Earlier this week, The Wall Street Journal wrote, "Vanguard Challenges Bond Behemoths With Active Funds," which discussed the company'​s rapid growth in short-​term and ultra-​short bond funds. They explain, "Vanguard Group, the titan of low-​cost index funds, is coming after a fast-​growing pocket of the money-​management industry: actively managed bond funds. The firm'​s investment dollars in such funds pushed past the half-​trillion mark for the first time in June, a potential problem for competitors such as BlackRock Inc., Fidelity Investments, Pimco and Western Asset Management Co., which have long dominated bond investing. Malvern, Pa.-​based Vanguard has made a number of hires in recent years to expand in areas like emerging markets, short-​term corporate debt and pan-​market, or '​core bond' funds. Most of the nascent funds are small to midsize but they are growing quickly, in large part because they charge much less than the competition." The piece continues, "About five years ago, the firm set out to change that by broadening the range of active bond funds it offers, said John Hollyer, global head of fixed income at Vanguard. It launched an ultra-​short-​term bond fund in 2015, and the core bond fund and an emerging markets bond fund in 2016.... The new funds are still relatively small, and Vanguard'​s active bond funds account for about 8% of overall assets. Still, the rate of growth picked up in 2020. Vanguard'​s ultrashort fund has been particularly attractive this year as a slightly riskier alternative to money-​market funds, which now yield close to zero because of the Fed'​s rate cuts, Mr. DeMaso said. The fund, which yields about 1%, has grown to $​9.​3 billion from $​6.​7 billion at the start of the year, while Pimco'​s comparable fund has shrunk and Fidelity'​s has stayed unchanged, according to Morningstar. The lowest-​cost shares in Vanguard'​s fund charge $​1 per $​1,​000 invested, compared with $​4.​50 for Pimco and $​2.​50 for Fidelity." (​Let us know if you'​d like to see our latest Bond Fund Intelligence publication, which tracks the bond fund marketplace with an emphasis on the ultra-​short segment, or Bond Fund Portfolio Holdings data set. We released our Ultra-​Short Bond Fund Portfolio Holdings last week, and updated our Short-​Term Bond Fund Portfolio Holdings yesterday.)

Schwab filed a "Form N-​1A Registration Statement" for new "Ultra Share" classes of its Schwab Government Money Fund, Schwab Treasury Obligations Money Fund and Schwab U.​S. Treasury Money Fund. The shares are expected to go live on Sept. 24, but don'​t have tickers or expense ratios posted yet. The filing explains, "The fund'​s goal is to seek the highest current income consistent with stability of capital and liquidity.... To pursue its goal, the fund invests in U.​S. government securities, such as: U.​S. Treasury bills and notes, other obligations that are issued by the U.​S. government, its agencies or instrumentalities, including obligations that are not fully guaranteed by the U.​S. Treasury, such as those issued by the Federal National Mortgage Association (​Fannie Mae), the Federal Home Loan Mortgage Corporation (​Freddie Mac) and the Federal Home Loan Banks, repurchase agreements that are collateralized fully by cash and/​or U.​S. government securities [​and] obligations that are issued by private issuers that are guaranteed as to principal or interest by the U.​S. government, its agencies or instrumentalities." Schwab Treasury Obligations Money Fund'​s prospectus says, "​The fund'​s goal is to seek current income consistent with stability of capital and liquidity. The fund'​s investment objective is not fundamental and therefore may be changed by the fund’​s Board of Trustees without shareholder approval.... To pursue its goal, the fund typically invests in securities backed by the full faith and credit of the U.​S. government and repurchase agreements backed by such investments." Schwab U.​S. Treasury Money Fund'​s prospectus adds, "​The fund'​s goal is to seek the highest current income that is consistent with stability of capital and liquidity.... To pursue its goal, the fund typically invests in securities backed by the full faith and credit of the U.​S. government. The fund intends to operate as a government money market fund under the regulations governing money market funds. The fund will invest at least 99.​5% of its total assets in cash and/​or government securities (​including bills and notes); under normal circumstances, at least 80% of the fund'​s net assets (​including, for this purpose, any borrowings for investment purposes) will be invested solely in U.​S. Treasury securities (​excluding cash). With respect to the 80% policy, the fund will notify its shareholders at least 60 days before changing the policy. The full faith and credit backing is the strongest backing offered by the U.​S. government, and traditionally is considered by investors to be the highest degree of safety as far as the payment of principal and interest." Currently, our MFI Daily tracks 14 Schwab money funds: Schwab AMT Tax-​Free MF Inv ($​1.​1 billion in total assets), Schwab CA Municipal MF Inv ($​4.​6B), Schwab Government Money Fund Inv ($​16.​0B), Schwab Government Money Fund Swp ($​17.​4B), Schwab Govt Money Market Portfolio ($​185M), Schwab Municipal MF Inv ($​2.​5B), Schwab Municipal MF Ultra ($​11.​6B), Schwab NY AMT T-​F MM Inv ($​873M), Schwab Retirement Govt MF ($​2.​5B), Schwab Treasury Oblig MF Inv ($​10.​9B), Schwab US Treasury MF Investor ($​16.​0B), Schwab Value Adv MF Inv ($​67.​6B), Schwab Value Adv MF Ultra ($​44.​8B) and Schwab Variable Share MF Ultra ($​4.​6B).

Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics Tuesday, which track a shifting subset of our monthly Portfolio Holdings collection. The most recent cut (​with data as of July 24) includes Holdings information from 86 money funds (​up 15 from a week ago), which represent $​2.​475 trillion (​up from $​2.​132 trillion) of the $​4.​963 trillion (​49.​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. For our latest monthly Holdings, see our July 13 News, "July MF Portfolio Holdings: Repo Plunges, Treasuries Break $​2.​5 Trillion.") Our latest Weekly MFPH Composition summary again shows Government assets dominating the holdings list with Treasury totaling $​1.​326 trillion (​up from $​1.​204 trillion a week ago), or 53.​6%, Repurchase Agreements (​Repo) totaling $​500.​3 billion (​up from $​404.​8 billion a week ago), or 20.​2% and Government Agency securities totaling $​381.​5 billion (​up from $​339.​6 billion), or 15.​4%. Commercial Paper (​CP) totaled $​89.​8 billion (​up from $​59.​0 billion), or 3.​6% and Certificates of Deposit (​CDs) totaled $​86.​3 billion (​up from $​68.​8 billion), or 3.​5%. The Other category accounted for $​52.​1 billion or 2.​1%, while VRDNs accounted for $​38.​6 billion, or 1.​6%. The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $​1.​326 trillion (​53.​6% of total holdings), Federal Home Loan Bank with $​222.​8B (​9.​0%), Federal Farm Credit Bank with $​64.​0B (​2.​6%), BNP Paribas with $​62.​6B (​2.​5%), Fixed Income Clearing Co with $​54.​9B (​2.​2%), Federal National Mortgage Association with $​54.​7B (​2.​2%), RBC with $​44.​6B (​1.​8%), Federal Home Loan Mortgage Co with $​37.​6B (​1.​5%), JP Morgan with $​33.​8B (​1.​4%) and Credit Agricole with $​32.​3B (​1.​3%). The Ten Largest Funds tracked in our latest Weekly include: Goldman Sachs FS Govt ($​246.​1B), JP Morgan US Govt MMkt ($​192.​1B), Fidelity Inv MM: Govt Port ($​166.​3B), Wells Fargo Govt MM ($​139.​9B), Federated Hermes Govt Obl ($​133.​6B), JP Morgan 100% US Treas MMkt ($​124.​1B), Goldman Sachs FS Treas Instruments ($​97.​4B), Morgan Stanley Inst Liq Govt ($​91.​3B), Dreyfus Govt Cash Mgmt ($​88.​4B), State Street Inst US Govt ($​85.​9B) and JP Morgan Prime MM ($​82.​8B). (​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.) In other news, Calastone is sponsoring a Euromoney webinar entitled, "Managing the 24-​hour money market." It takes place Thursday, July 30 at 9am Eastern (​2pm UK). The webinar will feature Edward Lopez of Calastone, Naresh Aggarwal of ACT, Will Goldthwaite of State Street Global Advisors and Paul Przybylski of JP Morgan. It'​s description explains, "​The money market is rapidly becoming a 24-​hour industry. But as it becomes more global, continuous and wide-​reaching, is that making it easier or harder to do business? This webinar from Euromoney and Calastone explores the importance of robust, accountable and informed technology in underpinning the money market, ensuring that people can make the right decisions with the right information and not simply be swamped with data. At the same time, it asks where we need to ensure oversight exists, so that automation doesn'​t lead to a lack of accountability or missed opportunities."

The Philadelphia Inquirer writes, "Money market fund yields are dropping, prompting Vanguard and BlackRock to waive fees for investors." They explain, "Good news for investors: Some large firms, such as Fidelity and Vanguard, the Malvern-​based mutual fund giant, are waiving some fees on money market funds. The bad news: That'​s because yields are so low on money market funds that without a fee waiver, the returns might drop below zero. Blame the Federal Reserve for this conundrum, as yields fall below the expenses of running a money market fund, said Jeffrey DeMaso, head of research at Adviser Investments and co-​editor of a Vanguard newsletter.... The Federal Reserve set the target range for federal funds at 0.​00% to 0.​25%. Yields on money market mutual funds tend to follow short-​term rates set by the Fed, although typically with a lag. That means following a Fed rate cut, yields on money market mutual funds trend lower. And that'​s exactly what'​s happened." The article continues, "For the Vanguard Pennsylvania Municipal Money Market Fund, for example, Vanguard said expenses of the fund are being '​temporarily reallocated' to other funds within Vanguard. Effectively, it'​s a fee waiver. Vanguard, the world'​s largest fund manager with $​6 trillion in assets, said in a securities filing this month that it made the change '​to maintain a zero or positive yield for the fund.' (​See the Vanguard filing here.) 'This is not a '​break the buck’ scenario like we saw during the Great Financial Crisis,' DeMaso said. That was when money market funds' net asset value fell below the $​1-​per-​share floor, shaking the economy.... 'It'​s more akin to the 2011 period when money market yields were heading down because of what the Fed did, cutting rates. The Fed funds rate is near zero as well. So that'​s the gravity that'​s the pull on yields again today' in money market funds, DeMaso said. As an alternative, he prefers to hold Vanguard Short Term Tax Exempt Fund, saying, '​I get a little bit of income with about the same risk.'" It adds, "Will bond funds be next for fee waivers? Vanguard'​s Short-​Term Treasury Fund [​VFISX] has also seen its yield drop sharply, said Adviser Investments' Dan Wiener. After fees, the yield on the Vanguard Short-​Term Treasury Fund actually fell to a negative yield, -​0.​01% last week. And it'​s not just Vanguard waiving fees. Roughly half of Wall Street firms are cutting fees temporarily, according to trade publication Ignites.​com. Fidelity in March began waiving fees on Fidelity Treasury Money Market Fund, Fidelity Government Money Market Fund, and the FIMM Treasury Portfolio, due to falling interest rates."

BlackRock'​s Ellen Bockius spoke during a breakout session at the giant fund manager'​s recent "Future Forum" event, in a talk entitled, "Fortifying portfolios for the next crisis." The segment briefly touched on cash, Prime MMFs and SMAs. The description explains, "​The current crisis has provided real-​time tests of portfolio construction and market liquidity. We'​ll examine the lessons learned, with an eye on fortifying portfolios for continued volatility." Bockius explains, "There are valid reasons why corporations had to rush to liquefy balance sheets to obtain the peace of mind that they need when their future is uncertain. They need to know that they can sustain operations and pay their employees and their suppliers. They'​ve also seen health care companies draw down credit lines or issue debt to support their overall enterprise, health insurers sitting on more cash than they'​ve had in the past, driven by higher liquidity buffers and lack of payouts for elective procedures. We'​ve seen universities grappling with uncertainty challenging their revenues, leading them to increase cash balances. For pensions, we'​ve seen increased allocations to cash to take advantage of market dislocations. These are all prudent actions to be taking. However, it'​s really important to remember increasing cash allocations isn'​t a risk-​free decision. The important questions to be asking in order to future proof portfolios are: How much cash do I need? What tolerance do I have for principal volatility? How important is yield to me? And maybe, should I consider ESG factors? These answers are different for every single client." She continues, "And they'​re highly situational and depend on a number of factors.... But one thing is consistent across all clients, cash investing must be an active decision. And like I said, just because it'​s cash, it doesn'​t mean it'​s riskless. A passive strategy today gives you zero, [​but] reaching for yield can create challenges for the cash investor.... The question that I'​m getting a lot right now is, with interest rates tethered to zero, 'What do I do in order to obtain yield in my cash allocation?' And this is a global phenomenon. It'​s an environment that we are likely to be in for quite some time. Chairman Powell has said recently that the Fed isn'​t even thinking about thinking about raising rates. So how do I future proof my cash allocations?" Bockius adds, "The most obvious answer is separately managed accounts for institutions. In addition to the customization from an investment perspective, a key advantage of SMAs in this market is the ability to take advantage of the front-​end yield curve, and earn incremental yield on the portion of cash that doesn'​t need to be accessed on a daily basis. These advantages are greater today than they have been in the past. And as we hit a zero-​rate interest rate environment, a story we'​ve all seen before, the cost of holding liquidity will be high, and removing the requirement for daily liquidity of portfolios is a significant advantage. Remember, money market funds in the US must hold weekly levels of liquidity over 30 percent. That'​s not a requirement for separate accounts, it'​s dependent solely on the institution'​s liquidity needs. So, in today'​s environment, SMA clients can pick up an additional 30 to 50 basis points just on that 30 to 40 percent of money that'​s not sitting in overnights and Treasuries. Another option for clients to consider is Prime money market funds. Currently, Prime funds are averaging over 20 basis points over Government money market funds. Prime funds saw significant outflows in March. But we are seeing clients come back and it'​s driven by the principal stability they'​ve exhibited, and the higher relative yield." Finally, she tells us, "So, the punchline here, in order to fortify your cash allocations for the future, pay attention. And this is a PSA not just for institutions, but for individual investors alike. Uninvested cash or inactive cash can create a real drag on portfolios in this interest rate environment. Know and understand your liquidity needs to play an active strategy based on those assumptions, and look for other opportunities to deploy the excess."

Money market fund assets rebounded in the latest week, following last week'​s Tax Day plunge and a slide in June and July. Since the week ended May 20, assets have fallen by $​200.​9 billion, but this follows 15 straight weeks of inflows (​during which time assets increased by $​1.​172 trillion). ICI'​s latest weekly "Money Market Fund Assets" report says, "Total money market fund assets increased by $​20.​17 billion to $​4.​59 trillion for the week ended Wednesday, July 22, the Investment Company Institute reported.... Among taxable money market funds, government funds increased by $​17.​42 billion and prime funds increased by $​4.​23 billion. Tax-​exempt money market funds decreased by $​1.​48 billion." ICI'​s stats show Institutional MMFs increasing $​22.​8 billion and Retail MMFs decreasing $​2.​6 billion. Total Government MMF assets, including Treasury funds, were $​3.​703 trillion (​80.​7% of all money funds), while Total Prime MMFs were $​762.​7 billion (​16.​6%). Tax Exempt MMFs totaled $​122.​6 billion, 2.​7%. Money fund assets are up an eye-​popping $​957 billion, or 26.​3%, year-​to-​date in 2020, with Inst MMFs up $​785 billion (​34.​7%) and Retail MMFs up $​171 billion (​12.​5%). Over the past 52 weeks, ICI'​s money fund asset series has increased by $​1.​304 trillion, or 39.​7%, with Retail MMFs rising by $​288 billion (​23.​0%) and Inst MMFs rising by $​1.​016 trillion (​50.​0%). They explain, "Assets of retail money market funds decreased by $​2.​64 billion to $​1.​54 trillion. Among retail funds, government money market fund assets increased by $​45 million to $​980.​49 billion, prime money market fund assets decreased by $​1.​42 billion to $​451.​11 billion, and tax-​exempt fund assets decreased by $​1.​26 billion to $​109.​73 billion." Retail assets account for just over a third of total assets, or 33.​6%, and Government Retail assets make up 63.​7% of all Retail MMFs. ICI adds, "Assets of institutional money market funds increased by $​22.​81 billion to $​3.​05 trillion. Among institutional funds, government money market fund assets increased by $​17.​38 billion to $​2.​72 trillion, prime money market fund assets increased by $​5.​65 billion to $​311.​62 billion, and tax-​exempt fund assets decreased by $​215 million to $​12.​87 billion." Institutional assets accounted for 66.​4% of all MMF assets, with Government Institutional assets making up 89.​4% of all Institutional MMF totals. (Note: Crane Data has its own separate daily and monthly asset series.)

Citi'​s latest "Short Duration Strategy," discusses, "Tax season and revisiting the fixed vs. floating debate." Authors Vikram Rai, Jack Muller and Vedanta Goenka asks, "How will money funds fare this tax season? Short duration investors approach tax season with some trepidation given that funding pressures can cause significant market volatility. And, since most fund categories witness fairly momentous outflows, money fund managers prepare by building up liquidity. We discuss how money fund assets flows fared this tax season." They continue, "Retail investors tend to sell their money fund holdings, typically tax-​exempt holdings, to meet their personal income tax bill needs. Similarly, institutional investors make redemptions to meet their corporate tax payment needs. Figure 1 shows the money fund redemptions over the last two weeks, and tax-​exempt money funds have borne the brunt of redemptions." Citi adds, "Nonetheless, so far, the redemptions faced by money funds, which can be attributed to seasonal factors, have been somewhat muted vs. past years. And while we could see some more redemptions over the next few weeks, we do not expect the intensity of outflows to increase. And, we expect more outflows from retails funds vs. institutional funds.... [M]​ost corporations seem to have already made their tax-​payments and thus the rush to redeem from institutional money funds in July is likely to be less. Fewer retail investors seem to have made their tax-​payments and we could see more redemptions from retail funds, especially tax-​exempt money funds." Finally, they comment, "​We have admitted that SIFMA has humbled our forecasts on more than one occasion. But, we must admit its volatility can still surprise us, as it did during the market disruption witnessed in March. While rollover worries over a BAN issued by a very high profile issuer contributed to the spike in SIFMA witnessed in May, we can expect SIFMA resets to stay volatile for two main reasons: Tax-​exempt MMF demand remains exposed to seasonal fluctuations: Tax exempt MMFs form a very large portion of the demand base for short term tax exempt paper. If we look at the current supply demand equation, we find that the aggregate AUM for tax-​exempt MMFs is about $​124 billion and tax-​exempt MMFs account for 51% of the overall demand for short-​term tax-​exempt products.... Tax-​exempt MMFs face a unique problem, that of diminishing investible paper. `​VRDO outstandings, currently at $​135 billion, have been shrinking. The same is true for TOB outstandings and the size of this market is currently about $​54.​4 billion, thus down 73% from its peak of $​200 billion in 2007. VRDOs and TOBs account for 79% of the short term tax-​exempt market and demand for this category of paper from the traditional tax-​exempt base can be quite sticky."

Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics Tuesday, which track a shifting subset of our monthly Portfolio Holdings collection. The most recent cut (​with data as of July 17) includes Holdings information from 71 money funds (​up 16 from two weeks ago), which represent $​2.​132 trillion (​up from $​1.​959 trillion) of the $​4.​963 trillion (​43.​0%) 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. For our latest monthly Holdings, see our July 13 News, "July MF Portfolio Holdings: Repo Plunges, Treasuries Break $​2.​5 Trillion.") Our latest Weekly MFPH Composition summary again shows Government assets dominating the holdings list with Treasury totaling $​1.​204 trillion (​up from $​1.​137 trillion two weeks ago), or 56.​5%, Repurchase Agreements (​Repo) totaling $​404.​8 billion (​up from $​354.​9 billion two weeks ago), or 19.​0% and Government Agency securities totaling $​339.​6 billion (​up from $​294.​5 billion), or 15.​9%. Certificates of Deposit (​CDs) totaled $​68.​8 billion (​up from $​67.​1 billion), or 3.​2%, and Commercial Paper (​CP) totaled $​59.​0 billion (​up from $​58.​6 billion), or 2.​8%. VRDNs accounted for $​29.​8 billion, or 1.​4%, while the Other category accounted for $​26.​3 billion or 1.​2%. The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $​1.​204 trillion (​56.​5% of total holdings), Federal Home Loan Bank with $​195.​7B (​9.​2%), Federal Farm Credit Bank with $​58.​6B (​2.​7%), BNP Paribas with $​50.​5B (​2.​4%), Federal National Mortgage Association with $​48.​9B (​2.​3%), Fixed Income Clearing Corp with $​40.​2B (​1.​9%), RBC with $​39.​9B (​1.​9%), Federal Home Loan Mortgage Co with $​34.​4B (​1.​6%), Mitsubishi UFJ Financial Group with $​27.​3B (​1.​3%) and JP Morgan with $​26.​6B (​1.​2%). The Ten Largest Funds tracked in our latest Weekly include: Goldman Sachs FS Govt ($​252.​6B), JP Morgan US Govt MMkt ($​185.​6B), Fidelity Inv MM: Govt Port ($​164.​9B), Wells Fargo Govt MM ($​140.​3B), JP Morgan 100% US Treas MMkt ($​120.​8B), Goldman Sachs FS Treas Instruments ($​97.​4B), Morgan Stanley Inst Liq Govt ($​94.​3B), State Street Inst US Govt ($​87.​7B), Dreyfus Govt Cash Mgmt ($​86.​8B), JP Morgan Prime MM ($​80.​7B) and Fidelity Inv MM: MM Port ($​65.​8B). (​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.)

Money market fund yields continue to bottom out just slightly above zero, as our flagship Crane 100 inched down by one basis point to 0.​09% in the latest week. The Crane 100 Money Fund Index fell below the 1.​0% level in mid-​March and below the 0.​5% level in late March. It is down from 1.​46% at the start of the year and down from 2.​23% at the beginning of 2019. Well over half of all money funds and over one quarter of MMF assets have since landed on the zero yield floor, though many continue to show some yield. According to our Money Fund Intelligence Daily, as of Friday, 7/​17, 502 funds (​out of 850 total) yield 0.​00% or 0.​01% with assets of $​1.​532 trillion, or 31.​1% of the total. There are 180 funds yielding between 0.​02% and 0.​10%, totaling $​1.​616 trillion, or 32.​8% of assets; 142 funds yielded between 0.​11% and 0.​25% with $​1.​563 trillion, or 31.​7% of assets; 26 funds yielded between 0.​26% and 0.​50% with $​215.​4 billion in assets, or 4.​4%. No funds yield over funds yield over 0.​50%. The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (​currently 671), shows a 7-​day yield of 0.​06%, unchanged in the week through Friday, 7/​17. The Crane Money Fund Average is down 41 bps from 0.​47% at the beginning of April. Prime Inst MFs were down 2 basis points to 0.​14% in the latest week and Government Inst MFs were flat at 0.​05%. Treasury Inst MFs were unchanged at 0.​05%. Treasury Retail MFs currently yield 0.​01%, (​unchanged in the last week), Government Retail MFs yield 0.​01% (​unchanged in the last week), and Prime Retail MFs yield 0.​07% (​down a basis point for the week), Tax-​exempt MF 7-​day yields were up 2 bps at 0.​04%. (​Let us know if you'​d like to see our latest MFI Daily.) The largest funds tracked by Crane Data yielding 0.​00% or 0.​01% include: Fidelity Govt Cash Reserves ($​200.​9B), Fidelity Government Money Market ($​195.​2B), Fidelity Treasury Fund ($​27.​7B) and Edward Jones Money Mkt Inv ($​22.​7B). Our Crane Brokerage Sweep Index, which hit the zero floor roughly three months ago, remains at 0.​01%. The latest Brokerage Sweep Intelligence, with data as of July 17, shows no changes in the last week. All of the major brokerages now offer rates of 0.​01% for balances of $​100K. No brokerage sweep rates or money fund yields have gone negative to date, but this could become a distinct possibility in coming weeks or months. Crane'​s Brokerage Sweep Index has been flat for the last ten weeks at 0.​01% (​for balances of $​100K). Ameriprise, E*​Trade, Fidelity, Merrill Lynch, Morgan Stanley, Raymond James, RW Baird, Schwab, TD Ameritrade, UBS and Wells Fargo all currently have rates of 0.​01% for balances at the $​100K tier level (​and almost every other tier too). Even fin-​tech firms Betterment, Wealthfront and Robinhood have cut rates, currently offering 0.​40%, 0.​35% and 0.​30%, respectively.

BlackRock'​s Q2 Earnings were released Friday, and the conference call (​see Seeking Alpha transcript) discussed money markets a number of times. CFO Gary Shedlin comments, "BlackRock'​s cash management platform crossed $​600 billion of AUM during the quarter driven by $​24 billion of net inflows. A significant portion of that growth was driven by corporate clients who acted to reinforce balance sheets and strengthen liquidity in the current environment, and we also witnessed strong flows back into institutional prime funds." He explains, "​On the fee waiver point, as I mentioned in my initial calls, we haven'​t yet waived any fees. But in the past, when our clients have struggled with low rates, and subject to market conditions, we have used yield-​support waivers. They typically come into play when yields fall below management fees. We typically share them with our distribution partners. And previously in other periods of time, we'​ve tried to maintain yield floors of somewhere around 1 to 3 basis points.... While timing obviously depends on a lot of things, depending on how quickly portfolios grow, how quickly portfolios turn over, we haven'​t really come to that. As an example, our Fed fund gross yield today is roughly around 26 basis points. That'​s in excess of the management fee which is closer to 17 basis points.... Looking at our crystal ball, that will probably start to hit us in August or September. But I would say a couple of things as you think about that. If we do choose to implement yield support waivers, we do anticipate that about 40% to 50% of those would be shared with our distributors, so that lessens the bottom line impact for us. And we would also anticipate that the primary impact would be on U.​S. government funds which represents today about 50% of our overall -- our cash business.... We'​ve been seeing increasing flows into prime funds. I think as long as those are operating and with the Fed currently providing some secondary market support there, we do think we'​ll continue to see people migrate out of government funds and into those prime vehicles, which we don'​t anticipate to be impacted by fee waivers." Fink adds, "Clients turned to our scaled cash management platform for liquidity and safety, driving $​77 billion of inflows in the first half of this year.... Last year, when we launched our Liquid Environmentally Aware Fund or LEAF strategy, it was the first money market fund to incorporate ESG. In 1 year, it has grown to $​13 billion."

ICI also released its latest monthly "Money Market Fund Holdings" summary yesterday, which reviews the aggregate daily and weekly liquid assets, regional exposure, and maturities (​WAM and WAL) for Prime and Government money market funds. (​For more, see our July 13 News, "July MF Portfolio Holdings: Repo Plunges, Treasuries Break $​2.​5 Trillion," and register for the upcoming "Crane'​s Money Fund Webinar: Portfolio Manager Perspectives," which features our Peter Crane hosting a panel of PMs, including Federated Hermes' Sue Hill, Northern Trust Asset Management'​s Peter Yi and UBS Asset Management'​s David Walczak, on July 22 at 1pm.) The MMF Holdings release says, "The Investment Company Institute (​ICI) reports that, as of the final Friday in June, prime money market funds held 40.​3 percent of their portfolios in daily liquid assets and 50.​2 percent in weekly liquid assets, while government money market funds held 74.​6 percent of their portfolios in daily liquid assets and 83.​6 percent in weekly liquid assets." Prime DLA increased from 41.​3% in May, and Prime WLA increased from 50.​0%. Govt MMFs' DLA increased from 72.​9% in May and Govt WLA increased from 83.​3% from the previous month. ICI explains, "At the end of June, prime funds had a weighted average maturity (​WAM) of 45 days and a weighted average life (​WAL) of 64 days. Average WAMs and WALs are asset-​weighted. Government money market funds had a WAM of 43 days and a WAL of 101 days." Prime WAMs were down three days from the previous month and WALs were unchanged from the previous month. Govt WAMs and WALs were both unchanged in the previous month. Regarding Holdings By Region of Issuer, the release tells us, "Prime money market funds' holdings attributable to the Americas rose from $​402.​00 billion in May to $​430.​17 billion in June. Government money market funds' holdings attributable to the Americas declined from $​3,​487.​55 billion in May to $​3,​400.​40 billion in June." The Prime Money Market Funds by Region of Issuer table shows Americas-​related holdings at $​430.​2 billion, or 55.​8%; Asia and Pacific at $​114.​6 billion, or 14.​9%; Europe at $​217.​4 billion, or 28.​2%; and, Other (​including Supranational) at $​9.​3 billion, or 1.​2%. The Government Money Market Funds by Region of Issuer table shows Americas at $​3.​400 trillion, or 90.​0%; Asia and Pacific at $​110.​6 billion, or 2.​9%; Europe at $​253.​9 billion, 6.​7%, and Other (​Including Supranational) at $​15.​1 billion, or 0.​4%."

Invesco'​s latest "Global Fixed Income Strategy" publication features a brief entitled, "Fixed Income Liquidity - What Did We Learn from the COVID-​19 Crisis?" It tells us, "The Invesco 2020 Global Fixed Income Study and the conversations with 159 global investors late last year offered a common view that we were late in the economic cycle. Almost half of respondents felt that we were less than a year from the next downturn with credit spreads at extremely tight levels. Investors were concerned about liquidity but the survey also showed that, over the past two years, institutions have increased allocations to less liquid fixed income in their search for yield.... We speak with Invesco Fixed Income portfolio managers Laurie Brignac and Matt Brill about their experiences managing liquidity during the March selloff." Invesco asks, "Were the markets any better prepared for liquidity shock compared to 2008?" Brignac answers, "I think it'​s important to recognize how much reform went into effect after the 2008 global financial crisis. Many new regulations were put into place to make our financial system and banks more stable and able to withstand another financial crisis. This was really the first crisis that tested these new reforms. We think the regulators did a terrific job addressing problems quickly. But post-​2008, the plumbing in the financial system has changed quite a bit, and that was part of the problem we faced in March. However, the authorities were also very effective in building on the programs of 2008 and changing them to make them work in 2020." Brill explains, "We have always favored keeping some excess liquidity for periods of volatility. One thing we aim to do is avoid being a forced seller. We believe if you can avoid being a forced seller, you can survive a crisis much more successfully.... The first stage of our response centered on reducing beta and improving liquidity in our portfolios to guard against spread widening or potential outflows. The second stage centered around the potential for rating downgrades and major bond price declines. The guard against that, we relied on our credit research capabilities. We have a watch list at Invesco Fixed Income that includes every bond or company that we believe could be downgraded from investment grade to high yield. Our goal is to place issuers on this watch list well in advance of any credit trouble." Brignac also says, "When you get inflows of over USD1 trillion in a matter of weeks, there is likely going to be a supply-​demand mismatch in the front end of the curve. Recall that in early March, the Fed was actively buying short-​term US Treasuries, trying to inject more reserves into the market. Then with the outbreak of the crisis, a huge volume of money flowed into government money market funds in the span of two or three weeks. It created a massive imbalance with too many people chasing too few assets. As a result, for the first time ever, we saw pervasive negative yields in the US Treasury bill market.... Again, the authorities were very proactive. We provided feedback on the need to issue more US Treasury bills and the US Treasury was very responsive."

J.​P. Morgan Securities writes in their latest "Short-​Term Fixed Income" that "Tax day looms; MMF trend towards T-​bills persists." They tell us, "Money market investors are anxiously preparing for [​the] July 15 tax date. Beyond its impact of Treasury'​s General Account (​TGA) at the Fed and the implications on net T-​bill issuance, money market participants are wondering how much cash could be withdrawn from MMFs to fund the tax payments. Based on the pace observed in 2018 and 2019, our Treasury strategists estimate individual income taxes would amount to about $​90bn while corporate taxes would amount to $​60bn for a total of $​150bn to be collected by Treasury.... As we noted in our mid-​year outlook, it is typical for corporations to draw on their MMFs to fund their tax payments while it is less common for individuals.... This would suggest that we could see at least $​50-​60bn be withdrawn from institutional MMFs (​most likely government institutional MMFs) to pay for corporate taxes, and more if individuals also decide to fund their tax payments with MMFs rather than bank deposits." The piece continues, "While $​60bn only represents about 2% of government institutional MMFs' balances, nonetheless this implies less demand for repo and T-​bills. Over the past two years, we have found that SOFR tends to move higher by ~​5bp around tax days (​excluding last September), though we suspect this should not be an issue this time around given the amount of liquidity in the system and the availability of TOMOs as a backstop. As for T-​bills, while outflows will generate less demand for this product, we also anticipate net T-​bill issuance to slow considerably this month. In fact, our Treasury strategists believe that net T-​bill issuance will increase a modest $​24bn in July (​versus +$​460bn in June, +$​588bn in May, and +$​1344bn in April) given Treasury'​s continued elevated TGA balances. Net, the reduction in demand is met with relatively muted net T-​bill supply in the coming weeks which we believe will keep T-​bill yields relatively contained." JPM'​s piece adds, "There is also uncertainty as to how MMF AUMs evolve in 2H. Beyond the seasonal aspect that typically drives flows into institutional MMFs, to the degree that the virus gets worse relative to expectations, companies may want to top up more of their cash, issue more as a liquidity insurance, and perhaps be more proactive in trying to refinance maturities in the coming year, all of which would suggest more government MMF demand. Furthermore, when Treasury makes use of the cash sitting at the TGA, this also releases more reserves in the system, though the size and timing of these flows are quite uncertain. Taken together, how these factors evolve will have implications for T-​bills/​OIS and until we get more clarity, T-​bill yields are likely going to be range bound, if not move modestly lower."

Funds Europe writes "JPMAM unveils euro money market fund that turns up risk gradually," which tells us, "JP Morgan Asset Management (​JPMAM) has launched its first [​sic] euro money market fund designed for risk-​averse European investors. The firm says the fund will invest conservatively in corporate bonds and focus on capital preservation – but it will steadily move up the risk spectrum from top-​rated bonds to those with a slightly lower risk in order to gain yield. Negative interest rates mean many cash investors are looking for ways to gain additional yield without too much additional risk, JPMAM said." The brief explains, "Called JPMorgan Liquidity Funds – EUR Standard Money Market VNAV, the fund will take incremental risk by stepping out from securities suitable for a AAA short-​term money market fund, and moving into BBB-​rated credit, extending the duration up to six months. This is intended to reduce the level of negative returns cash investors are generating on their euro assets while still maintaining a high degree of liquidity, said Jim Fuell, international head of global liquidity sales." Fuell adds "At present, sitting on the side-​lines in cash can mean you'​re deeply in negative territory." Fitch Ratings writes "Fitch Rates JPMorgan Liquidity Funds - EUR Standard Money Market VNAV Fund '​AAf'/'​S1'," saying, "Fitch Ratings has assigned JPMorgan Liquidity Funds - EUR Standard Money Market VNAV Fund a Fund Credit Quality Rating of '​AAf' and a Fund Market Risk Sensitivity Rating of '​S1'. As the fund has just been launched, it may take time for the fund to reach its target portfolio construction. Fitch had based its analysis on the fund'​s governing documentation, investment guidelines and model portfolio, combined with stress-​testing scenarios to reach its final rating. Fitch'​s standard stress tests, and additional scenarios based on the fund'​s investment guidelines, show that the ratings are robust at the current rating." Fitch adds, "The fund is a sub fund of the umbrella fund (​JPMorgan Liquidity Funds) which is a Socié​té d'​Investissement à Capital Variable (​SICAV) that falls under the UCITS regulation framework. The fund is authorised and supervised by Commission de Surveillance du Secteur Financier (​CSSF) as a standard money market fund under European money market fund regulation. Fitch considers the legal and regulatory framework of the fund satisfactory. As of 9 July 2020, the fund'​s total assets under management were approximately EUR170 million at launch."

The Washington Post features a column by Allan Sloan entitled, "The Fed interest rate cuts are costing money fund investors billions a year," which is subtitled, "Money fund yields have fallen more than 90 percent since the Fed began cutting short-​term rates to near zero to help stimulate the economy after the coronavirus struck." It asks, "Would you believe that the Federal Reserve'​s interest rate cuts are costing money market mutual fund investors more than $​60 billion a year of income? Well, you should believe it, because it'​s true. Using numbers from money fund specialist Crane Data, I estimate that in the past four months, the Fed'​s rate cuts have reduced money fund dividends by almost $​64 billion a year from what they were at the end of February. That'​s because money fund yields have fallen more than 90 percent since the beginning of March, when the Fed began cutting already-​low short-​term rates to near zero to help stimulate the economy." The column quotes Crane Data President Peter Crane, "Never have so many gotten so little on so much money." It continues, "I want to show you how the Fed'​s cuts in short-​term rates, part of a multi-​trillion-​dollar attempt to keep the U.​S. economy from imploding because of the coronavirus, is clobbering people looking for a safe place to keep their money.... But what'​s best for most people isn'​t best for all people. And the reason I'​m taking you through this math is to show how much impact ultralow interest rates can have on people of modest means who need income from their savings to live on." Sloan explains, "I worked out a way to estimate those numbers in several conversations with Peter Crane. According to Crane, the average yield on the Crane 100 -- 100 major money funds that have about 75 percent of all money fund assets -- was 1.​41 percent as of Feb. 29. As of June 30, the average yield was down to 0.​11 percent. That drop to 0.​11 percent from 1.​41 percent is the 90 percent yield reduction that I talked about earlier. As of June 30, the most recent date for which Crane has statistics, money fund assets totaled about $​4.​9 trillion. Apply the 1.​3 percent difference between the Feb. 29 yield and the June 30 yield to $​4.​9 trillion and you get a $​63.​7 billion drop." The piece adds, "Crane says managers of more than half the money funds in its universe have reduced their fees to make sure that returns on their funds don'​t turn negative.... I expect more money fund managers to cut their fees and for yields to keep drifting down as higher-​yielding securities funds bought a while ago mature and are replaced by lower-​yielding securities. In the last cycle, kicked off by the 2008-​09 financial meltdown, the Crane 100 yield bottomed out at 0.​02 percent. Don'​t be surprised if yields get that close to zero this time around, too."

Last week, The Wall Street Journal wrote the article, "Credit Suisse Funds Under Review Financed Nissan, Kellogg -- and a Mogadishu Hotel Owner," which explains, "Greensill Capital, a SoftBank Group Corp.-​backed financing firm, has raised billions of dollars by offering a way for investors to boost yields by helping companies manage cash flow. Greensill funds long-​established companies such as cereal maker Kellogg Co. and Nissan Motor Co., but it also has a roster of lesser-​known businesses that inject risk into its portfolio, according to fund documents distributed to investors. These include a private security firm that runs a hotel in Mogadishu, a coal miner that paid Greensill in stock instead of cash and several firms that got more in financing than they generated in revenue. Last week, Credit Suisse Group AG launched an internal review of four funds that the bank runs with Greensill. The funds have grown quickly and hold about $​7.​5 billion in assets in aggregate, up from $​2 billion at the start of 2019. They invest in securities sourced from Greensill clients." The piece continues, "Credit Suisse hasn'​t provided details about the review, which is continuing and is looking at the funds broadly. According to people familiar with the matter, it was prompted by concerns about the multilayered role of SoftBank. As well as holding a large stake in Greensill, the Japanese conglomerate invested $​500 million in the funds. The less-​established names that the funds finance include several of SoftBank'​s Vision Fund portfolio companies, including one to whom it provided unusually long payment terms." The WSJ adds, "Greensill, run by former Citigroup Inc. banker Lex Greensill, is part of a broader industry that provides short-​term funding to pay companies' suppliers, also known as supply-​chain financing.... Using this financing, companies effectively borrow money to pay their bills. Greensill pays the suppliers faster than they normally would be, but at a discount to the invoiced amount. The corporate clients, known as obligors, agree to pay back Greensill later. Those promises are packed up into securities that can be sold to investors. The Credit Suisse funds, which invest in securities primarily originated by Greensill, are pitched as alternatives to other relatively liquid diversified investments, such as money-​market funds, which also lend short term to companies. The main Credit Suisse Greensill fund returned 3.​35% in the year to June 1, compared with 1.​8% in the same period for a large money-​market fund run by JPMorgan Chase & Co. Assets in three of the funds are also protected by trade credit insurance, which covers potential defaults. Credit Suisse warns investors that there is no certainty that obligors or the insurance contracts pay in full or on time, according to a fund document."

Wells Fargo Money Market Funds published their monthly "Portfolio Manager Commentary," yesterday, and authors Jeff Weaver, Laurie White, et. al., tell us, "​If the end of the first quarter of 2020 felt like deja vu all over again, the second quarter positively felt like a renaissance. As we watched the tremendous risk-​off trades and liquidity raising taking place in March, we couldn'​t help but flash back to 2016 and the implementation of money market reform, which saw institutional prime funds shrink by over 86%, bottoming out that year at just north of $​119 billion. While that was clearly a regulatory-​driven event, the pandemic-​related selling we saw in the prime funds was prompted by a confluence of a few different factors: investors raising cash to meet liquidity needs, shareholders conducting precautionary cash raises in case fees and/​or gates were implemented, falling net asset values (​NAVs) in institutional floating NAV (​FNAV) funds due to market dislocations, and a general flight to perceived safety.... Some funds were hit harder than others -- institutional versus retail -- as were different fund families. But by and large, with only one exception, funds were able to manage their liquidity in excess of the 30% regulatory requirement, and all funds avoided implementing fees and gates. The Federal Reserve (​Fed) played a vital role in ensuring this outcome and helping calm the financial markets with the implementation of its Money Market Mutual Fund Liquidity Facility (​MMLF), which went operational on March 23, and outflows from prime funds ceased by the end of March. At the end of the day, so to speak, prime funds ended down over 15% on the month, with institutional prime funds down almost 19%." Wells continues, "And then a funny thing happened: Prime funds started growing again.... April inflows were $​82 billion followed by another $​87 billion in May, which then slowed to $​23 billion in June. All in all, prime fund assets under management reached a post-​reform high of over $​1.​1 trillion. This focus on prime funds is not to downplay the tremendous growth of government funds during the past two quarters, which propelled the industry to record assets under management of over $​5 trillion. It is meant to illustrate that in spite of market dislocations, there is still a demand on the part of some investors for this type of product." They add, "The course of asset flows as the year progresses, liquidity facilities wind down, and the inevitable talk of reform gets started will help us better understand the risk characteristics driving client flows and preferences and, in turn, help us better manage the funds to meet investor expectations."

Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics Tuesday, which track a shifting subset of our monthly Portfolio Holdings collection. The most recent cut (​with data as of July 3) includes Holdings information from 55 money funds (​down 26 from a week ago), which represent $​1.​959 trillion (​down from $​2.​551 trillion) of the $​5.​122 trillion (​38.​2%) 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. For our latest monthly Holdings, see our June 10 News, "June Portfolio Holdings: Treasuries Skyrocket; Repo, Agencies Plunge.") Our latest Weekly MFPH Composition summary again shows Government assets dominating the holdings list with Treasury totaling $​1.​137 trillion (​down from $​1.​425 trillion a week ago), or 58.​0%, Repurchase Agreements (​Repo) totaling $​354.​9 billion (​down from $​508.​4 billion a week ago), or 18.​1% and Government Agency securities totaling $​294.​5 billion (​down from $​408.​1 billion), or 15.​0%. Certificates of Deposit (​CDs) totaled $​67.​1 billion (​down from $​75.​2 billion), or 3.​4%, and Commercial Paper (​CP) totaled $​58.​6 billion (​down from $​65.​9 billion), or 3.​0%. VRDNs accounted for $​27.​2 billion, or 1.​4%, while the Other category accounted for $​19.​9 billion or 1.​0%. The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $​1.​137 trillion (​58.​0% of total holdings), Federal Home Loan Bank with $​168.​2B (​8.​6%), Federal Farm Credit Bank with $​47.​6B (​2.​4%), Fixed Income Clearing Corp with $​44.​7B (​2.​3%), Federal National Mortgage Association with $​44.​0B (​2.​2%), BNP Paribas with $​34.​7B (​1.​8%), Federal Home Loan Mortgage Corp with $​33.​0B (​1.​7%), RBC with $​28.​2B (​1.​4%), JP Morgan with $​24.​8B (​1.​3%) and Mitsubishi UFJ Financial Group Inc with $​23.​6B (​1.​2%). The Ten Largest Funds tracked in our latest Weekly include: Goldman Sachs FS Govt ($​249.​3B), JP Morgan US Govt MMkt ($​185.​7B), Fidelity Inv MM: Govt Port ($​173.​2B), Wells Fargo Govt MM ($​143.​6B), JP Morgan 100% US Treas MMkt ($​116.​8B), Goldman Sachs FS Treas Instruments ($​99.​1B), Morgan Stanley Inst Liq Govt ($​98.​5B), State Street Inst US Govt ($​87.​3B), Dreyfus Govt Cash Mgmt ($​85.​3B), JP Morgan Prime MMkt ($​77.​9B) and Fidelity Inv MM: MM Port ($​66.​5B). (​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.)

Our flagship Crane 100 Money Fund Index inched down another basis point to 0.​11% in the latest week. The Crane 100 fell below the 1.​0% level in mid-​March and below the 0.​5% level in late March, and it'​s down from 1.​46% at the start of the year and down from 2.​23% at the beginning of 2019. Over half of all money funds and over one quarter of MMF assets have already hit the zero floor, though many continue to show some yield. According to our Money Fund Intelligence Daily, as of Thursday, 7/​2, 485 funds (​out of 849 total) yield 0.​00% or 0.​01% with assets of $​1.​493 trillion, or 29.​9% of the total. There are 179 funds yielding between 0.​02% and 0.​10%, totaling $​1.​591 trillion, or 31.​9% of assets; 117 funds yielded between 0.​11% and 0.​25% with $​1.​381 trillion, or 27.​7% of assets; 65 funds yielded between 0.​26% and 0.​50% with $​438.​4 billion in assets, or 8.​8%; and just three funds yield between 0.​51% and 0.​99% with $​81.​2 billion in assets or 1.​6% (​no funds yield over 1.​00%). The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (​currently 671), shows a 7-​day yield of 0.​07%, down a basis point in the week through Thursday, 7/​2. The Crane Money Fund Average is down 40 bps from 0.​47% at the beginning of April. Prime Inst MFs were down 2 basis points to 0.​18% in the latest week and Government Inst MFs were flat at 0.​06%. Treasury Inst MFs were unchanged at 0.​05%. Treasury Retail MFs currently yield 0.​01%, (​unchanged in the last week), Government Retail MFs yield 0.​02% (​unchanged in the last week), and Prime Retail MFs yield 0.​10% (​down a basis point for the week), Tax-​exempt MF 7-​day yields were down a basis point at 0.​03%. (​Let us know if you'​d like to see our latest MFI Daily.) The largest funds tracked by Crane Data yielding 0.​00% or 0.​01% include: Fidelity Govt Cash Reserves ($​201.​3B), Fidelity Government Money Market ($​194.​2B), Fidelity Treasury Fund ($​29.​5B) and Edward Jones Money Mkt Inv ($​22.​8B). Our `​Crane Brokerage Sweep Index, which hit the zero floor a little over two months ago, remains at 0.​01%. The latest Brokerage Sweep Intelligence, with data as of July 2, shows no changes in the last week. All of the major brokerages now offer rates of 0.​01% for balances of $​100K. No brokerage sweep rates or money fund yields have gone negative to date, but this could become a distinct possibility in coming weeks or months. Crane'​s Brokerage Sweep Index has been flat for the last ten weeks at 0.​01% (​for balances of $​100K). Ameriprise, E*​Trade, Fidelity, Merrill Lynch, Morgan Stanley, Raymond James, RW Baird, Schwab, TD Ameritrade, UBS and Wells Fargo all currently have rates of 0.​01% for balances at the $​100K tier level (​and almost every other tier too).

Barron'​s published the article, "Why Your Money-​Market Fund Isn'​t as Safe as You Think." It opines, "No one wants their money-​market funds to be interesting. They are the cash-​like income funds you buy when you'​re waiting to buy something else, with a $​1 share price that you always want to stay $​1. Unfortunately, during the coronavirus crisis, money funds became interesting. From March 2 to March 23, the assets under management of prime money-​market funds, which buy high-​quality corporate debt, dropped by $​120 billion -- 15% of prime funds' assets at the time. To prevent a stampede like in the 2008 financial crisis, the Federal Reserve established the Money Market Mutual Fund Liquidity Facility, or MMLF, on March 18 to provide loans to banks to purchase money funds' underlying securities, thereby improving their liquidity. Given the crisis, it'​s time people stop thinking of money funds as risk-​free." The piece explains, "While the last fund to break the buck was 2008'​s Reserve Primary, liquidity in 2020 proved a greater problem, ironically because of regulations the SEC created in 2014 as a result of the Reserve fund debacle. After the financial crisis, the SEC issued two rounds of reforms: The first, in 2010, tackled liquidity, mandating that a larger portion of the securities a fund owns must be easily sold. The second, in 2014, separated money-​market funds into two categories -- retail funds, which were allowed to keep the $​1 per share value so long as they held only government-​issued securities, and institutional prime money-​market funds, which have a floating NAV." They quote Wells Fargo Asset Management'​s Jeff Weaver, "As a manager of a prime money-​market fund, you must maintain 30% in liquid assets, which are predominantly assets that mature within seven days and Treasury bills. If you drop below that 30%, then the [​fund'​s] board of directors must consider fees and gates." Barron'​s adds, "Currently, the average fund in the Crane 100 Money Fund Index of the 100 largest taxable money funds yields only 0.​12%. And that minuscule payout is only possible by money funds waiving part of their fees. 'About half of all money funds currently yield 0.​01%,' says Peter Crane, president of money fund tracker Crane Data. 'And those are the ones that are waiving the most fees. They account for about a third of all money fund assets -- your smaller, higher-​expense funds.' Total U.​S. money-​market fund assets were $​5.​2 trillion at the end of May. Such waivers can be costly even for the lowest-​fee managers."

Federated Hermes Deborah Cunningham writes about the money markets' "Ebb and flow" in her latest commentary. She tells us, "The month of June-​and the year for that matter-​has shown the dynamic nature of the liquidity space. While stability is the asset class' defining feature, its reputation as static has always been unwarranted. Cash products are essential to the fluidity of the markets, especially in times of uncertainty, and crucial to portfolio reallocation, personal finances and capital expenditures in times of growth. All you have to do is look at flows. As the markets tanked due to fear of Covid-​19, assets in government funds skyrocketed for their relative safety. The vast majority of that money came from investors selling positions in stocks, but some came from institutional prime portfolios. As it became clear the pandemic wasn'​t ushering in the apocalypse and the Federal Reserve and Congress stepped up, institutional prime funds regained assets, growing nearly 36% from March 31 to June 29. We consider this a vote of confidence from investors who value them for the combination of relative safety and a yield spread above many cash-​like alternatives." Cunningham explains, "While the influx is impressive, flows reversed slightly in June. This is not a negative, but further proof of the dynamic aspect of money markets, showing they are part of the collective investing process. A certain amount of ebb and flow in money funds and similar portfolios is part of the process, whether it'​s due to investors conserving dry powder for future purchases (​witness strong retail sales and the stock market) or businesses withdrawing assets to restart operations." She adds, "​Recent Fed action on rates has been helpful. No, not a rise in interest rates, but policymakers increased the overnight and term repo rates by five basis points. We had advocated for a bump in the reverse repo program to raise the floor on overnight rates. But the result has been similar as rates have increased. Part of the reason for this rise is that the Fed moved the timing of its repo transactions from the morning to the afternoon.... The majority of volume in the repo takes place between 7-​9 a.​m. While the Fed is offering a higher rate than before, dealers don'​t want to wait until 2 p.​m. to be funded, so they are offering higher rates in the morning. The Fed wants this -- and frankly most of its new programs -- to operate as a backstop, not as an active part of the markets. It is another smart move by policymakers."

As we told Sponsors and Speakers in an e-​mail last week, due to the coronavirus pandemic and continued travel restrictions, we'​ve again shifted back the dates of our annual Money Fund Symposium conference. Crane'​s Money Fund Symposium is now scheduled for October 26-​28, 2020, at the Hyatt Regency Minneapolis. (​It had been scheduled for August 24-​26.) We'​ll continue to watch events carefully in coming weeks (​and will keep our fingers crossed), and we'​ll be prepared to cancel and to switch to a virtual event 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 August show will be transferred to the new October dates, and August hotel reservations will be cancelled if you'​ve already made plans.) Register too for our next online event, "Crane'​s Money Fund Webinar: Portfolio Manager Perspectives," which will feature our Peter Crane hosting a panel including Federated Hermes' Sue Hill, Northern Trust Asset Management'​s Peter Yi and UBS Asset Management'​s David Walczak. Watch the replay of our previous "Portfolio Holdings Update" webinar too. Also, we'​re in the process of cancelling our next European Money Fund Symposium, which was scheduled for Sept. 17-​18, 2020, in Paris, France. (​We'​ll likely hold a virtual event this year, and next year'​s European MFS will be Oct. 20-​21, 2021 in Paris.) 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. Crane Data will 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 fall! 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 our events and Crane Data subscribers may access the latest recordings, Powerpoints and binder materials at the bottom of our Content page.

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