased by $1.34 billion to $12.87 billion." Institutional assets accounted for 61.3% of all MMF assets, with Government Institutional assets making up 85.3% of all Institutional MMF totals.

A Form N-1A Registration for Schwab Municipal Money Funds indicates that they're preparing to launch "Ultra" share class version of Schwab AMT Tax-Free Money Fund, Schwab California Municipal Money Fund and Schwab New York Municipal Money Fund. (Schwab Municipal Money Fund already has an "UltraShares" class, SWOXX.) These classes, which will have $1 million minimums like other existing UltraShares classes, will launch on April 29, 2020. These funds all have existing "InvestorShares" classes: Schwab AMT Tax-Free Money Fund InvestorShares (SWWXX), Schwab Municipal Money Fund InvestorShares (SWTXX), Schwab California Municipal Money Fund InvestorShares (SWKXX), and Schwab New York Municipal Money Fund InvestorShares (SWYXX). The filing says, "The Ultra Shares for each of Schwab AMT Tax-Free Money Fund, Schwab California Municipal Money Fund and Schwab New York Municipal Money Fund is newly organized and therefore has not yet had any operations as of the date of this prospectus. Certain information reflects financial results for a single fund share. 'Total return' shows the percentage that an investor in a fund would have earned or lost during a given period, assuming all distributions were reinvested." For more on Schwab's latest money fund liquidations, see our Feb. 20 Crane Data News, "Franklin, Legg Mason Deal Signals More Consolidation; More Liquidations," and watch for coverage in our pending March issue of Money Fund Intelligence, which ships on Friday.

Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics, which track a shifting subset of our monthly Portfolio Holdings collection, yesterday. The most recent cut (with data as of Feb. 28) includes Holdings information from 52 money funds (down 40 from a week ago), which represent $1.225 trillion (down from $2.081 trillion) of the $3.830 trillion (32.0%) in total money fund assets tracked by Crane Data. (See our Feb. 12 News Feb. MF Portfolio Holdings: Repo, TDs, CDs Jump; Treas, Agencies Fall. Note that our Weekly MFPH are e-mail only and aren't available on the website.) Our latest Weekly MFPH Composition summary again shows Government assets dominating the holdings list with Repurchase Agreements (Repo) totaling $461.6 billion (down from $777.4 billion a week ago), or 37.7%, Treasury totaling $332.7 billion (down from $619.8 billion a week ago), or 27.2% and Government Agency securities totaling $237.2 billion (down from $355.2 billion), or 19.4%. Certificates of Deposit (CDs) totaled $80.1 billion (down from $119.4 billion), or 6.5%, and Commercial Paper (CP) totaled $62.7 billion (down from $103.1 billion), or 5.1%. A total of $27.6 billion or 2.3%, was listed in the Other category (primarily Time Deposits), and VRDNs accounted for $22.7 billion, or 1.9%. The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $332.7 billion (27.2% of total holdings), Federal Home Loan Bank with $165.5B (13.5%), Fixed Income Clearing Co with $99.8B (8.1%), Federal Farm Credit Bank with $43.3B (3.5%), RBC with $40.5B (3.3%), BNP Paribas with $37.9B (3.1%), Mitsubishi UFJ Financial Group with $26.2B (2.1%), JP Morgan with $25.8B (2.1%), Credit Agricole with $23.3B (1.9%) and Federal Home Loan Mortgage Co with $23.2B (1.9%). The Ten Largest Funds tracked in our latest Weekly include: JP Morgan US Govt ($152.9B), Fidelity Inv MM: Govt Port ($135.2B), Wells Fargo Govt MM ($86.2B), Fidelity Inv MM: MM Port ($78.8B), JP Morgan 100% US Treas MMkt ($67.7B), Morgan Stanley Inst Liq Govt ($62.9B), JP Morgan Prime MMkt ($62.8B), Dreyfus Govt Cash Mgmt ($60.9B), State Street Inst US Govt ($57.6B) and First American Govt Oblg ($51.9B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary, or our Bond Fund Portfolio Holdings data series.)

India's Economic Times writes "PGIM India launches money market fund." The piece explains, "PGIM India Mutual Fund has launched its 'Money Market Fund'.... PGIM India Money Market Fund will be managed by Kumaresh Ramakrishnan, CIO-Debt and Kunal Jain, Fund Manager – Debt. The benchmark of the fund is CRISIL Money Market Fund Index and will aim to generate alternate investment avenues to park idle surplus funds for short term with the investment horizon of 4–6 Months.... The positioning is keeping in view the current nature of the short-term yield curve, present liquidity conditions and expectations of easy monetary conditions for the near term. However, the fund manager will act according to the evolving market dynamics." PGIM's Ramakrishnan comments, "Being at the ... end of the fiscal year, money market securities currently enjoy fiscal year crossover premiums. This together with prevailing benign liquidity conditions greatly increases the chances of such a fund outperforming the Liquid and Ultra short categories in the short term. This fund thus makes a case for a better risk reward opportunity over other traditional alternatives in the short-term space." The article adds, "The PGIM India Money Market fund will invest across a range of money market instruments including commercial papers (CPs), certificates of deposits (CDs), treasury bills, cash management bills (CMBs) and any other discounted instrument of a tenure not exceeding 1 year. The minimum initial investment in the scheme will be Rs 5,000 and multiples of Re 1 thereafter. The fund also provides a minimum additional investment of Rs 1,000." India is the 11th largest money fund marketplace worldwide, according to ICI's latest figures with $63.8 billion, behind Mexico and ahead of the U.K. (See our Dec. 20 News, "Worldwide MF Assets Hit $6.6T: US Jumps, China Falls Below $1T in Q3.")

Crane Data is monitoring news on the slowly spreading coronavirus carefully, but we're still on and making final preparations for our upcoming Bond Fund Symposium, March 23-24, at the Hyatt Regency Boston. Note that we'll let speakers, sponsors and attendees know if anything changes, and we'll give full credit or refunds to sponsors and attendees if we're (or you're) forced to cancel due to safety concerns or unfolding events. (This goes for our Money Fund Symposium in June in Minneapolis and our European MFS in Sept. in Paris too.) For now, though, travel to and gatherings in Boston appear to be fine, and we'll be taking extra precautions at the show to assure our guests' safety. (Of the registered attendees so far, just two are from outside the U.S. and both of these are U.K.-based.) Crane's Bond Fund Symposium offers a concentrated and affordable educational experience, as well as an excellent networking venue, for bond fund and fixed-income professionals. Registrations are still being accepted ($750) and sponsorship opportunities are still available. (Free or sponsored tickets are also available to select Crane Data clients and bond fund portfolio managers in Boston. Let us know if you'd like more information.) See the latest agenda and details here. 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 Hyatt Regency. We'd like to thank our sponsors and exhibitors -- Wells Fargo Securities, Bank of America, Fidelity Investments, Fitch Ratings, J.P. Morgan Asset Management, Northern Trust, J.P. Morgan Securities, S&P Global Ratings, Invesco, INTL FCStone, Bloomberg Intelligence and Toyota Financial Services -- for their support. E-mail us for more details. Also, we're still full-speed ahead for our big show, Crane's Money Fund Symposium, which will be held June 24-26, 2020, at the Hyatt Regency Minneapolis. The preliminary agenda is now available and registrations are now being taken at: www.moneyfundsymposium.com. We've also set the dates and location for our next European Money Fund Symposium. It is scheduled for Sept. 17-18, 2020, in Paris, France, but we'll be watching travel restrictions to Europe closely in coming months. Let us know if you'd like more details on any of our events, and we hope to see you in Boston later this month! Finally, mark your calendars for next year's Money Fund University, which will be Jan. 21-22, 2021, in Pittsburgh, Pa. Watch for details in coming months, and let us know if you're interested in sponsoring or speaking, and contact us if you have any feedback or questions. Attendees to MFU and Crane Data subscribers may access the latest recordings, Powerpoints and binder materials here: https://cranedata.com/publications/mfuniversity-2020.