Daily Links Archives: November, 2022
Weekly Money Fund Portfolio Holdings
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 Nov. 25) includes Holdings information from 68 money funds (up 23 from a week ago), which represent $1.967 trillion (up from $1.474 trillion) of the $5.080 trillion (38.7%) 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 $1.115 trillion (up from $848.2 billion a week ago), or 56.7%; Treasuries totaling $542.0 billion (up from $421.8 billion a week ago), or 27.5%, and Government Agency securities totaling $140.0 billion (up from $89.2 billion), or 7.1%. Commercial Paper (CP) totaled $66.5 billion (up from a week ago at $49.8 billion), or 3.4%. Certificates of Deposit (CDs) totaled $32.0 billion (up from $22.7 billion a week ago), or 1.6%. The Other category accounted for $48.7 billion or 2.5%, while VRDNs accounted for 23.4 billion, or 1.2%. The Ten Largest Issuers in our Weekly Holdings product include: the Federal Reserve Bank of New York with $771.8 billion (39.2%), the US Treasury with $542.0 billion (27.5% of total holdings), Federal Home Loan Bank with $82.8B (4.2%), Fixed Income Clearing Corp with $71.3B (3.6%), Federal Farm Credit Bank with $53.3B (2.7%), JP Morgan with $33.3B (1.7%), RBC with $26.1B (1.3%), Barclays PLC with $25.0B (1.3%), Citi with $24.1B (1.2%) and BNP Paribas with $22.3B (1.1%). The Ten Largest Funds tracked in our latest Weekly include: Morgan Stanley Inst Liq Govt ($136.5B), Federated Hermes Govt ObI ($132.6B), BlackRock Lq FedFund ($130.7B), Fidelity Inv MM: Govt Port ($124.7B), BlackRock Lq Treas Tr ($106.8B), Dreyfus Govt Cash Mgmt ($106.3B), Allspring Govt MM ($100.7B), BlackRock Lq T-Fund ($91.4B), State Street Inst US Govt ($89.2B) and Fidelity Inv MM: MM Port ($75.2B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary.)
Money Fund University in 2 Weeks!
Crane Data is preparing for its next Money Fund University "basic training" conference in just over 2 weeks! Our 12th annual MFU will change slightly from its previous basics format to a more advanced "Master's in Money Markets" program this year. It will take place at the Hyatt Regency in Boston, Mass., December 15-16, 2022. (We're also hosting Crane Data's Holiday Party at MFU on Dec. 15 from 5-7pm, so please join us!) Crane's Money Fund University is designed for those relatively new to the money market fund industry or those in need of a concentrated refresher on a broad core curriculum. The event also focuses on hot topics like money market fund regulations, money fund alternatives, offshore markets, and other recent industry trends. Our educational conference features a faculty of the money fund industry's top lawyers, strategists, and portfolio managers, and the Boston show will include an `extra session on proposed regulations and an extended free training session for Crane Data clients. Money Fund University offers a 2-day crash course on money market mutual funds, educating attendees on the history of money funds, the Fed, interest rates, ratings, rankings, and money market instruments such as commercial paper, Treasury bills, CDs and repo. We also cover portfolio construction and credit analysis. Registrations ($750) are now being taken, and the latest agenda is available here. (E-mail us to request the latest brochure.) Also, join us for our next Bond Fund Symposium, which be held in Boston, Mass., on March 23-24, 2023. Bond Fund Symposium is the only conference devoted entirely to bond mutual funds, bringing together bond fund managers, marketers, and professionals with fixed-income issuers, investors and service providers. The majority of the content is aimed at the growing ultra-short and conservative ultra-short bond fund marketplace. Finally, mark your calendars too for our next big show, Crane's Money Fund Symposium, which will be held in Atlanta, Ga., June 21-23, 2023. Money Fund Symposium attracts money fund managers, marketers and servicers, cash investors, money market securities dealers, issuers, and regulators for 2 1/2 days of sessions, socializing and networking. Let us know if you'd like more details on any of our events, and we hope to see you in Boston next month or in March 2023, or in Atlanta in June 2023.
Fed Nov. 2 Minutes and Money Funds
The Federal Reserve published its "Minutes of the Federal Open Market Committee, November 1-2, 2022," last week, which contained several references to money market funds and repo. Discussing "developments in money markets and Federal Reserve operations," they comment, "Usage of the overnight reverse repurchase agreement (ON RRP) facility remained fairly steady other than during the period surrounding quarter-end. In the period ahead, the relative pace of decline in ON RRP facility balances and reserve balances would depend importantly on shifts in money market conditions. Recent developments, including with regard to the relationship between ON RRP facility balances and money market rates, suggested that, over time, conditions could evolve in a manner that would lead to falling usage of the ON RRP facility. However, the manager pro tem noted that money market conditions could change somewhat more quickly in the lead-up to year-end because of normal factors, such as a Treasury tax payment date in December that could increase the Treasury General Account balance, and year-end position adjustments. This prospect could require money market participants to be more responsive to shifting liquidity conditions and to plan ahead for the coming period. Current market quotes suggested expectations of limited upward pressure on domestic money market rates around year-end. In offshore dollar funding markets, the premium associated with borrowing dollars was modestly higher than at similar points in previous years." The Minutes also say, "Conditions in short-term funding markets remained stable over the intermeeting period, with the September increase in the target range for the federal funds rate and the associated increases in the Federal Reserve's administered rates passing through quickly to overnight money market rates. In secured markets, money market rates remained soft relative to the ON RRP offering rate, attributed to subdued Treasury bill supply, elevated demand for Treasury collateral, and investor demand for very short-term assets amid uncertainty over the pace of policy rate increases. Daily take-up in the ON RRP facility remained elevated amid this softness in repurchase agreement rates. Money market fund net yields rose along with the rise in administered rates, while retail bank deposit rates increased modestly on balance."
WSJ: Why Bank Rates Are Lagging
The Wall Street Journal posted a video entitled, "Why Your Bank's Savings Rate Isn't Increasing With the Fed's," which says, "The Federal Reserve's interest rate continues to climb, reaching nearly 4% in November. But the average savings account's interest rate is just 0.16%. Here's how banks determine that rate — and which accounts are paying closer to the Fed's." They ask, "But what about the interest rates that make you money, like on your savings accounts? Right now the average savings account pays less than a quarter of a percent, but some savings rates are going up.... Here's why most savings rates and which ones aren't."
Weekly Money Fund Portfolio Holdings
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 Nov. 18) includes Holdings information from 45 money funds (unchanged from a week ago), which represent $1.474 trillion (up from $1.319 trillion) of the $5.055 trillion (29.2%) 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 $848.2 billion (up from $773.4 billion a week ago), or 57.6%; Treasuries totaling $421.8 billion (up from $347.8 billion a week ago), or 28.6%, and Government Agency securities totaling $89.2 billion (down from $93.9 billion), or 6.1%. Commercial Paper (CP) totaled $49.8 billion (up from a week ago at $45.4 billion), or 3.4%. Certificates of Deposit (CDs) totaled $22.7 billion (up from $21.8 billion a week ago), or 1.5%. The Other category accounted for $27.9 billion or 1.9%, while VRDNs accounted for 13.9 billion, or 0.9%. The Ten Largest Issuers in our Weekly Holdings product include: the Federal Reserve Bank of New York with $627.1 billion (42.6%), the US Treasury with $421.8 billion (28.6% of total holdings), Federal Home Loan Bank with $53.0B (3.6%), Fixed Income Clearing Corp with $43.2B (2.9%), Federal Farm Credit Bank with $32.9B (2.2%), Barclays PLC with $21.8B (1.5%), JP Morgan with $20.9B (1.4%), RBC with $17.2B (1.2%), BNP Paribas with $16.9B (1.1%) and Citi with $14.8B (1.0%). The Ten Largest Funds tracked in our latest Weekly include: Morgan Stanley Inst Liq Govt ($139.7B), BlackRock Lq FedFund ($135.8B), Fidelity Inv MM: Govt Port ($123.1B), BlackRock Lq Treas Tr ($117.3B), Allspring Govt MM ($105.2B), BlackRock Lq T-Fund ($98.0B), State Street Inst US Govt ($90.9B), Fidelity Inv MM: MM Port ($73.6B), First American Govt Oblg ($72.1B) and Invesco Govt & Agency ($69.1B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary.)
Top MMFs Break 4.0% Yield; Sweeps Up
Money fund yields were higher yet again last week -- our Crane 100 Money Fund Index (7-Day Yield) rose 5 basis points to 3.54% in the week ended Friday, 11/18. Yields rose by 36 basis points the previous week and are up from 2.88% on Oct. 31 and 2.66% on Sept. 30. Yields should continue to inch higher as they digest the remainder of the Fed's Nov. 2nd 75 bps rate hike, and they should hit 4.0% by year end, if, as expected, the Fed hikes rates again on Dec. 14. The top-yielding money market funds are already touching 4.0% though (see our "`Highest-Yielding Money Funds" table above) <b:>`_. Our broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 677), shows a 7-day yield of 3.41%, up 6 bps in the week through Friday. Prime Inst MFs were up 6 bps to 3.69% in the latest week. Government Inst MFs rose by 3 bps to 3.40%. Treasury Inst MFs up 7 bps for the week at 3.40%. Treasury Retail MFs currently yield 3.20%, Government Retail MFs yield 3.19%, and Prime Retail MFs yield 3.54%, Tax-exempt MF 7-day yields were down at 1.65%. According to Monday's Money Fund Intelligence Daily, with data as of Friday (11/18), 133 funds (out of 816 total) still yield between 0.00% and 1.99% with assets of $111.2 billion, or 2.2% of total assets; 75 funds yielded between 2.00% and 2.99% with $98.2 billion, or 1.9%; 608 funds yield 3.00% or more ($4.846 trillion, or 95.9%), and 4 funds have now officially broken over the 4.0% yield barrier. Brokerage sweep rates saw a number of changes 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 0.40% following a 6 bps jump the previous week. The latest Brokerage Sweep Intelligence, with data as of Nov. 18, shows just one rate change over the previous week. Wells Fargo increased rates to 0.15% for all balances between $1 and $999K, to 0.50% for all balances between $1 million and $1.9 million and to 0.85% for all balances between $5 million and $9.9 million. Just 3 of 11 major brokerages still offer rates of 0.01% for balances of $100K (and lower tiers). These include: E*Trade, Merrill Lynch and Morgan Stanley.
S&P on Q3'22 Money Fund Trends
S&P Global published the brief, "U.S. Domestic 'AAAm' Money Market Fund Trends (Third-Quarter 2022)," earlier this month, writing, "Growth in rated U.S. government and prime money market funds (MMFs) were mixed during the third quarter of 2022. Assets under management (AUM) in government fund strategies saw a de-minimis decline, resulting in a 0.23% quarter-over-quarter decrease. While prime fund net assets had a modest increase from the previous quarter of 4.46%, this, driven by an increase in prime institutional funds, make money funds more compelling than other asset classes in a rising rate environment." They explain, "Government and prime funds are benefiting from higher-yielding assets. During the third quarter, the seven-day and 30-day net yields for government funds grew to 2.64% and 2.25%, respectively. The seven-day and 30-day net yield for prime funds jumped to 2.75% and 2.378%, respectively. The spread between government and prime funds continued to be in a range of 10bps–15 bps. Repo exposure in government funds continues to see a greater allocation by fund managers. During the quarter, the Fed's reverse repurchase facility exceeded the prior quarter month end at $2.4 trillion. Government funds also had a modest increase in agency and Treasury floaters, while Treasury bills had lower allocation in the funds, primarily because of lower supply." S&P adds, "Managers of government and prime strategies continue to remain short. Although predictions on where the terminal rate will end up and the exact level of rate hikes vary, the funds' maturity profiles remain conservative until they are convinced that the Fed is closer to the end of its tightening cycle. Weighted average maturities moved downward by eight days for government funds and five days for prime funds. Despite the rapid rise in rates by the Fed's tightening by 150 bps during the quarter, the distribution of net asset values (NAV per share) for funds has been narrower, with only one rated fund pricing below 0.9985. As a result, we increased our surveillance to daily for this fund. It has remained within all of our metrics for 'AAAm' principal stability fund ratings (PSFRs) during the observed period. Funds appear to be mitigating the price volatility by remaining shorter in duration and higher in credit quality."
Retail MMFs Hit Record $1.6 Trillion
ICI's latest weekly "Money Market Fund Assets" report shows money fund assets rising the past week after dropping last week but skyrocketing in the first week of November and Retail money fund assets breaking above the $1.6 trillion level for the first time ever. Over the past 52 weeks, money fund assets are up by $49 billion, or 1.1%, with Retail MMFs rising by $169 billion (11.8%) and Inst MMFs falling by $120 billion (-3.8%). ICI shows assets down by $80 billion, or -1.7%, year-to-date, with Institutional MMFs down $214 billion, or -6.6% and Retail MMFs up $133 billion, or 9.1%. The weekly release says, "Total money market fund assets increased by $3.44 billion to $4.62 trillion for the week ended Wednesday, November 16, the Investment Company Institute reported.... Among taxable money market funds, government funds decreased by $8.10 billion and prime funds increased by $12.16 billion. Tax-exempt money market funds decreased by $615 million. Due to the upcoming Thanksgiving holiday on Thursday, November 24, data for the week ending November 22 will be available on Wednesday, November 23." ICI's stats show Institutional MMFs falling $8.4 billion and Retail MMFs increasing $11.8 billion in the latest week. Total Government MMF assets, including Treasury funds, were $3.919 trillion (84.7% of all money funds), while Total Prime MMFs were $592.9 billion (12.8%). Tax Exempt MMFs totaled $113.1 billion (2.4%). ICI explains, "Assets of retail money market funds increased by $11.80 billion to $1.60 trillion. Among retail funds, government money market fund assets increased by $4.44 billion to $1.14 trillion, prime money market fund assets increased by $7.95 billion to $356.90 billion, and tax-exempt fund assets decreased by $589 million to $100.44 billion." Retail assets account for over a third of total assets, or 34.6%, and Government Retail assets make up 71.5% of all Retail MMFs. They add, "Assets of institutional money market funds decreased by $8.37 billion to $3.02 trillion. Among institutional funds, government money market fund assets decreased by $12.54 billion to $2.77 trillion, prime money market fund assets increased by $4.20 billion to $235.97 billion, and tax-exempt fund assets decreased by $26 million to $12.64 billion." Institutional assets accounted for 65.4% of all MMF assets, with Government Institutional assets making up 91.8% 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.) For the month of November through 11/16, MMF assets increased by $13.0 billion to $5.067 trillion according to Crane's MFI XLS, which tracks a broader universe of funds than ICI. Crane Data's Prime asset totals, which broke the $1.0 trillion level two weeks ago, increased $23.7 billion MTD (and $26.8 billion in October) to $1.019 trillion. Given that November and December are the two strongest months of the year seasonally, we expect big inflows in the coming weeks.
Fidelity's Potenza on Tough Q3'22
Fidelity Investments recently posted a "Q3 2022 Fixed Income Perspectives Video" featuring Julian Potenza, co-manager of Fidelity Limited Term Bond Fund, Fidelity Sustainable Low Duration Bond Fund, Fidelity Conservative Income Bond Fund, Fidelity Short-Term Bond Fund and a number of other bond funds. He "discusses another challenging quarter in the fixed income markets," and tells viewers, "Turning to the numbers, the sharp rise in yields drove another tough performance quarter in the bond markets. The US investment grade bond market, as measured by the Bloomberg Aggregate Bond Index, was down 4.75% in the quarter, while US Treasuries were down 4.35%. Investment grade corporates were down over 5%, while high yield outperformed down just 0.65%. Given the dramatic moves this year, how should investors be thinking about the fixed income markets at this point in the cycle?" Potenza continues, "To start, it is worth recognizing the significant repricing that has occurred this year. I often look at real interest rates or interest rates after expected inflation is removed to gauge the stance of monetary policy. In the U.S., five-year real interest rates rose from about 40 basis points at the start of the third quarter to just under 2% at the end. For context, that is almost 1% higher than the peak of the last tightening cycle and up almost 4% from the post-pandemic lows, of 4% adjustment in real interest rates is a major change to the economic ecosystem and much of the adjustment is fairly recent. It is likely enough to slow the more interest sensitive sectors of the economy, such as housing. While the Fed may well continue hiking to control the inflation situation. The adjustment in real rates suggests that the balance of risks between higher inflation and lower growth may start to tilt towards lower growth, which could raise the diversification value of bonds in your portfolio."
Allspring MMFs on RRP, Higher Rates
Allspring Money Market Funds' latest "Overview, Strategy, and Outlook" discusses the Fed's RRP program and higher yields. They write, "In the government space, the appeal of investments is measured against the rate on the Fed's reverse repurchase (repo) program (RRP), factoring in expected changes in the RRP rate during this hiking cycle. The RRP has performed its job of reinforcing the lower bound of the Fed's target rate admirably, keeping market repo rates anchored near the RRP rate and planting the EFFR firmly in the target range. Given that the RRP is routinely taking in about $2.2 trillion per day from investors who view it as the best place for their money, it follows that those investors must not view the potential alternative investments as very appealing at all. As we've mentioned throughout the year, this has largely been the result of a supply shortage in the space, especially of Treasury bills (T-bills). The T-bill supply situation has varied throughout the year, with investors suffering through much of the spring and early summer as the Treasury digested the larger-than-expected tax payments it received in April, with the excess cash it received then lessening its need to borrow.... [S]upply has been a roller-coaster this year, with strength to start the year, followed by the long slump induced by spring tax receipts, leading to a late-summer bump that was interrupted again by tax receipts, this time in mid-September. The last half of October saw supply begin to rise again, in what should be a steady climb throughout the fourth quarter." Allspring also comments, "You'll know when supply increases have pushed yields high enough to pique investor interest when the RRP balances start to fall materially and consistently. This is likely to be a 2023 story." On the "Prime sector," they write, "As one would expect in this scenario, where the FOMC is actively communicating its intentions to combat inflation and inflation expectations and not fall further behind the curve, yields continued to increase. Year to date, the six-month London Interbank Offered Rate (LIBOR) yield is higher by roughly 460 bps to 4.92% and the three-month LIBOR is higher by roughly 438 bps to 4.46%. Additionally, higher rates have affected risk assets in general where, for example, the broader stock market, as measured by the S&P 500 Index,1 has declined by more than 19% year to date. As a result, the front end of the yield curve offers an attractive risk/reward proposition compared with other asset classes." Allspring adds, "Given the backdrop of an FOMC still in the process of raising rates, we tend to conservatively structure our portfolios in favor of keeping excess liquidity over the stated regulatory requirements, running shorter weighted average maturities, and looking to fixed-rate securities if the opportunity offers a favorable risk/reward proposition. This has allowed our portfolios to capture the Fed's rate increases quickly, while the enhanced level of liquidity allows our portfolios to meet the liquidity needs of our investors and helps dampen net asset value (NAV) volatility."
Crane 100 Money Fund Index Hits 3.5%
Money fund yields jumped yet again last week -- our Crane 100 Money Fund Index (7-Day Yield) rose 36 basis points to 3.48% in the week ended Thursday, 11/10. (Money markets were closed Friday for Veterans Day). Yields rose by 26 basis points the previous week and are up from 2.66% on Sept. 30. Yields should continue to move higher towards 4.0% as they digest the remainder of the Fed's Nov. 2nd 75 bps rate hike in coming weeks. They should break over 4.0% by year end, if, as expected, the Fed hikes rates again on Dec. 14. Our broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 677), shows a 7-day yield of 3.35%, up 35 bps in the week through Thursday. Prime Inst MFs were up 44 bps to 3.63% in the latest week. Government Inst MFs rose by 34 bps to 3.37%. Treasury Inst MFs up 28 bps for the week at 3.34%. Treasury Retail MFs currently yield 3.12%, Government Retail MFs yield 3.15%, and Prime Retail MFs yield 3.48%, Tax-exempt MF 7-day yields were unchanged at 1.82%. According to Monday's Money Fund Intelligence Daily, with data as of Thursday (11/10), 102 funds (out of 816 total) still yield between 0.00% and 1.99% with assets of $47.5 billion, or 0.9% of total assets; 132 funds yielded between 2.00% and 2.99% with $185.1 billion, or 3.7%; 582 funds yield 3.00% or more ($4.821 trillion, or 95.4%), and 3 funds have now officially broken over the 4.0% yield barrier. Brokerage sweep rates saw a number of changes 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 up 6 bps this past week at 0.40%. The latest Brokerage Sweep Intelligence, with data as of Nov. 10, shows four rate changes over the previous week. Ameriprise Financial Services increased rates to 0.25% for all balances between $1 and $99K, to 0.40% for all balances between $100K and $249K, to 0.55% for all balances between $250K and $499K, to 0.70% for all balances between $500K and $999K, to 1.49% for all balances between $1 million and $4.9 million and to 1.73% for all balances over $5 million. Merrill Lynch increased rates to 0.30% for balances between $1 million and $9.9 million and to 1.06% for all balances over $10 million. Raymond James increased rates to 0.25% for all balances between $1 and $99K, to 0.50% for all balances between $100K and $249K, to 2.00% for all balances between $1 million and $9.9 million and to 2.50% for all balances over $10 million. And lastly, RW Baird increased rates to 1.00% for all balances between $1 and $249K, to 1.69% for all balances between $250K and $999K, to 2.40% for all balances between $1 million and $1.9 million and to 3.01% for all balances over $5 million. Just 3 of 11 major brokerages still offer rates of 0.01% for balances of $100K (and lower tiers). These include: E*Trade, Merrill Lynch and Morgan Stanley.
Academy Lists Clients on Veteran's Day
A press release entitled, "Academy Asset Management Announces Its Initial Cohort of Clients," tells us, "Academy Asset Management, an SEC registered investment adviser and certified disabled veteran-owned and operated business, is pleased to announce the initial cohort of clients supporting the first institutional veteran owned and operated asset manager. The firm is honored to announce Eli Lilly and Company, Paramount Global, and Comcast Corporation as new clients for Academy Asset Management." It continues, "The announcement is particularly meaningful on Veterans Day, as Academy's social mission is to mentor, hire, and train military Veterans for a career in asset management. Academy Asset Management is an affiliate of Academy Securities, a FINRA registered broker-dealer, certified disabled veteran-owned business, and Minority Business Enterprise (MBE). Both firms are committed to community impact and training opportunities for veterans, pairing the best Wall Street veterans with high-potential military veterans. Academy Securities is also the sole distributor of Academy Asset Management's offering." The release adds, "This initial cohort is a special group of companies that have long supported veterans. Lilly was founded by Colonel Eli Lilly, a veteran of the Civil War. Paramount Global has a lengthy history of telling the stories of veterans and the military as well as supporting veterans through the Paramount Veterans Network. Comcast was founded by Ralph Roberts, a World War II veteran, and is an award-winning military-inclusive workplace." CEO Chance Mims comments, "With the addition of these new clients, the firm will be able to reinvest in its social mission while helping our clients reach their investment goals. We are honored to have the support of such an amazing group of organizations as we continue building an authentic veteran owned and operated asset manager." The release adds, "Academy Asset Management has built a strong foundation to manage portfolios, being led by the Former Head of Bank Portfolio Management at Northern Trust, Seth Rosenthal. Mr. Rosenthal oversaw over $100 Billion in global fixed-income and money market assets across a range of duration and credit mandates and brought this expertise to Academy Asset Management as the firm's Chief Investment Officer. He was joined by Portfolio Manager and Army Veteran John Gilmore, previously of the Vanguard Group." Rosenthal tells us, "We would like to publicly recognize these companies for their partnership and willingness to plant the flag supporting our veteran social mission and commitment to being a first-class asset manager. Academy Asset Management is designed and built to be a leading competitor in the asset management space." For more on ESG and Veteran-Affiliated MMFs, see: "Morgan Stanley Names OFN Beneficiary of Impact Shares; ESG to Retail" (10/27/22), "ESG and Social MMF Update: Mischler News, Green Deposits, Reg Debate" (12/4/20), "Academy Launches Treasury MMFs" (10/22/20), "BlackRock to Launch Mischler Shares" (9/29/20), "Mischler Financial Joins "Impact" or Social Money Market Investing Wave" (12/5/19), "Academy Securities, JPMAM Launch First Veteran-Affiliated Money Fund" (5/16/19).
Barron's on Money Funds, Ultra ETFs
Last weekend's Barron's featured the brief, "Money-Market Funds Are Back. But There Are Now Other Options for Your Cash." They comment, "In our turbulent times, money-market funds have returned from the dead, along with a number of liquid, short-term, near-cash alternatives. As of Nov. 2, money funds were yielding an average 2.9% [now 3.37%], and that is likely to keep rising as the Federal Reserve continues to raise interest rates. Their real competition, in investment convenience, security, and liquidity, isn't bank accounts, but rather ultrashort-term bond exchange-traded funds." The piece states, "The largest, the $25 billion SPDR Bloomberg 1-3 Month T-Bill (BIL), invests in the safest Treasury bills. But that ETF pays a slightly lower SEC or official 'standardized' yield, 2.7%, than many retail money funds today. With the huge demand for T-bills this year, they now yield 0.25 to 0.30 percentage points below some of the overnight repos that money funds will invest in. If you're willing to take some credit risk, ultrashort ETFs are interesting. The $7 billion iShares Ultra Short-Term Bond (ICSH) is actively managed like a money fund, can invest in various kinds of high-quality debt, and yields 3.5%. Still, if it were a money fund, it would have broken the buck in March 2020, during the pandemic liquidity crisis, and this year, it's down a tiny 0.1%. That's the trade-off."
Bloomberg on GBP Inflows, BOE Action
Bloomberg writes about "A £60 Billion Wall of Cash Fuels UK Market Calls for BOE Action." The article explains, "A record flood of cash into UK money-market funds following recent pension sector turmoil is worsening a scarcity of high-quality securities, sparking calls for the Bank of England to take action. An estimated £60 billion flowed into sterling money markets last month, versus just £2 billion in September, according to Crane Data, which specializes in the sector. That's an 'eye-poppingly large' amount that dwarfed funds heading into euro or dollar-denominated equivalents, said Pete Crane, the firm's founder." The piece continues, "While it's not possible to break down precisely where this new cash is from, analysts, including at Fitch Ratings, attribute it mostly to UK pension funds racing to build cash buffers after their leveraged liability-driven investment (LDI) strategies came under stress during September's bond market selloff. This additional demand for cash-proxy assets is exacerbating a pre-existing lack of collateral, leading short-term bonds to become far more expensive than equivalent swaps and causing historic distortions in repo rates last week. That's a problem for dealers and also monetary authorities, since it could hurt the BOE’s tightening of financial conditions." Bloomberg adds, "`Investors took notice last week when BOE Governor Andrew Bailey delivered an unprompted comment on the situation, while his deputy Dave Ramsden went on to reveal that debt sales from the BOE portfolio had been specially tilted toward short-dated securities to ease the collateral squeeze. Those remarks left market participants speculating whether a more targeted response from officials is imminent. 'Although BOE intervention may not be immediate, it is clearly on their radar and could be introduced before the end of the year,' said Imogen Bachra, head of UK rates strategy at NatWest Markets. Pension funds' LDI crisis worsened the collateral scarcity, she noted, adding that while the funds would usually be buyers at the long-end of the bond curve, their current high cash balances 'created a demand for high quality, short-term paper, which is in short supply.'"
Money Fund Yields Jump Past 3.0%
Money fund yields jumped again last week -- our Crane 100 Money Fund Index (7-Day Yield) rose 26 basis points to 3.12% in the week ended Friday, 11/4. Yields rose by 4 basis points the previous week and are up from 2.66% on Sept. 30. Yields should continue to surge higher towards 3.5% as they digest the Fed's Nov. 2nd 75 bps rate hike, and they should jump towards 4.0% by year end, if, as expected, the Fed hikes rates again on Dec. 14. Our broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 677), shows a 7-day yield of 3.00%, up 23 bps in the week through Friday. Prime Inst MFs were up 23 bps to 3.19% in the latest week. Government Inst MFs rose by 24 bps to 3.03%. Treasury Inst MFs up 22 bps for the week at 3.06%. Treasury Retail MFs currently yield 2.84%, Government Retail MFs yield 2.78%, and Prime Retail MFs yield 3.05%, Tax-exempt MF 7-day yields dropped by 3 bps to 1.82%. According to Monday's Money Fund Intelligence Daily, with data as of Friday (11/4), 108 funds (out of 816 total) still yield between 0.00% and 1.99% with assets of $55.0 billion, or 1.1% of total assets; 321 funds yielded between 2.00% and 2.99% with $1.218 trillion, or 26.1%; and 387 funds yield 3.00% or more ($3.680 trillion, or 72.8%). 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 Nov. 4, shows just one rate change over the previous week. Ameriprise Financial Services increased rates to 1.24% for all balances between $1 million and $4.9 million and to 1.49% 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.
WSJ on Robinhood's Cash Paying
The Wall Street Journal writes, "Robinhood's Cash Riches Pay Off." They explain, "Rising rates are helping Robinhood Markets survive slow markets. There's still more to be done to truly thrive again.... Efforts to gather customer cash are also bearing fruit. Robinhood said that it has swept up about $1.5 billion worth of customer cash via its Gold accounts since it raised the rate for those customers to 3% in September. Cash sweeps, which move uninvested customer money to program banks, generated $8 million in third-quarter net interest revenue, up from just $2 million in the second quarter." They tell us, "Overall, net customer deposits into Robinhood grew at a 17% annualized rate in the third quarter. It also generated $20 million in net interest revenue from segregated customer cash and clearinghouse deposits." The update adds, "Investors shouldn't get carried away, though. A portion of Robinhood's interest revenue doesn't come directly from customer activities but from its own corporate cash pile. Robinhood has more than $6 billion worth on its balance sheet, which generated $29 million in net interest revenue or more than a fifth of its total net interest revenue. That is a good way to help Robinhood on its path to profitability, but it doesn't necessarily represent deepening relationships with customers for investing and money management. Gathering cash is often a means to an end: Getting people to do something with it. Otherwise, in this environment it is just a competition for who can offer customers the highest rates. And, in a less-upbeat sign, Robinhood says activity in margin borrowing and securities lending by customers is slowing so far in the fourth quarter."
Goldman's Mosaic Parners with Kyriba
A press release entitled, "Goldman Sachs Asset Management Partners with Kyriba," explains, "Goldman Sachs Asset Management announced today that it has entered into a connectivity agreement with Kyriba, a global leader of enterprise liquidity management solutions, to connect the Goldman Sachs Liquidity Solutions Portal, Mosaic, with Kyriba's digital Treasury Management System (TMS). The new arrangement will create an end-to-end workflow for investing in money market funds, introducing on-demand connectivity to third-party banking and fintech services." GSAM's Global Head of Liquidity Solutions Mike Siegel comments, "Our partnership with Kyriba integrates two market-leading platforms, providing the most efficient user experience and new tools to manage enterprise liquidity. Unifying cash and product data with powerful, automated workflows is the next level of streamlined liquidity management from banks and fintechs." The release continues, "Mosaic will be connected through a single-sign on interface within Kyriba, where clients will be able to view their cash positions across all connected bank accounts. Clients can execute their trades through Mosaic with a wide variety of US based or international money market funds. The trade data flows into Kyriba, updating cash, investment and accounting activities in real time." Wolfgang Koester of Kyriba adds, "Our partnership with Mosaic demonstrates the demand for a refined approach to liquidity management, with the TMS as a digital backbone for corporate financial services. Effectively managing enterprise liquidity with third-party bank and fintech vendor processes into a digital workflow enables finance leaders with the easiest route to scale and efficiency."
Moody's, Fitch on JPM Lux Changes
A press release, "Moody's affirms Aaa-mf rating of JP Morgan Liquidity Funds -USD Treasury CNAV Fund following fund merger," tells us, "Moody's Investors Service has affirmed the Aaa-mf rating of the JPMorgan Liquidity Funds – USD Treasury CNAV Fund following the merger of JPMorgan Liquidity Funds – US Government LVNAV Fund and JPMorgan USD Treasury VNAV Fund into the Fund. The rating affirmation of the Fund reflects Moody's expectation that it will maintain its very strong ability to meet the dual objectives of providing liquidity and preserving capital. The Aaa-mf rating is supported the Fund's high credit quality, strong liquidity profile, short weighted average maturity, diversified investor base and low exposure to market risk. The funds merging into JPMorgan liquidity Funds – USD Treasury CNAV Fund were managed very similarly to the Fund. The Fund's high credit quality reflects that the portfolio is comprised of US Treasury Bills and Notes as well as repurchase agreements (repos) in which Treasuries serve as the underlying collateral. The nature of the Treasury portfolio supports the Fund's strong liquidity profile. The weighted-average maturity is required by the prospectus to be maintained at 60 days or less and was 5 days as of 26 October 2022. In addition, the repos, which represent a significant portion of the portfolio, are limited to two days maturity by the prospectus, which keeps the Fund's weighted-average maturity short. JPMorgan Liquidity Funds is an investment company registered in Luxembourg with total net assets of approximately $180 billion as of May 31, 2022. JPMorgan Liquidity Funds is managed by JPMorgan Asset Management (Europe) and ultimately a subsidiary of JPMorgan Chase & Co (A1 stable), which had $3.8 trillion in total assets as of September 30, 2022." Another release, "Fitch Takes Rating Actions on JPMorgan MMFs After Reorganisations," tells us, "Fitch Ratings has withdrawn five JPMorgan Money Market Fund (MMF) 'AAAmmf' ratings and assigned two JPMorgan Bond Fund Ratings of 'AAf' and 'S1', subsequent to their reorganisations concluded on 31 October 2022. A full list of rating actions is detailed below. The affected funds are: JPMorgan Liquidity Funds - USD Government LVNAV Fund, which has now been merged into JPMorgan Liquidity Funds - USD Treasury CNAV Fund; JPMorgan Liquidity Funds - USD Treasury VNAV Fund, which has now been merged into JPMorgan Liquidity Funds - USD Treasury CNAV Fund; JPMorgan Liquidity Funds - EUR Liquidity VNAV Fund, which has now been merged into JPMorgan Liquidity Funds - EUR Standard Money Market VNAV Fund; JPMorgan Liquidity Funds - GBP Liquidity VNAV Fund, which has now been converted to JPMorgan Liquidity Funds - GBP Standard Money Market VNAV Fund; and, JPMorgan Liquidity Funds - USD Liquidity VNAV Fund, which has now been converted to JPMorgan Liquidity Funds - USD Standard Money Market VNAV Fund. The mergers do not have an impact on the existing ratings of the JPMorgan Liquidity Funds - USD Treasury CNAV Fund (rated AAAmmf) and JPMorgan Liquidity Funds - EUR Standard Money Market VNAV Fund (rated AAf/S1). Fitch has chosen to rate JPMorgan Liquidity Funds - GBP Standard Money Market VNAV Fund and JPMorgan Liquidity Funds - USD Standard Money Market VNAV Fund post their conversion under its Bond Fund Rating Criteria. This is because as standard MMFs, as defined in Regulation (EU) 2017/1131, they are allowed longer weighted average maturity (WAM) and weighted average life (WAL) than their previous status as short-term MMFs. As the GBP Standard Money Market VNAV Fund and USD Standard Money Market VNAV Fund have now converted to standard MMFs, it may take time for the funds to reach their target portfolio allocations under the new fund type. Fitch had based its analysis on the funds' governing documentations, investment guidelines and target portfolios, combined with stress-testing scenarios to reach their ratings. Fitch's standard stress tests, and additional scenarios based on the funds' investment guidelines, show that the ratings are robust at their current levels. The withdrawal of the five MMF ratings is due to JPMorgan funds' reorganisations."
CNBC.com on Retail MMF Flows
Last week, CNBC.com published the article, "Retail money market funds inflows are the highest in 30 years as investors seek safety." They write, "As yields on money market mutual funds march toward their highest rates in more than a decade, some investors are pouring into the asset class. One fixture of overall money market funds is seeing the highest growth in decades this year -- retail money market fund inflows hit $122.1 billion in the week ending Oct. 19, the most since 1992, according to data from Refinitiv Lipper. Overall, the market is seeing outflows driven by institutional investors, with $189.5 billion being withdrawn from U.S. money market funds through Oct. 19. That's the largest net outflow for any full year since 2010, according to Refinitiv Lipper. The retail funds, however, are attractive because they've seen a huge increase in yields as the Federal Reserve raises interest rates to cool off high inflation." The piece tells us, "At the start of the year, such accounts were yielding 0.02% on average, according to Crane Data, a firm that tracks money markets. Now, the average yield is 2.8% and moving higher, notching levels that haven't been seen since 2007, ahead of the Great Financial Crisis. 'No doubt they will be 3% within two weeks, on average,' said Peter Crane, founder of the firm, adding that they could be pushing 4% on average by the end of the year, with little market risk. 'Anyone buying 2-year Treasurys at 4% a month ago is probably going to be sorry,' he said."
Money Fund Yields Climb to 2.86%
Money fund yields climbed again last week -- our Crane 100 Money Fund Index (7-Day Yield) rose 4 basis points to 2.86% in the week ended Friday, 10/28. Yields rose by 6 basis points the previous week and are up from 2.66% on Sept. 30. On average, they're up from 2.01 on August 31, up from 1.57% on July 29, up from 1.18% on June 30 and from 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 later this week after the Fed hikes rates again on Nov. 2. Our broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 677), shows a 7-day yield of 2.77%, up 5 bps in the week through Friday. The Crane Money Fund Average is up 174 bps since beginning of July and up 230 bps from 0.47% at the beginning of June. Prime Inst MFs were up 3 bps to 2.96% in the latest week, up 169 bps since the start of July and up 232 bps since the start of June (close to double from the month prior). Government Inst MFs rose by 4 bps to 2.79%, they are up 169 bps since start of July and up 225 bps since the start of June. Treasury Inst MFs up 8 bps for the week at 2.84%, up 180 bps since beginning of July and up 234 bps since the beginning of June. Treasury Retail MFs currently yield 2.62%, (up 8 bps for the week, up 182 bps since July and up 232 bps since June), Government Retail MFs yield 2.54% (up 4 bps for the week, up 175 bps since July started and up 228 bps since June started), and Prime Retail MFs yield 2.80% (up 3 bps for the week, up 173 bps from beginning of July and up 232 bps from beginning of June), Tax-exempt MF 7-day yields dropped by 9 bps to 1.85%, they are up 129 bps since the start of July and up 147 bps since the start of June. According to Monday's Money Fund Intelligence Daily, with data as of Friday (10/28), 100 funds (out of 816 total) still yield between 0.00% and 1.99% with assets of $53.8 billion, or 1.1% of total assets; 150 funds yield between 2.00% and 2.49% with $291.4 billion in assets, or 5.8%; 407 funds yielded between 2.50% and 2.99% with $3.277 trillion, or 64.8%; and 159 funds yielded 3.00% or more ($1.432 trillion, or 28.3%). 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 0.90% for all balances between $1 million and $4.9 million and to 1.25% 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.
