Daily Links Archives: October, 2022

A press release entitled, "Citigroup : Citi Offers First Money Market Fund Distribution Service to Institutional Clients in China," states, "Citi has started offering money market fund distribution services to institutional clients in China -- a move set to help multinational and local corporates in the country better manage cash amid volatile global markets. Leading food and beverage company Danone has become the first to execute this service. With short investment cycles, money market funds might offer treasurers valuable return in volatile markets. The RMB-denominated fund Citi offers as of now is AAA-rated by an international credit rating agency, with onshore commercial paper, certificates of deposit, short-term government bonds and other money market instruments.... Clients can efficiently manage, subscribe and redeem via Citi's banking platform." Rajesh Mehta, Asia Pacific Head of Treasury and Trade Solutions at Citi, comments, "With a RMB 10 trillion market1, China's onshore money market funds provide many investment opportunities for Citi's clients. Citi plans to roll out more of such funds for clients in China to meet their cash management needs, while beefing up our RMB product offering." Melvin Lim, VP, Danone Business Services China, North Asia & Oceania, says, "Citi's RMB Money Market Fund Distribution Program provides a convenient transaction channel of money market funds to enhance the return of surplus cash while maintaining liquidity." Howard Yang, China Head of Treasury and Trade Solutions at Citi, adds, "We are actively rolling more RMB investment channels that are convenient to use with plenty liquidity, as we meet client demand, help them navigate risks and create value for the real economy." The release explains, "The first money market fund on the shelf is offered by a large asset management company Citi has worked with for many years in China. Among the first foreign banks to incorporate locally in 2007, Citi has strong ties with leading Chinese brokerages and fund houses, which helped provide Citi's clients with a wide range of local and global opportunities."

A filing for Transamerica Government Money Market explains, "The fund is closed to most new investors. The following investors may continue to purchase shares of the fund: existing fund investors, investors exchanging shares of another Transamerica fund for shares in the same class of the fund, asset allocation funds and other investment products in which the fund is currently an underlying investment option, retirement plans in which the fund is a plan option, and any plan that is or becomes a part of a multiple plan exchange recordkeeping platform that includes the fund as a plan option. The fund will remain closed until further notice. The fund reserves the right to modify the foregoing terms of the closure at any time and to accept or reject any investment for any reason." It continues, "Effective immediately, the corresponding paragraph in the sub-section of the Retail Statement of Additional Information for Transamerica Government Money Market entitled 'Purchase of Shares,' under the section 'Purchase, Redemption and Pricing of Shares,' is replaced in its entirety with the following: Class R shares of Transamerica Government Money Market were renamed Class R2 shares on October 13, 2017. Class R2 shares of Transamerica Government Money Market are discussed in a separate SAI. Effective March 31, 2021, Transamerica Government Money Market is closed to most new investors. The following investors may continue to purchase shares of the fund: existing fund investors, investors exchanging shares of another Transamerica fund for shares in the same class of the fund, asset allocation funds and other investment products in which the fund is currently an underlying investment option, retirement plans in which the fund is a plan option, and any plan that is or becomes a part of a multiple plan exchange recordkeeping platform that includes the fund as a plan option. Transamerica Government Money Market will remain closed until further notice. The fund reserves the right to modify the foregoing terms of the closure at any time and to accept or reject any investment for any reason."

Reuters writes in a brief, "China Seeking to Curb Liquidity Risks in $1.4 Trln Money Market Fund - Sources." They explain, "Chinese regulators have urged money market fund managers to improve investor structure and ensure adequate holdings of liquid assets, three sources told Reuters, as authorities seeks to head off liquidity risks in the $1.4 trillion sector. Securities regulators have recently asked fund managers to prevent an excessive proportion of institutional investors in money market funds, the sources said. For those funds with more than 70% of assets held by institutions, fund managers must ensure that at least 20% of the money is invested in liquid assets, while bond durations must be kept within 70 days." The article continues, "One source said that the aim of the guidance is to prevent the risk of severe market volatility in the event of massive redemptions. Another source said that 'regulators are worried that, if interest rates goes up from such a low level now, big redemptions from banks could trigger liquidity stress.' The China Securities Regulatory Commission (CSRC) didn't immediately respond to a request for comment. Money market funds totalled roughly 10.7 trillion yuan ($1.46 trillion) by the end of September, accounting for about 46% of China's mutual fund industry."

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 Oct. 21) includes Holdings information from 71 money funds (up 30 from a week ago), which represent $2.059 trillion (up from $1.403 trillion) of the $5.011 trillion (41.1%) in total money fund assets tracked by Crane Data. (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 $1.162 trillion (up from $655.6 billion a week ago), or 56.4%; Treasuries totaling $577.4 billion (up from $272.3 billion a week ago), or 28.0%, and Government Agency securities totaling $141.7 billion (up from $67.0 billion), or 6.9%. Commercial Paper (CP) totaled $67.5 billion (up from a week ago at $21.3 billion), or 3.3%. Certificates of Deposit (CDs) totaled $36.0 billion (up from $7.9 billion a week ago), or 1.8%. The Other category accounted for $50.9 billion or 2.5%, while VRDNs accounted for 23.6 billion, or 1.1%. The Ten Largest Issuers in our Weekly Holdings product include: the Federal Reserve Bank of New York with $866.1 billion (42.1%), the US Treasury with $577.4 billion (28.0% of total holdings), Federal Home Loan Bank with $79.9B (3.9%), Federal Farm Credit Bank with $56.5B (2.7%), Fixed Income Clearing Corp with $34.7B (1.7%), JP Morgan with $28.9B (1.4%), RBC with $23.0B (1.1%), BNP Paribas with $22.7B (1.1%), Barclays PLC with $18.6B (0.9%) and Mitsubishi UFJ Financial Group Inc with $17.4B (0.8%). The Ten Largest Funds tracked in our latest Weekly include: BlackRock Lq FedFund ($139.1B), Morgan Stanley Inst Liq Govt ($136.9B), Federated Hermes Govt Obl ($136.2B), Fidelity Inv MM: Govt Port ($122.3B), BlackRock Lq Treas Tr ($113.3B), Dreyfus Govt Cash Mgmt ($108.6B), State Street Inst US Govt ($104.0B), BlackRock Lq T-Fund ($100.5B), Allspring Govt MM ($99.4B) and First American Govt Oblg ($77.9B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary.)

Mutual fund news source ignites published, "Retail Prime Money Fund Assets Jumped 67% Since March." They tell us, "Since March, when the Federal Reserve kicked off a series of five interest rate hikes, retail prime money market funds have added $132 billion in assets, growing to $331 billion, Investment Company Institute data shows. Assets in such products have grown by 66% in the past seven months, the data shows. During the same period, retail prime money funds boosted their market share from 46% of all prime money fund assets to 59%, according to the ICI's data. Institutional prime money fund assets, on the other hand, have remained essentially flat since March, dropping about $2 billion, to $228.3 billion, as of Oct. 19." They quote, "It's a 'tale of two investor bases in money market funds,' said Peter Crane, chief executive of Crane Data. 'Everybody keeps expecting money market fund assets to move higher, and they've been flat or lower, but retail has been growing, and that's really a function of brokerage sweep cash.'" The article continues, "`The retail money fund 'comeback' is in prime money funds, he added.... The volatile stock market is clearly driving the substantial flows into retail money funds, but low rates on brokerage sweep and bank deposit options are equally responsible for the influx of cash, Crane said. Most brokerages no longer sweep client assets into a money market fund, and instead push the assets into bank sweep products, which generally yield substantially less. But brokerage clients can also opt to move their money into what firms call 'a position money fund,' he noted, and that appears to be happening. 'Investors are starting to move the money themselves,' Crane said." The ignites piece adds, "Certain money funds in brokerage plans tend to be 'prime heavy,' Crane said, 'so you look at who's gaining assets, and that tells you [the gain is due to] position money funds.' At Schwab, for example, investors added about $17 billion to money funds in September, according to Crane Data. The firm's money fund assets stood at $211 billion as of Sept. 30, up 43% from a year earlier, its latest earnings report shows.... Schwab's bank sweep option yielded 40 bps as of Oct. 17, Crane Data reports. Its $73 billion Schwab Value Advantage Money Fund, a retail prime fund, had a seven-day yield of 2.93% as of Oct. 20.... 'The spreads between bank sweeps and top money funds, you could drive a truck through,' Crane said."

Federated Hermes' recently posted a brief video, "Not all cash is alike," which features Steve Chiavarone answering the question, "How can investors diversify cash investments." He tells us, "Well, as a matter of course, just philosophically, we're believers in diversification. We also understand that not all cash is alike, if you will. Right? There's different uses of cash. There's different durations of cash and there's different timeframes. So we are a big believer in investing across the short end of the yield curve, not just one specific place as an example, dependent on cash needs and your strategic goals. What I'd say is that as we think about that 0-3 year point curve, there's some areas that we find attractive and there's some themes that will play through in our current thinking. And I'd say what those themes are is first off short duration. While we do think we'll hit a point at some point, maybe, over the next 12 to 18 months where you want to lengthen duration, we don't think that time is now as the market is still pricing in." He continues, "I think [we have] a Fed that's going to be a little bit more aggressive than we thought they would be even a month ago. So we think the bias is for rates to move higher and so we prefer shorter duration assets. That's why we say that cash is king right now. That's why we particularly like the money market space, and we're not afraid of credit in the money market space. So we think prime money market funds are well positioned." Chiavarone adds, "In addition, though, there are opportunities to move down either from intermediate duration fixed income into the 2-3 year part of the curve, or from that low duration 2-3 year part of the curve into the ultra-short part of the curve. And I think the shorter the better. So when you think about ultra-short funds that have the shortest duration, micro short if you will, we think that those are particularly well positioned. In addition, up in quality is the move right now. As growth is deteriorating and as we have concerns about potential recession, the further out the curve we go, the less likely we are inclined to take credit risk. So while I might be okay with credit risk in the money market space, I'm probably going to be more inclined towards either munies or govies as I get into that ultra-short space, and certainly as I'm in that low duration space. Those are really the big themes. It's about shorter duration, higher quality, and we still think for the time being, if you can find floating rate securities that are attractively priced, that makes sense throughout that short end of the yield curve."

The Investment Company Institute's weekly "Money Market Fund Assets" shows money fund assets fell in the latest week as Inst MMFs continue sliding but Retail MMFs continue jumping. ICI shows assets down by $120 billion, or -2.6%, year-to-date, with Institutional MMFs down $222 billion, or -6.9% and Retail MMFs up $102 billion, or 6.9%. Over the past 52 weeks, money fund assets are up by $67 billion, or 1.5%, with Retail MMFs rising by $135 billion (9.4%) and Inst MMFs falling by $68 billion (-2.2%). (For the month of October through 10/19, MMF assets have decreased by $4.0 billion to $5.032 trillion according to Crane's MFI XLS, which tracks a broader universe of funds than ICI. Crane Data's Prime asset total is currently $986.4 billion.) Their weekly release says, "Total money market fund assets decreased by $3.65 billion to $4.58 trillion for the week ended Wednesday, October 19, the Investment Company Institute reported.... Among taxable money market funds, government funds decreased by $13.53 billion and prime funds increased by $7.76 billion. Tax-exempt money market funds increased by $2.12 billion." ICI's stats show Institutional MMFs decreasing $19.4 billion and Retail MMFs increasing $15.8 billion in the latest week. Total Government MMF assets, including Treasury funds, were $3.917 trillion (85.4% of all money funds), while Total Prime MMFs were $559.8 billion (12.2%). Tax Exempt MMFs totaled $107.4 billion (2.3%). ICI explains, "Assets of retail money market funds increased by $15.77 billion to $1.57 trillion. Among retail funds, government money market fund assets increased by $4.52 billion to $1.14 trillion, prime money market fund assets increased by $9.22 billion to $331.45 billion, and tax-exempt fund assets increased by $2.03 billion to $96.24 billion." Retail assets now account for over a third of total assets, or 34.3%, and Government Retail assets make up 72.8% of all Retail MMFs. They add, "Assets of institutional money market funds decreased by $19.42 billion to $3.01 trillion. Among institutional funds, government money market fund assets decreased by $18.05 billion to $2.77 trillion, prime money market fund assets decreased by $1.47 billion to $228.30 billion, and tax-exempt fund assets increased by $91 million to $11.19 billion." Institutional assets accounted for 65.7% of all MMF assets, with Government Institutional assets making up 92.1% of all Institutional MMF totals. (Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data, so they're over $400 billion lower than Crane's asset series.)

J.P. Morgan Asset Management's Head of Liquidity John Donohue posted a blog entitled, "Remembering Black Monday." He writes, "On October 19, 1987, I was a 22 year old recent graduate, and four months into a thankless entry-level job on Wall Street. By the end of the day, now known as 'Black Monday,' the Dow had plunged 22.6% in what remains the biggest single-day stock market selloff on record. My memories of Black Monday are still fresh as we approach its 35th anniversary." He comments, "The chaos that followed the market crash eventually eased, but the lessons learned continue guiding me to this day as head of J.P. Morgan's Global Liquidity business. Black Monday was the first of many crises I've encountered over the past 35 years. Each serves as a reminder of how quickly markets can freeze up and how critical liquidity becomes at those times. As I look back over the decades, I also see the Fed following a nearly identical playbook during every major emergency. Their specific policies may vary, but the goal is always the same -- inject enough liquidity into the system to stabilize markets and reassure investors." Donohue explains, "Of course, they can also remove liquidity from markets -- a lesson I learned firsthand in 1994 on the money market trading desk. Back then, the Fed was aggressively raising interest rates to fight inflation, driving down stocks and bonds and leaving investors with nowhere to hide except cash. That exact same scenario is playing out again today, but an even more aggressive strategy has put us in truly uncharted territory." He adds, "History teaches that money market funds are hyper-sensitive to Fed policy. As liquidity crunches arise, we in Global Liquidity often feel the biggest impact because our clients need ready access to their cash. I'm always telling my team that cash is the most sacred asset people own in times of turmoil. We need to be good stewards of it. We need to be extra vigilant in protecting it. We need to be diversified and disciplined, yet ready to shift course quickly as conditions change. Some of the younger folks on our team are in their first jobs, just as I was on Black Monday. As someone who started out stuffing envelopes, I'm living proof that you never know where a career might lead. Do great work, no matter how menial, and the recognition and promotions will follow. Be open to any and all new job opportunities, but don't take them based only on short-term rewards because choices made now will affect careers later. Investors need that same long-term focus today. Markets are down, and we're seeing a lot of value across asset classes. Recovery may be months or even years away, but those who invest now will likely consider it one of their best financial decisions when looking back in another 20 or 30 years."

CFO magazine writes "Corporate Cash Finally Finds Some Yield." The article tells us, "For the first time in a while, there's enough yield in short-term cash investing to make CFOs and treasurers notice. Relatively safe and liquid money market funds, Treasury bills, and other credit instruments have attractive rates again because of the Federal Reserve's interest rate hikes. Inflation, of course, has also made seeking some yield prudent -- cash idle on balance sheets becomes less valuable by the day." It comments, "While a company might be unable to fully offset increases in the costs of materials, labor, and energy use without taking on undue risk, treasury departments have realistic alternatives to parking cash in bank accounts. 'The Fed and global central banks have suppressed market-determined interest rates' for years, Jerry Klein, a managing director at Treasury Partners, told CFO. 'Now, as the Fed pulls the punch bowl ... our clients are very excited about the opportunity to earn significant interest income on cash balances.'" The article adds, "But treasurers can earn income apart from bank accounts without losing principal and staying relatively liquid in the event economic conditions worsen. Following are four tips for approaching short-term investments. 1. Money market funds are safe and liquid, but beware they have a downside. 'The presumed safe bet' is to leave excess cash balances in money market funds (MMFs) and short-maturity (less than three months) Treasury bills, Lance Pan, director of investment research & strategy at Capital Advisors Group, wrote in a market commentary. Money market fund assets have climbed from $4.47 trillion in April 2022 to $4.58 trillion as of October 5, according to the Investment Company Institute. Very few corporations still allocate cash to prime institutional MMFs due to the market's structural vulnerabilities. But Government and Treasury MMFs made up 14% of organizations' cash allocations in the most recent Association for Financial Professionals Liquidity Survey."

Money fund yields climbed again last week -- our Crane 100 Money Fund Index (7-Day Yield) rose 3 basis points to 2.76% in the week ended Friday, 10/14. Yields rose by 5 basis points the previous week, 34 bps the week before that, and 24 basis points the week before that. On average, they're up from 1.57% on July 29, up from 1.18% on June 30 and more than quadruple their level of 0.58% on May 31. MMF yields are up from 0.21% on April 29, 0.15% on March 31 and 0.02% on February 28 (where they'd been for almost 2 years prior). Yields continue to inch higher as they digest the Fed's Sept. 21 75 bps rate hike, and they should jump again in early November when the Fed hikes rates again. Our broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 679), shows a 7-day yield of 2.67%, up 7 bps in the week through Friday. The Crane Money Fund Average is up 164 bps since beginning of July and up 220 bps from 0.47% at the beginning of June. Prime Inst MFs were up 6 bps to 2.90% in the latest week, up 163 bps since the start of July and up 226 bps since the start of June (close to double from the month prior). Government Inst MFs rose by 9 bps to 2.71%, they are up 161 bps since start of July and up 217 bps since the start of June. Treasury Inst MFs up 7 bps for the week at 2.68%, up 164 bps since beginning of July and up 218 bps since the beginning of June. Treasury Retail MFs currently yield 2.45%, (up 6 bps for the week, up 165 bps since July and up 215 bps since June), Government Retail MFs yield 2.45% (up 7 bps for the week, up 166 bps since July started and up 219 bps since June started), and Prime Retail MFs yield 2.74% (up 4 bps for the week, up 167 bps from beginning of July and up 226 bps from beginning of June), Tax-exempt MF 7-day yields dropped by 3 bps to 1.98%, they are up 142 bps since the start of July and up 160 bps since the start of June. According to Monday's Money Fund Intelligence Daily, with data as of Friday (10/14), 78 funds (out of 818 total) still yield between 0.00% and 1.99% with assets of $34.6 billion, or 0.7% of total assets; 233 funds yield between 2.00% and 2.49% with $462.4 billion in assets, or 9.2%; 424 funds yielded between 2.50% and 2.99% with $3.906 trillion, or 77.9%; and just 83 funds yielded 3.00% or more ($608.4 billion, or 12.1%). Brokerage sweep rates remained mostly unchanged over the past week. Our Crane Brokerage Sweep Index, the average rate for brokerage sweep clients (almost all of which are swept into FDIC insured accounts; only Fidelity sweeps to a money market fund), was unchanged this past week at 0.34%. The latest Brokerage Sweep Intelligence, with data as of Oct. 14, shows just one rate change over the previous week. Ameriprise Financial Services increased rates to 0.20% for all balances between $100K and $249K, to 0.30% for balances between $250K and $999K, to 0.45% for all balances between $1 million and $4.9 million and to 0.65% for all balances over $5 million. Just 3 of 11 major brokerages still offer rates of 0.01% for balances of $100K (and most other tiers). These include: E*Trade, Merrill Lynch and Morgan Stanley.

The Financial Times published the piece, "UK money funds draw 'gigantic' inflows as pension schemes build up war chests," which tells us, "Sterling money market funds have gathered £53bn in just a fortnight as UK pension schemes rush to build defences against market volatility before the Bank of England's emergency bond-buying programme ends on Friday. The UK pensions industry has been in a dash for cash to avoid a fresh liquidity crisis if there is a repeat of the chaotic moves in the gilt market caused by chancellor Kwasi Kwarteng's package of unfunded tax cuts in his September 23 'mini' Budget. The powerful inflows into money market funds, which act in a similar way to a bank account for institutional investors, are one of the clearest signs yet of how schemes are selling assets in order to build a war chest that they hope will be big enough to weather any new collateral calls." The article continues, "The pension schemes need quick access to cash since many use liability-driven investment (LDI) strategies to match their assets and liabilities -- vehicles that required large injections of collateral after Kwarteng's fiscal statement sent gilts tumbling. At the end of last year, LDI schemes covered about £1.4tn in defined-benefit pension fund liabilities, according to The Pensions Regulator." The FT quotes, "The inflows into sterling money market funds 'have been gigantic', said Peter Crane, president of Crane Data, a specialist service focused on the money market sector. 'The growth for sterling money market funds has been far stronger than for the dollar and euro-denominated funds that trade in Europe, which indicates that specific UK issues are driving the increase.' Sterling money market fund assets registered £251bn on October 11, a 27 per cent rise from September 28, the day the BoE launched its intervention to avert 'fire sales' by pension funds." The article adds, "Holdings of the most liquid assets in sterling money market funds have also risen this month, according to Fitch, the rating agency. 'This suggests the managers of these funds are anticipating large withdrawals related to LDI collateral calls to pension schemes or to build liquidity cushions in light of the extreme gilt market volatility,' said Minyue Wang, an analyst at Fitch. The majority of the inflows have gone to sterling funds run by BlackRock, Legal & General Investment Management and Insight Investment, the asset managers that oversee the biggest LDI portfolios." Crane Data's Money Fund Intelligence International shows GBP-denominated money funds rising by £35.0 billion to £249.3 billion month-to-date in October (through 10/13/22). See also, The Wall Street Journal's "What Happens Now That the Bank of England Has Stopped Buying Bonds," which says, "The Bank of England is hoping a safety net in the form of short-term cash infusions will stabilize markets after it wound down its emergency bond-buying program on Friday. Bankers and investors are skeptical it will work. The Bank of England launched what it called a temporary repo facility on Monday when volatility rocked the U.K.’s government debt markets."

The Investment Company Institute's latest weekly "Money Market Fund Assets" report shows money fund assets rose in the latest week after one down week and two weeks of big gains before that. ICI shows assets down by $117 billion, or -2.5%, year-to-date, with Institutional MMFs down $203 billion, or -6.3% and Retail MMFs up $86 billion, or 5.9%. Over the past 52 weeks, money fund assets are up by $64 billion, or 1.4%, with Retail MMFs rising by $119 billion (8.3%) and Inst MMFs falling by $56 billion (-1.8%). (For the month of October, MMF assets increased by $6.0 billion to $5.042 trillion according to Crane's MFI XLS, which tracks a broader universe of funds than ICI. Crane Data's Prime asset total is currently $981.0 billion.) Their weekly release says, "Total money market fund assets increased by $10.29 billion to $4.59 trillion for the week ended Wednesday, October 12, the Investment Company Institute reported.... Among taxable money market funds, government funds decreased by $2.78 billion and prime funds increased by $9.70 billion. Tax-exempt money market funds increased by $3.38 billion." ICI's stats show Institutional MMFs decreasing $1.5 billion and Retail MMFs increasing $11.8 billion in the latest week. Total Government MMF assets, including Treasury funds, were $3.931 trillion (85.7% of all money funds), while Total Prime MMFs were $552.0 billion (12.0%). Tax Exempt MMFs totaled $105.3 billion (2.3%). ICI explains, "Assets of retail money market funds increased by $11.75 billion to $1.55 trillion. Among retail funds, government money market fund assets increased by $1.15 billion to $1.14 trillion, prime money market fund assets increased by $7.70 billion to $322.23 billion, and tax-exempt fund assets increased by $2.90 billion to $94.21 billion." Retail assets account for a third of total assets, or 33.9%, and Government Retail assets make up 73.2% of all Retail MMFs. They add, "Assets of institutional money market funds decreased by $1.46 billion to $3.03 trillion. Among institutional funds, government money market fund assets decreased by $3.94 billion to $2.79 trillion, prime money market fund assets increased by $2.00 billion to $229.76 billion, and tax-exempt fund assets increased by $475 million to $11.10 billion." Institutional assets accounted for 66.1% of all MMF assets, with Government Institutional assets making up 92.1% of all Institutional MMF totals. (Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data, so they're over $400 billion lower than Crane's asset series.)

A press release entitled, "Moody's assigns Aaa-mf rating to HSBC US Dollar ESG Liquidity Fund," tells us, "Moody's Investors Service has assigned an Aaa-mf rating to HSBC US Dollar ESG Liquidity Fund, a new low volatility net asset value money market fund, domiciled in Ireland and managed by HSBC Global Asset Management (USA) Inc. This Fund is classified as Article 8 under the European Union Sustainable Finance Disclosures Regulation and must, as such, promote environmental or social characteristics. The Fund's primary investment objective will be to maintain the principal and to provide shareholders with daily liquidity with an income which is comparable to US Dollar denominated short dated money market interest rates." Moody's explains, "The Aaa-mf rating reflects Moody's view that the Fund will have a strong ability to meet its objectives of providing liquidity and preserving capital. This view is supported by the model portfolio's high scores for each of the key rating factors, including credit quality, asset profile, liquidity and exposure to market risk. The Fund will invest in a diversified portfolio of short-term securities, instruments and obligations which are of high quality at the time of purchase, with an additional focus on the performance of the underlying issuers on a range of ESG (environmental, social, governance) metrics. HSBC Global Asset Management (USA) Inc., the Fund advisor, determines an ESG score for each issuer in the universe, made up of individual E, S and G scores and weighted based on a proprietary model. The Fund's eligible investment universe will be limited to issuers that score in the top three quartiles based on the aggregate ESG score, while the issuers in the bottom decile for each individual component of E, S and G will also be excluded. The Fund's weighted average maturity will be below 60 days and we expect the Fund to maintain a strong liquidity profile supported by high levels of overnight and weekly liquidity in the portfolio. As a result, we expect the Fund to have a very low exposure to market risk." The release adds, "The rating agency expects the Fund will be managed in line with the model portfolio. However, Moody's notes that if the Fund's investment portfolio was to deviate materially from the model portfolio, the Fund's rating could be changed. The Fund will be launched on 12 October 2022. It will operate under the low volatility net asset value (LVNAV) fund structure domiciled in Ireland and offer a same day settlement. Moody's expects modest shareholder concentration risk during the Fund's ramp-up period to diminish as the Fund grows in size and its shareholder base diversifies. HSBC Global Asset Management (USA) Inc., the fund's investment advisor, is part of the asset management business of HSBC Holdings plc that had $595 billion in assets under management worldwide as of 30 June 2022, of which about $146 billion are invested in liquidity funds."

Money fund yields climbed again last week -- our Crane 100 Money Fund Index (7-Day Yield) rose 5 basis points to 2.73% in the week ended Friday, 10/7. Yields rose by 34 basis points the previous week, 24 bps the week before that, and 5 basis points the week before that. On average, they're up from 1.57% on July 29, up from 1.18% on June 30 and more than quadruple their level of 0.58% on May 31. MMF yields are up from 0.21% on April 29, 0.15% on March 31 and 0.02% on February 28 (where they'd been for almost 2 years prior). Yields continue to move higher as they digest the Fed's Sept. 21 75 bps rate hike. Our broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 679), shows a 7-day yield of 2.60%, up 5 bps in the week through Friday. The Crane Money Fund Average is up 157 bps since beginning of July and up 213 bps from 0.47% at the beginning of June. Prime Inst MFs were up 4 bps to 2.84% in the latest week, up 157 bps since the start of July and up 220 bps since the start of June (close to double from the month prior). Government Inst MFs rose by 3 bps to 2.62%, they are up 152 bps since start of July and up 208 bps since the start of June. Treasury Inst MFs up 7 bps for the week at 2.61%, up 157 bps since beginning of July and up 211 bps since the beginning of June. Treasury Retail MFs currently yield 2.39%, (up 6 bps for the week, up 159 bps since July and up 209 bps since June), Government Retail MFs yield 2.38% (up 5 bps for the week, up 159 bps since July started and up 212 bps since June started), and Prime Retail MFs yield 2.70% (up 6 bps for the week, up 163 bps from beginning of July and up 222 bps from beginning of June), Tax-exempt MF 7-day yields rose by 24 bps to 2.01%, they are up 145 bps since the start of July and up 163 bps since the start of June. According to Tuesday's Money Fund Intelligence Daily, with data as of Friday (10/7), 90 funds (out of 818 total) still yield between 0.00% and 1.99% with assets of $50.2 billion, or 1.0% of total assets; 261 funds yield between 2.00% and 2.49% with $589.4 billion in assets, or 11.7%; 413 funds yielded between 2.50% and 2.99% with $3.957 trillion, or 78.7%; and just 54 funds yielded 3.00% or more ($429.8 billion, or 8.5%). Brokerage sweep rates remained mostly unchanged over the past week. Our Crane Brokerage Sweep Index, the average rate for brokerage sweep clients (almost all of which are swept into FDIC insured accounts; only Fidelity sweeps to a money market fund), was unchanged this past week at 0.34%. The latest Brokerage Sweep Intelligence, with data as of Oct. 7, shows two rate changes over the previous week. Ameriprise Financial Services increased rates to 0.15% for all balances between $1K and $249K, to 0.25% for balances between $250K and $999K, to 0.40% for all balances between $1 million and $4.9 million and to 0.60% for all balances over $5 million. RW Baird increased rates to 1.20% for all balances between $250K and $999K, to 1.70% for all balances between $1 million and $1.9 million and to 2.13% for all balances over $5 million. Just 3 of 11 major brokerages still offer rates of 0.01% for balances of $100K (and most other tiers). These include: E*Trade, Merrill Lynch and Morgan Stanley.

A press release sent out late Friday, entitled, "SEC Reopens Comment Periods for Several Rulemaking Releases Due to Technological Error in Receiving Certain Comments" tells us, "The Securities and Exchange Commission today reopened the public comment periods for 11 Commission rulemaking releases and one request for comment due to a technological error that resulted in a number of public comments submitted through the Commission's internet comment form not being received by the Commission. The majority of the affected comments were submitted in August 2022; however, the technological error is known to have occurred as early as June 2021. To ensure that interested persons, including any affected commenters, have the opportunity to comment on the affected releases or to resubmit comments, the Commission is reopening the comment periods for the affected releases until 14 days following publication of the reopening release in the Federal Register." It continues, "As further described in the reopening release, all commenters who submitted a public comment to one of the affected comment files through the internet comment form between June 2021 and August 2022 are advised to check the relevant comment file on SEC.gov to determine whether their comment was received and posted. If a comment has not been posted, commenters should resubmit that comment. Commenters may submit a comment by following the instructions provided in the reopening release. The affected Commission releases are listed below." The SEC adds, "The technological error also may have affected certain comments with respect to self-regulatory organization matters listed in the reopening release. The Commission will evaluate any comments resubmitted with respect to these matters and consider whether further action is warranted." The list the "Affected Releases: Reporting of Securities Loans, Release No. 34-93613 (Dec. 8, 2021); Prohibition Against Fraud, Manipulation, or Deception in Connection with Security-Based Swaps; Prohibition against Undue Influence over Chief Compliance Officers; Position Reporting of Large Security-Based Swap Positions, Release No. 34-93784 (Feb. 4, 2022); Money Market Fund Reforms, Release No. IC-34441 (Feb. 8, 2022); Share Repurchase Disclosure Modernization, Release Nos. 34-93783, IC-34440 (Feb. 15, 2022); Short Position and Short Activity Reporting by Institutional Investment Managers, Release No. 34-94313 (Mar. 16, 2022); see also Notice of the Text of the Proposed Amendments to the National Market System Plan Governing the Consolidated Audit Trail for Purposes of Short Sale-Related Data Collection, Release No. 34-94314 (Mar. 16, 2022); Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure, Release Nos. 33-11038, 34-94382, IC-34529 (Mar. 23, 2022); Private Fund Advisers; Documentation of Registered Investment Adviser Compliance Reviews, Release No. IA-5955 (Mar. 24, 2022); The Enhancement and Standardization of Climate-Related Disclosures for Investors Release Nos. 33-11042, 34-94478 (Apr. 11, 2022); Special Purpose Acquisition Companies, Shell Companies, and Projections, Release Nos. 33-11048, 34-94546, IC-34549 (May 13, 2022); Investment Company Names, Release Nos. 33-11067, 34-94981, IC-34593 (June 17, 2022); Enhanced Disclosures by Certain Investment Advisers and Investment Companies About Environmental, Social, and Governance Investment Practices, Release Nos. 33-11068, 34-94985, IA-6034, IC-34594 (June 17, 2022); and, Request for Comment on Certain Information Providers Acting as Investment Advisers, Release Nos. IA-6050, IC-34618 (June 22, 2022)." (See the "Comments on Money Market Fund Reforms" posted to the SEC's website here, and see our Sept. 6 News, "Funds Doing Last-Minute Lobbying to SEC Says Ignites; Germain on RDM.")

The Investment Company Institute released its latest weekly "Money Market Fund Assets" report Thursday. Their weekly update shows money fund assets fell in the latest week after two weeks of big gains (and declines in 6 of the past 8 weeks before that). ICI shows assets down by $127 billion, or -2.7%, year-to-date, with Institutional MMFs down $201 billion, or -6.2% and Retail MMFs up $74 billion, or 5.1%. Over the past 52 weeks, money fund assets are up by $47 billion, or 1.0%, with Retail MMFs rising by $107 billion (7.5%) and Inst MMFs falling by $60 billion (-1.9%). (For the month of September, MMF assets increased by $1.1 billion to $5.043 trillion according to Crane's MFI XLS, which tracks a broader universe of funds than ICI. Crane Data's Prime asset total is currently $962.1 billion.) Their weekly release says, "Total money market fund assets decreased by $12.16 billion to $4.58 trillion for the week ended Wednesday, October 5, the Investment Company Institute reported.... Among taxable money market funds, government funds decreased by $27.71 billion and prime funds increased by $13.54 billion. Tax-exempt money market funds increased by $2.01 billion." ICI's stats show Institutional MMFs decreasing $27.6 billion and Retail MMFs increasing $15.4 billion in the latest week. Total Government MMF assets, including Treasury funds, were $3.934 trillion (85.9% of all money funds), while Total Prime MMFs were $542.3 billion (11.8%). Tax Exempt MMFs totaled $101.9 billion (2.2%). ICI explains, "Assets of retail money market funds increased by $15.41 billion to $1.54 trillion. Among retail funds, government money market fund assets increased by $4.37 billion to $1.14 trillion, prime money market fund assets increased by $9.79 billion to $314.54 billion, and tax-exempt fund assets increased by $1.26 billion to $91.31 billion." Retail assets account for a third of total assets, or 33.7%, and Government Retail assets make up 73.7% of all Retail MMFs. They add, "Assets of institutional money market funds decreased by $27.57 billion to $3.04 trillion. Among institutional funds, government money market fund assets decreased by $32.07 billion to $2.80 trillion, prime money market fund assets increased by $3.75 billion to $227.76 billion, and tax-exempt fund assets increased by $755 million to $10.62 billion." Institutional assets accounted for 66.3% of all MMF assets, with Government Institutional assets making up 92.1% of all Institutional MMF totals. (Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data, so they're over $400 billion lower than Crane's asset series.)

Pensions & Investments writes "U.K. money market funds suffer outflows amid bond market chaos." They tell us, "Certain sterling-denominated money market funds experienced 'substantial' outflows as a result of the decline in U.K. gilt prices over recent weeks, with some strategies potentially forced to convert to a different model, Moody's Investors Service said. The ratings agency said in a market note Wednesday that low-volatility net asset value money market funds -- a type of short-term money market fund -- are at risk of needing to convert to a variable net asset value model, which would be a credit negative. Outflows were not immediately available." The piece explains, "The outflows partly reflect moves by U.K. pension funds to sell assets to meet collateral calls on LDI-related derivatives positions, Moody's said. 'The combination of extreme volatility in the price of short-dated government bonds and investor outflows has put downward pressure on the mark-to-market (net-asset values) of the affected' money market funds." It adds, "Intervention by the Bank of England to temporarily buy long-dated gilts 'brought some stability, but the scale of the initial NAV declines demonstrate the stress the U.K. bond market was under,' Moody's said. The threat of forced conversions for low-volatility strategies is further adding to the money market fund industry's 'anxiety,' Moody's said." Crane Data's Money Fund Intelligence International shows GBP money market fund assets increasing substantially over the past week. They've risen by L41.4 billion to L245.0 billion for the week ended October 4. They had declined by L11.9 billion the prior week, and market NAVs are currently 0.9994 on average.

Crane Data's Peter Crane was recently featured on Blockworks' Forward Guidance Podcast hosted by Jack Farley. (See the YouTube video here and the Podcast here.) The episode "What Will Break First?" includes segments on: "Reflecting On the Fed's September FOMC Meeting (2:10)," "What Is A Money Market Fund? (4:48)," "What Will Break? (14:37)," "Maturity & Composition (18:41)," "Why Are There No Inflows Into Money Market Funds? (25:31)," "Quantitative Tightening (QT) (27:37)," "Who Invests In Money Market Funds (31:36)," "Offshore Dollar Money Market Funds (39:19)," "New SEC Regulation on Money Market Funds ("Swing Pricing") (43:03)," "What Part of The Financial System Will Crack First? (51:45)," "How Bad Is Treasury Liquidity? (1:05:12)," "Pete Crane on Stablecoins (1:06:33)," and, "Joseph Wang On Sales of Mortgage-Backed Securities (1:10:55)." The description says, "With the Fed hiking interest rates rapidly in order to fight inflation, cash is finally earning its highest yield since before the Great Financial Crisis. Peter Crane, President of Crane Data, and Joseph Wang, former senior trader for the Federal Reserve, join Jack to discuss how the growing attractiveness of cash might cause markets to 'break' as investors pull capital out of risk assets and deploy it in cash and money market funds, which harvest yields on cash by investing them in ultra-short duration loans to extremely safe counterparties, primarily the U.S. government and the Federal Reserve."

Money fund yields jumped again last week -- our Crane 100 Money Fund Index (7-Day Yield) rose 34 basis points to 2.68% in the week ended Friday, 9/30. Yields rose by 24 basis points the previous week, 5 bps the week before that, and 3 basis points the week before that. On average, they're up from 1.57% on July 29, up from 1.18% on June 30 and more than quadruple their level of 0.58% on May 31. MMF yields are up from 0.21% on April 29, 0.15% on March 31 and 0.02% on February 28 (where they'd been for almost 2 years prior). Yields continue to surge higher as they digest the Fed's Sept. 21 75 bps rate hike. Our broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 679), shows a 7-day yield of 2.55%, up 32 bps in the week through Friday. The Crane Money Fund Average is up 152 bps since beginning of July and up 208 bps from 0.47% at the beginning of June. Prime Inst MFs were up 39 bps to 2.80% in the latest week, up 153 bps since the start of July and up 216 bps since the start of June (close to double from the month prior). Government Inst MFs rose by 30 bps to 2.59%, they are up 149 bps since start of July and up 205 bps since the start of June. Treasury Inst MFs up 25 bps for the week at 2.54%, up 150 bps since beginning of July and up 204 bps since the beginning of June. Treasury Retail MFs currently yield 2.33%, (up 27 bps for the week, up 153 bps since July and up 203 bps since June), Government Retail MFs yield 2.33% (up 33 bps for the week, up 154 bps since July started and up 207 bps since June started), and Prime Retail MFs yield 2.64% (up 37 bps for the week, up 157 bps from beginning of July and up 216 bps from beginning of June), Tax-exempt MF 7-day yields rose by 45 bps to 1.77%, they are up 121 bps since the start of July and up 139 bps since the start of June. According to Monday's Money Fund Intelligence Daily, with data as of Friday (9/30), 155 funds (out of 818 total) still yield between 0.00% and 1.99% with assets of $95.5 billion, or 1.9% of total assets; 245 funds yield between 2.00% and 2.49% with $1.061 trillion in assets, or 21.1%; 388 funds yielded between 2.50% and 2.99% with $3.501 trillion, or 69.5%; and just 30 funds yielded 3.00% or more ($378.4 billion, or 7.5%). Brokerage sweep rates also rose over the past week. Our Crane Brokerage Sweep Index, the average rate for brokerage sweep clients (almost all of which are swept into FDIC insured accounts; only Fidelity sweeps to a money market fund), rose this past week at 0.34%. The latest Brokerage Sweep Intelligence, with data as of Sept. 30, shows three rate changes over the previous week. Last week, Raymond James increased rates to 0.20% for all balances between $1K and $99K, to 0.40% for balances between $100K and $249K, to 1.00% for all balances between $250K and $999K and to 1.50% for all balances between $1 million and $4.9 million. Schwab increased rates to 0.40% for all balances between $1K and over $5 million. TD Ameritrade increased rates to 0.30% for all balances between $1K and over $5 million. Just 3 of 11 major brokerages still offer rates of 0.01% for balances of $100K (and most other tiers). These include: E*Trade, Merrill Lynch and Morgan Stanley.

The Wall Street Journal writes "Three Ways You Can Cash In on Cash." Columnist Jason Zweig tells us, "Cash isn't trash anymore. With stocks -- and just about every other asset -- taking a beating this year, even the most aggressive investors can suddenly see the virtue of keeping some money liquid and safe from market turmoil. And, at long last, your cash can earn income you don't need a microscope to detect. To do better, though, you'll have to put your money in motion. Bank accounts have earned next to nothing for nearly a decade and a half -- and still do. With the Federal Reserve jacking up interest rates, the national average yields on savings and money-market accounts at banks have doubled this year -- to 0.14%, a level that Greg McBride, chief financial analyst at Bankrate.com, calls 'nothing short of pathetic.'" The piece continues, "Fortunately, raising the return on your cash is easier than ever. For most investors, the two best choices are money-market mutual funds and U.S. Treasury securities. For years, money-market funds' yields have been stuck near zero, and individual investors yanked $43 billion out of such funds last year, according to the Investment Company Institute. In recent months, though, these funds have finally begun to pay more income. The Crane 100 index of the largest money-market funds yielded 2.64% this week, up from only 0.02% in February and 2.01% at the end of August. 'Money-market funds are worth a second look now,' says Harry Sit, who runs a blog called The Finance Buff. 'Rather than having to wait for [online banks] Ally or Synchrony or Marcus to adjust their rates on savings accounts or CDs, your money-fund yields can adjust daily with the market.'" Zweig adds, "Your brokerage firm may force you into its 'cash sweep,' an account with an affiliated bank that is likely to pay much lower yields -- a measly average of only 0.29% as of Sept. 23, according to Crane Data. Sweep accounts are designed as a receptacle for the dividend and interest payments your stocks or other investments throw off. All too often, they function like a jail, imprisoning your cash where it earns punitively low returns. However, you should be able to transfer your cash balance out of any sweep accounts into money-market funds offering much higher income. This week, more than 380 money-market funds were yielding 2.5% or higher, averaged over the past seven days, according to Crane Data. Many are from such leading firms as Fidelity Investments, Charles Schwab and Vanguard Group."

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