Daily Links Archives: September, 2022

Money fund yields jumped higher again -- our Crane 100 Money Fund Index (7-Day Yield) rose 24 basis points to 2.34% in the week ended Friday, 9/23. Yields rose by 5 basis points the previous week, 3 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 triple 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 2.23%, up 22 bps in the week through Friday. The Crane Money Fund Average is up 120 bps since beginning of July and up 176 bps from 0.47% at the beginning of June. Prime Inst MFs were up 22 bps to 2.41% in the latest week, up 114 bps since the start of July and up 177 bps since the start of June (close to double from the month prior). Government Inst MFs rose by 24 bps to 2.29%, they are up 119 bps since start of July and up 175 bps since the start of June. Treasury Inst MFs up 22 bps for the week at 2.29%, up 125 bps since beginning of July and up 179 bps since the beginning of June. Treasury Retail MFs currently yield 2.06%, (up 24 bps for the week, up 126 bps since July and up 176 bps since June), Government Retail MFs yield 2.00% (up 23 bps for the week, up 121 bps since July started and up 174 bps since June started), and Prime Retail MFs yield 2.27% (up 23 bps for the week, up 120 bps from beginning of July and up 179 bps from beginning of June), Tax-exempt MF 7-day yields rose by 28 bps to 1.32%, they are up 76 bps since the start of July and up 94 bps since the start of June. According to Monday's Money Fund Intelligence Daily, with data as of Friday (9/23), just 19 funds (out of 818 total) still yield between 0.00% and 0.99% with assets of $1.2 billion, or 0.0% of total assets; 91 funds yield between 1.00% and 1.49% with $48.7 billion in assets, or 1.0%; 78 funds yielded between 1.50% and 1.74% with $95.7 billion or 1.9%; 85 funds yielded between 1.75% and 1.99% ($96.0 billion, or 1.9%); 165 funds yielded between 2.00% and 2.24% ($1.021 trillion, or 20.3%) and 380 funds yielded 2.25% or more ($3.763 trillion, or 74.9%). Brokerage sweep rates jumped 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 0.29%. The latest Brokerage Sweep Intelligence, with data as of Sept. 23, shows just one rate change over the previous week. Last week, Fidelity increased rates to 1.57% 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.

Crane Data is starting to make plans for our next Money Fund University educational conference. (We're also hosting our European Money Fund Symposium this week, Sept. 27-28, in Paris, France.) Our 12th annual MFU will change slightly from its previous "basic training" 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 cancelled MFU last January and hosted a virtual event, but this year we'll be back live and in person.) 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 extended free training session (and lunch) for Crane Data clients, as well as a Holiday party where all are welcome. 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.) New portfolio managers, analysts, investors, issuers, service providers, and anyone interested in expanding their knowledge of "cash" investing should benefit from our comprehensive program. Even experienced professionals may enjoy a refresher course and the opportunity to interact with peers in an informal setting. Also, please join us for the 8th Annual Crane's European Money Fund Symposium. The latest agenda is available and registrations are still being taken for this year's European event, which will take place Sept. 27-28 at the Renaissance Paris La Defense in Paris, France. Registration for our 2022 Crane's European Money Fund Symposium is $1,000 USD. Please make your hotel reservations soon! Rooms must be booked before August 5 to receive the discounted rate of E259. Visit www.euromfs.com to register, and contact us to request the PDF brochure. (Let us know too if you'd like information on speaking or sponsorship pricing.) Mark your calendars for our next Bond Fund Symposium, which be held in Boston, Mass., on March 23-24, 2023. (Click here to see last year's agenda.) 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 Paris in September, Boston in December or in March 2023, and Atlanta in June 2023. Thanks to all of our speakers, sponsors and supporters for your patience and support over the past 2+ rough years!

Mutual fund news source ignites posted, "Vanguard Pilots 'Savings Account Alternative' for Clients." They explain, "Vanguard is testing whether clients who trust the firm with their long-term investments are willing to park their day-to-day cash there, too. The firm is piloting a new Cash Plus Account with a select group of clients, according to advertisements and emails sent to individuals and subsequently posted on Vanguard client message boards. The brokerage account is separate from the firm's traditional trading accounts that funnel assets to a handful of partner banks. The banks, in turn, offer FDIC protection up to $250,000 and attractive deposit interest rates. In addition, the account offers unlimited movement of assets in and out of the account, unlike traditional savings accounts." The piece adds, "Vanguard's communications advertise an APR of 2.25% for the Cash Plus Account as of Aug. 2, significantly above other sweep account options offered by the firm. The Vanguard Federal Money Market Fund offered an SEC yield of 2.17% as of Sept. 20, according to the Malvern, Pennsylvania-based firm’s website. And its Vanguard Cash Deposit bank-sweep option, which launched in a pilot earlier this year, advertised a yield of 1.75% as of the same date. A Vanguard spokesperson described Cash Plus as 'a savings account alternative that enables our clients to manage their cash assets alongside their investments.'" A posting on the Reddit "Bogleheads" message board quotes from Vanguard's communication, "The Vanguard Cash Plus Account is a brokerage account offered by Vanguard Brokerage Services (VBS), a division of Vanguard Marketing Corporation, member FINRA and SIPC. Under the Vanguard Cash Plus program, Eligible Balances swept to Program Banks are the obligations of each Program Bank and are not cash balances held by VBS. Eligible Balances swept to Program Banks are not securities: they are not covered by the SIPC but are eligible for FDIC insurance, subject to applicable limits. See the Bank Sweep Terms of Use (PDF) for more information."

Barron's writes "Short-Term Bonds Yield 4%. Why They Could Beat Cash." The article tells us, "Until recently, short-term bonds were a yield wasteland: A two-year Treasury note yielded 0.21% a year ago and just 1% in January. Today, the yield is over 3.8% and could soon touch 4%, thanks in good measure to the Federal Reserve's aggressive interest-rate-hiking campaign.... But this could be a good entry point for short-term bonds: They may not fall much more, and yields are now high enough to withstand some price pressure. 'We are actually comfortable owning the front end of the yield curve here,' says Bob Miller, head of Americas fundamental fixed income at BlackRock.'" They also state, "Short-term funds have racked up losses this year. The iShares 1-3 Year Treasury Bond exchange-traded fund (ticker: SHY), a proxy for Treasuries, is down 3.85%, after interest. Yet some analysts think that short-term yields may now be close to pricing in the remainder of the Fed's rate increases. With yields at nearly 4%, there's far more of an income cushion against price declines. Investors may also scoop up a bit more income than with cash proxies like money-market funds, now yielding about 2%. 'When you have a 3.75% yield, that's much more manageable,' says Cary Fitzgerald, head of short-duration fixed income at J.P. Morgan Asset Management." The piece also says, "Tom Tzitzouris, head of fixed-income research at Strategas, says short-term yields are also now in the terminal ballpark. If that's the case, he adds, 'you're basically going to clip your coupons in two-year Treasuries because the market has already priced in the tightening.' Opportunities in shorter-term bonds aren't confined to Treasuries. `John Bellows, a portfolio manager at Western Asset Management, likes investment-grade corporate debt, which features both a yield component and some income from the credit risk embedded in the bonds." It adds, "Various mutual funds and ETFs offer exposure to the shorter end of the yield curve. For pure Treasuries, the $26 billion iShares 1-3 Year Treasury Bond ETF offers broad diversification at a low fee. It has an SEC yield of 3.31% and an expense ratio of 0.15%. For corporate bond exposure, consider the $43 billion Vanguard Short-Term Corporate Bond ETF (VCSH), an index fund covering the broad market. It sports an SEC yield of 4.22% and an expense ratio of 0.04%."

Allspring Money Market Funds' most recent "Overview, Strategy, and Outlook" discusses the economy, the Fed and the "relentless optimism of market participants." They then ask, "So what have we been up to? Given the backdrop of an FOMC still in the process of raising rates, we tended to conservatively structure our portfolios in favor of keeping excess liquidity over the stated regulatory requirements, running shorter weighted average maturities, and selectively adding fixed-rate securities if the opportunity offered a favorable risk/reward proposition. This has allowed our portfolios to capture the Fed's rate increases fairly quickly, while the enhanced levels of liquidity allow our portfolios to meet the liquidity needs of our investors and help dampen net asset value (NAV) volatility." Allspring writes, "Aside from rate path developments, which have been unambiguously positive, investors have suffered through a supply drought for much of the year. But it finally rained in August: Treasury-bill (T-bill) supply, which fell by almost $600 billion from February through July, rebounded by over $200 billion by the end of August, giving the market a more balanced tone for the first time this year. Supply issues should be more modest over the next few months, with some retrenchment accompanying the September tax receipts, then a steadier course after." They tell us, "The municipal money market yield curve widened dramatically during August as rates on overnight and weekly variable-rate demand notes (VRDNs) and tender option bonds (TOBs) gyrated throughout the month and longer-term fixed-rate paper gapped higher. The Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Index rose to a multi-year high of 1.83% on August 10, up from 1.33% at the end of July. This dramatic increase in short-term rates resulted in a temporary yield-curve inversion in the municipal space; however, this rare occurrence eventually corrected as the market headed into month-end." Allspring adds, "Yields on fixed-rate, tax-exempt paper in the short end of the maturity spectrum began to gap higher in response to the curve inversion. Ultimately, yields on high-grade one-year notes closed out the month at roughly 2.43%, up from 1.57% at the end of July. The sudden increase in tax-exempt rates boosted the relative attractiveness of the sector and, accordingly, municipal money market funds were the recipients of roughly $4 billion in inflows during the month, according to Crane Data. This resulted in a surge in demand for daily and weekly VRDNs. This second-half rebound in demand led the SIFMA Index to close out the month at 1.50%. During the month, we continued to focus our purchases primarily in VRDNs and TOBs with daily and weekly put options in our order to emphasize principal preservation and fund liquidity, and we continued to adopt a conservative posture with respect to weighted average maturities. Accordingly, we remained highly selective in our fixed-rate purchases further out on the curve and opportunistically added term trades to capture the higher rates. However, with lingering questions surrounding the pace of tightening by the FOMC and terminal federal funds rate, we feel it is prudent to remain relatively short for the near future."

Money fund yields continued creeping higher again in the latest week, with our Crane 100 Money Fund Index (7-Day Yield) rising 5 basis points to 2.10% in the week ended Friday, 9/16. Yields rose by 3 basis points the previous week, 3 bps the week before that, and 2 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 triple 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 should jump again following the Fed's Wednesday (9/21) meeting, when they're expected to hike rates by another 75 bps. Our broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 679), shows a 7-day yield of 2.01%, up 7 bps in the week through Friday. The Crane Money Fund Average is up 98 bps since beginning of July and up 154 bps from 0.47% at the beginning of June. Prime Inst MFs were up 4 bps to 2.19% in the latest week, up 92 bps since the start of July and up 155 bps since the start of June (close to double from the month prior). Government Inst MFs rose by 8 bps to 2.05%, they are up 95 bps since start of July and up 151 bps since the start of June. Treasury Inst MFs up 7 bps for the week at 2.07%, up 103 bps since beginning of July and up 157 bps since the beginning of June. Treasury Retail MFs currently yield 1.82%, (up 6 bps for the week, up 102 bps since July and up 152 bps since June), Government Retail MFs yield 1.77% (up 10 bps for the week, up 98 bps since July started and up 151 bps since June started), and Prime Retail MFs yield 2.04% (up 4 bps for the week, up 97 bps from beginning of July and up 156 bps from beginning of June), Tax-exempt MF 7-day yields rose by 3 bps to 1.04%, they are up 48 bps since the start of July and up 66 bps since the start of June. According to Monday's Money Fund Intelligence Daily, with data as of Friday (9/16), just 50 funds (out of 822 total) still yield between 0.00% and 0.99% with assets of $5.4 billion, or 0.1% of total assets; 137 funds yield between 1.00% and 1.49% with $139.7 billion in assets, or 2.8%; 70 funds yielded between 1.50% and 1.74% with $99.9 billion or 2.0%; 163 funds yielded between 1.75% and 1.99% ($825.2 billion, or 16.5%); 259 funds yielded between 2.00% and 2.24% ($2.650 trillion, or 52.9%) and 143 funds yielded 2.25% or more ($1.286 trillion, or 25.7%). Brokerage sweep rates were flat 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 0.26%. Euro money market fund yields went positive this week too for the first time since 2014. Offshore USD MMFs yield 2.21% (7-Day) on average (as of 9/16/22), up from 2.05% a month earlier. Yields averaged 0.03% on 12/31/21, 0.05% on 12/31/20, 1.59% on 12/31/19 and 2.29% on 12/31/18. EUR MMFs yield 0.14% on average, up from -0.80% on 12/31/21. They averaged -0.71% at year-end 2020, -0.59% at year-end 2019 and -0.49% at year-end 2018. Meanwhile, GBP MMFs yielded 1.66%, up 20 bps from a month ago, and up from 0.01% on 12/31/21. Sterling yields were 0.00% on 12/31/20, 0.64% on 12/31/19 and 0.64% on 12/31/18. (See our latest MFI International for more on the "offshore" money fund marketplace. Note that these funds are only available to qualified, non-U.S. investors.)

Barron's writes "`Cash Is No Longer Trash. T-Bill Yields Near 4%." The piece tells us, "Cash is no longer trash. For the first time in 15 years, investors can get nearly 4% yields on U.S. Treasury bills, while rates on some money-market funds have hit 2% and likely are heading higher. These yields were around zero at the start of 2022. The rate rise helps formerly yield-starved savers who have suffered for most of the past decade and a half with sub-1% short-term yields." Barron's also says, "The added income on the enormous pool of money-market funds and other short-term bond assets also could provide a lift to the economy. One loser is the U.S. government, which is paying more on its borrowings. Other beneficiaries from higher short rates are cash-rich companies like Berkshire Hathaway, Apple, Alphabet, and Microsoft." They add, "Individual investors can also buy T-bills through liquid exchange-traded funds like the $23 billion iShares Short Treasury Bond ETF (SHV), which holds Treasuries with an average maturity of about four months, and the $20 billion SPDR Bloomberg 1-3 Month T-Bill ETF (BIL). The iShares SHV ETF has a 30-day yield of 2.5% based on a Securities and Exchange Commission methodology. The SPDR Bloomberg BIL ETF's SEC yield is 2%. Investors willing to take slightly more interest-rate risk can buy the iShares 1-3 Year Treasury Bond ETF SHY (SHY) with an average maturity of around two years and SEC yield of 3.3%. The $42 billion Vanguard Short-Term Corporate Bond ETF (VCSH) carries an SEC yield of more than 4% and an average maturity of 3 years.... Money-market fund yields also are rising. The huge, $216 billion Vanguard Federal Money Market Fund (VMFXX) now has an SEC yield of 2.15% and that yield probably is heading higher."

Money fund assets fell again in the latest week, their 6th decline in the past 7 weeks, though Prime assets increased again. The Investment Company Institute's latest weekly "Money Market Fund Assets" report shows assets down by $153 billion, or -3.3%, year-to-date, with Institutional MMFs down $194 billion, or -6.0% and Retail MMFs up $41 billion, or 2.8%. Over the past 52 weeks, money fund assets are up by $87 billion, or 2.0%, with Retail MMFs rising by $79 billion (5.5%) and Inst MMFs rising by $8 billion (0.3%). (For the month of Sept. through 9/15, MMF assets increased by $432 million to $5.025 trillion according to Crane's MFI XLS, which tracks a broader universe of funds than ICI. Crane Data's Prime asset total is currently $955.2 billion.) ICI's weekly release says, "Total money market fund assets decreased by $12.36 billion to $4.55 trillion for the week ended Wednesday, September 14, the Investment Company Institute reported.... Among taxable money market funds, government funds decreased by $13.28 billion and prime funds increased by $2.15 billion. Tax-exempt money market funds decreased by $1.22 billion." ICI's stats show Institutional MMFs decreasing $15.3 billion and Retail MMFs increasing $2.9 billion in the latest week. Total Government MMF assets, including Treasury funds, were $3.934 trillion (86.4% of all money funds), while Total Prime MMFs were $517.2 billion (11.4%). Tax Exempt MMFs totaled $101.1 billion (2.2%). ICI explains, "Assets of retail money market funds increased by $2.90 billion to $1.51 trillion. Among retail funds, government money market fund assets decreased by $3.00 billion to $1.13 trillion, prime money market fund assets increased by $6.47 billion to $290.16 billion, and tax-exempt fund assets decreased by $572 million to $90.83 billion." Retail assets account for just under a third of total assets, or 33.2%, and Government Retail assets make up 74.8% of all Retail MMFs. They add, "Assets of institutional money market funds decreased by $15.26 billion to $3.04 trillion. Among institutional funds, government money market fund assets decreased by $10.28 billion to $2.80 trillion, prime money market fund assets decreased by $4.33 billion to $227.08 billion, and tax-exempt fund assets decreased by $651 million to $10.28 billion." Institutional assets accounted for 66.8% of all MMF assets, with Government Institutional assets making up 92.2% 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.)

The Wall Street Journal writes "U.S. Banks Lost a Record $370 Billion in Deposits Last Quarter," which tells us, "Deposits at U.S. banks fell by a record $370 billion in the second quarter, the first decline since 2018. Deposits fell to $19.563 trillion as of June 30, down from $19.932 trillion in March, according to the Federal Deposit Insurance Corp. The outflow in the quarter isn't a problem for banks, which are sitting on more deposits than they want. Deposits in the banking system usually stay relatively stable, but swelled by some $5 trillion in the past two years due to pandemic stimulus. Now, a series of Federal Reserve rate increases is taking some of that money out of the system, in part by decreasing demand for loans and increasing demand for government bonds." The piece adds, "Complicating forecasts is a $2.2 trillion Federal Reserve Bank of New York program where investors park cash, which has held steady despite rising rates. That money is largely coming from money-market funds. The reverse repo facility swelled during the pandemic, when overloaded banks started pushing their customers to put some of their deposits in money-market funds. Many analysts thought money would drain out of the reverse-repo facility first. But so far the opposite has happened, and deposits declined, which could reduce bank reserves at the Fed faster than expected. That could prompt the Fed to stop tightening early next year, some economists have said." See also the source, the FDIC's latest "Quarterly Banking Profile," which states, "Deposits declined $369.1 billion (1.9%) between first quarter 2022 and second quarter 2022. This was the first decline in deposits since the second quarter 2018. Both uninsured and insured deposits declined during the quarter, but the reduction in uninsured deposits drove the reduction. The quarterly reduction in deposits offset only a fraction of the unprecedented deposit growth reported during the pandemic. As of second quarter 2022, deposits represented 82.5% of the total assets, well above the pre-pandemic average of 76.7%. A decline in deposit accounts with balances greater than $250,000 (down $282.2 billion, or 2.6%) led the quarterly reduction. Despite the decline in aggregate deposits, just over half of all banks (51.2%) reported higher deposit balances compared with a quarter ago."

Federated Hermes' posted a brief video with Head of Government Liquidity Susan Hill entitled, "Mind the Gap." They ask, "Is the Fed expected to keep rates elevated even if inflation normalizes?" Hill comments, "At Jackson Hole, Chair Powell said that the Fed's going to keep at it until the job is done. And what we think that means is that the Fed will continue to tighten monetary policy until they are really confident that inflation is moving in the right direction. However, because monetary policy works with the lag and because inflation is a lagging indicator, we think that once the inflation percentages become close to 2%, that the Fed will move back to a more neutral stance at that time." Hill commented on Jackson Hole and the Fed in a previous video entitled, "The Battle Continues." She says, "We got from that address that the Fed is not going to give up on the fight against inflation. It's not going to stop too soon and that rates should remain higher as a result of the Fed's resolve. So we went into the meeting expecting that the Fed would take certain action and we came out thinking that they perhaps will go a little bit higher in terms of their Fed target, a little longer in terms of their tightening cycle and stay there longer once they're done. We also got the sense that the Fed Chairman was not necessarily concerned about, at least yet, about the impact on economic growth, but rather it really is the inflation demon that they're fighting today." Finally, Federated also wrote, "The Place to Be: Cash has become a compelling asset class," recently. Money Market CIO Deborah Cunningham tells us, "As stocks and bonds struggle anew, liquidity investments no longer just offer shelter from volatility or serve as a base camp for future allocation. Rather, they have been providing a growing return. The Crane 100 Money Fund Index (the average of the 7-day yields of the 100 largest taxable money market funds) hit 2% on the last day of August, while equities retreat, Treasury yields rise and deposit-product interest rates lag."

Money fund yields continued creeping higher again in the latest week, with our Crane 100 Money Fund Index (7-Day Yield) rising 3 basis points to 2.05% in the week ended Friday, 9/9. Yields rose by 3 basis points the previous week, 2 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 triple 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 should jump again following the Fed's Sept. 21 meeting, when they're expected to hike rates by another 75 bps. Our broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 679), shows a 7-day yield of 1.94%, up 3 bps in the week through Friday. The Crane Money Fund Average is up 91 bps since beginning of July and up 147 bps from 0.47% at the beginning of June. Prime Inst MFs were up 1 bp to 2.15% in the latest week, up 88 bps since the start of July and up 151 bps since the start of June (close to double from the month prior). Government Inst MFs rose by 3 bps to 1.97%, they are up 87 bps since start of July and up 143 bps since the start of June. Treasury Inst MFs up 3 bps for the week at 2.00%, up 96 bps since beginning of July and up 150 bps since the beginning of June. Treasury Retail MFs currently yield 1.76%, (up 4 bps for the week, up 96 bps since July and up 146 bps since June), Government Retail MFs yield 1.67% (up 2 bps for the week, up 88 bps since July started and up 141 bps since June started), and Prime Retail MFs yield 2.00% (up 1 bp for the week, up 93 bps from beginning of July and up 152 bps from beginning of June), Tax-exempt MF 7-day yields fell by 11 bps to 1.01%, they are up 45 bps since the start of July and up 63 bps since the start of June. According to Monday's Money Fund Intelligence Daily, with data as of Friday (9/9), just 57 funds (out of 822 total) still yield between 0.00% and 0.99% with assets of $10.6 billion, or 0.2% of total assets; 155 funds yield between 1.00% and 1.49% with $184.8 billion in assets, or 3.7%; 92 funds yielded between 1.50% and 1.74% with $175.6 billion or 3.5%; 173 funds yielded between 1.75% and 1.99% ($1.227 trillion, or 24.4%); 255 funds yielded between 2.00% and 2.24% ($2.475 trillion, or 49.1%) and 90 funds yielded 2.25% or more ($963.6 billion, or 19.1%). Brokerage sweep rates were flat 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 0.26%.

A statement sent to us last week tells us, "BNY Mellon and Dreyfus, BNY Mellon's affiliated liquidity manager, are pleased to partner with NY MuniTrust to deliver competitive liquidity options through a turnkey solution for New York municipalities. As the manager for NY MuniTrust's recently launched local government investment pool (LGIP), Dreyfus is leveraging its nearly 50 years of experience to help municipalities optimize their liquidity with competitive investment returns at a unique value. In addition, BNY Mellon supports NY MuniTrust by providing custody, fund accounting and record keeping for the investment pools." John Tobin, Chief Investment Officer for Dreyfus, comments, "Dreyfus has deep roots in New York. We're pleased to be able to offer these competitive liquidity solutions to our local municipalities. NY MuniTrust offered us the opportunity to broaden the investment options for NY-based municipalities -- and we were eager to partner with them to provide this client-focused solution." Declan Denehan, Managing Director and Head of Public Funds Segment for BNY Mellon Asset Servicing, adds, "With 238 years in New York, it is powerful to see the broad impact our services can have in our communities.... BNY Mellon is proud to be able to provide a turnkey solution -- from custody, fund accounting and record keeping through investment management -- for New York municipalities."

Money fund assets inched lower again in the latest week, the 5th decline in the past 6 weeks, but Prime and Retail assets keep growing. The Investment Company Institute's latest weekly "Money Market Fund Assets" report shows assets down by $141 billion, or -3.0%, year-to-date, with Institutional MMFs down $179 billion, or -5.5% and Retail MMFs up $38 billion, or 2.6%. Over the past 52 weeks, money fund assets are up by $60 billion, or 1.3%, with Retail MMFs rising by $79 billion (5.5%) and Inst MMFs falling by $19 billion (-0.6%). (For the month of Sept. through 9/7, MMF assets increased by $3.2 billion to $5.028 trillion according to Crane's MFI XLS, which tracks a broader universe of funds than ICI. Crane Data's Prime asset total is currently $943.5 billion.) ICI's weekly release says, "Total money market fund assets decreased by $3.27 billion to $4.56 trillion for the week ended Wednesday, September 7, the Investment Company Institute reported.... Among taxable money market funds, government funds decreased by $11.62 billion and prime funds increased by $8.22 billion. Tax-exempt money market funds increased by $120 million." ICI's stats show Institutional MMFs decreasing $17.8 billion and Retail MMFs increasing $14.5 billion in the latest week. Total Government MMF assets, including Treasury funds, were $3.947 trillion (86.5% of all money funds), while Total Prime MMFs were $515.1 billion (11.3%). Tax Exempt MMFs totaled $102.3 billion (2.2%). ICI explains, "Assets of retail money market funds increased by $14.51 billion to $1.51 trillion. Among retail funds, government money market fund assets increased by $6.17 billion to $1.13 trillion, prime money market fund assets increased by $7.82 billion to $283.69 billion, and tax-exempt fund assets increased by $517 million to $91.40 billion." Retail assets account for just under a third of total assets, or 33.0%, and Government Retail assets make up 75.1% of all Retail MMFs. They add, "Assets of institutional money market funds decreased by $17.78 billion to $3.06 trillion. Among institutional funds, government money market fund assets decreased by $17.79 billion to $2.82 trillion, prime money market fund assets increased by $406 million to $231.40 billion, and tax-exempt fund assets decreased by $397 million to $10.93 billion." Institutional assets accounted for 67.0% 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.)

Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics Wednesday, which track a shifting subset of our monthly Portfolio Holdings collection. The most recent cut (with data as of Sept. 2) includes Holdings information from 54 money funds (down 19 from a week ago), which represent $1.732 trillion (down from $2.585 trillion) of the $5.014 trillion (34.5%) 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 $922.1 billion (down from $1.355 trillion a week ago), or 53.2%; Treasuries totaling $543.9 billion (down from $914.5 billion a week ago), or 31.4%, and Government Agency securities totaling $107.8 billion (down from $136.2 billion), or 6.2%. Commercial Paper (CP) totaled $45.9 billion (down from a week ago at $58.2 billion), or 2.7%. Certificates of Deposit (CDs) totaled $37.4 billion (down from $40.3 billion a week ago), or 2.2%. The Other category accounted for $46.7 billion or 2.7%, while VRDNs accounted for $28.4 billion, or 1.6%. The Ten Largest Issuers in our Weekly Holdings product include: the Federal Reserve Bank of New York with $705.0 billion (40.7%), the US Treasury with $543.9 billion (31.4% of total holdings), Federal Home Loan Bank with $66.7B (3.9%), Federal Farm Credit Bank with $36.6B (2.1%), BNP Paribas with $27.0B (1.6%), RBC with $23.7B (1.4%), JP Morgan with $16.7B (1.0%), Fixed Income Clearing Corp with $16.4B (0.9%), Mitsubishi UFJ Financial Group Inc with $13.6B (0.8%) and Barclays PLC with $12.6B (0.7%). The Ten Largest Funds tracked in our latest Weekly include: JPMorgan US Govt MM ($224.7B), Morgan Stanley Inst Liq Govt ($153.7B), Fidelity Inv MM: Govt Port ($121.3B), Dreyfus Govt Cash Mgmt ($117.1B), State Street Inst US Govt ($108.0B), Allspring Govt MM ($105.2B), JPMorgan 100% US Treas MMkt ($88.0B), First American Govt Oblg ($80.2B), Invesco Govt & Agency ($68.4B) and JPMorgan Prime MM ($58.2B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary, or our Bond Fund Portfolio Holdings data series.)

Western Asset writes on "The Cyclical Shift in Yields Between Bank Deposits and Money Market Funds." Authors Jason Straker, Ivor Schucking and Sebastian Angerer tell us, "US bank balance sheets are now arguably the strongest they've been in decades and surprisingly stronger than they were pre-Covid. Record earnings combined with the Federal Reserve's quantitative easing program resulted in banks coming out of the crisis with strong capital ratios.... Deposits now fund 83% of bank industry assets versus 65% in 2008, the highest proportion since 1993." They write, "In fact, deposit growth of $5.2 trillion over the past nine quarters equals the deposit growth of all the past 10 years combined. This has led to deposits now exceeding loans by a record gap of $8.5 trillion, representing more than 15 years of average annual loan growth of 4% to 5%." The piece comments, "Parallel to this credit-positive environment, these structural changes have also had an impact on the correlation between the fed funds rate and US bank deposit interest rates, also known as 'deposit betas.' Although at the start of 2022 US banks positioned themselves well for the prospect of higher rates and the subsequent expansion of net interest margins, this did not necessarily mean that these higher rates would be completely passed on to depositors. In fact, the record-high deposit balances have led to betas that were below market expectations in the current central bank rate-tightening cycle, and this will be especially true for non-operational deposits with the largest banks as well as deposits from retail customers." Western says, "So far in 2022, as expected, deposit betas have been comparatively low in relation to prior tightening cycles. The 2004-2006 tightening cycle showed a beta close to 50% and the 2016-2018 cycle beta was close to 25%, but the first two quarters of the 2022 cycle have so far only exhibited a beta close to 8%.... The total amount of deposits is not the sole factor driving betas; banks are also concerned with the source of funding. Non-operational deposits are treated less favorably under banking regulation such as Basel III. As a result, banks are keen to reduce these deposit types where possible by setting interest rates at less competitive levels. It is expected that once this reduction has reached suitable targets, deposit betas will reset slightly higher as banks will aim to retain the more valuable operational deposits where possible." The piece adds, "Despite the eventual uptick in betas, the wait will undoubtedly be frustrating for institutions and their staffs, such as corporate treasurers, who continue to need a place to park high cash reserves. Bank deposits, however, are not the only option for cash investors. Money market funds -- although offering different risk, return, operational and liquidity attributes -- have long been a viable alternative and may be viewed as a suitable complement or replacement if the yield is also attractive. When deposit betas do eventually increase, the expected large volume of operational deposits on bank balance sheets will still remain a significant headwind. This will, in turn, likely cause deposit rates to underperform money market funds once the hiking cycle is well underway. This was certainly witnessed in 2016 during the last tightening cycle, when yields of government style money market funds started to rise off their zero base almost two years before the average deposit rate rose. Looking ahead to the current cycle of 2022, it's important to realize that yields of money market funds stalled at the very beginning of the Fed's current hiking path as fund fee waivers -- which were applied to avoid net negative yields during the multi-year near zero interest rate environment -- were slowly reduced and ultimately removed." Finally, they write, "On average, the net seven-day yields of Treasury, government and prime money market funds fully reflected each of the first three rate hikes in 2022 within 36, 33 and 32 days, respectively. Differences between funds were driven by manager decisions such as the average maturity and average life going into the hike announcements. Although both money market funds and deposits exhibit different features and risks which may or may not be suitable for all investors, money market funds historically have outperformed deposits once a tightening path is underway. This suggests that money market funds may represent stiff competition for bank deposits for some time to come."

Fitch Ratings published "Global Money Market Fund Flows Dashboard: 2Q22" recently, which tells us, "Fitch Ratings estimates that U.S., European and Chinese money market fund (MMF) assets under management (AUM) fell to USD8.1 trillion at end-2Q22 from USD8.2 trillion at end-1Q22, based on Lipper data. The US accounted for 55% of total global assets with China at 18% and Europe at 17% at the end of the quarter, all measured in US dollars.... Total AUM in US MMFs ended the quarter at USD5.0 trillion, decreasing by less than 1%. US government MMF assets were down 3%. However, prime, tax-free, treasury MMFs AUM increased by 4%, 18% and 1%, respectively. Inflows to prime (USD32 billion), tax-free (USD 17 billion) and treasury (USD10 billion) MMFs offset a significant portion of the net outflows from government (USD95 billion) MMFs. Government, prime, treasury and tax-free MMFs represented 56%, 17%, 25% and 2% of US MMF AUM, respectively, at end-2Q22." The brief continues, "European MMFs' AUM increased by less than 1% to EUR1.46 trillion from EUR1.45 trillion. We estimate that short-term MMFs were the main contributors, with a 1% rise in AUM in 2Q22. Fitch estimates that short-term and standard MMFs represented respectively 32% and 68% of total MMF AUM at end-2Q22. When measured in base currency, sterling-denominated MMF AUM fell 8% in 2Q22, while euro-denominated MMFs decreased by 3%. US dollar MMFs AUM grew by 2%. Euro-, sterling- and US dollar-denominated MMFs represented around 95% of total MMF AUM in Europe at end-2Q22." Finally, Fitch adds, "Chinese MMFs' total assets increased by 5% with flows totalling CNY406 billion. Assets in China totalled CNY10.6 trillion at end-2Q22, meaning that the country overtook Europe to become the world's second-largest MMF market for the first time." (Note: To learn more on European and Chinese money funds, please join us at our upcoming European Money Fund Symposium, Sept. 27-28 in Paris, France!)

Money fund assets inched lower in the latest week, the 4th decline in the past 5 weeks, but Prime money fund assets increased again and broke back over the $500 billion level. The Investment Company Institute's latest weekly "Money Market Fund Assets" report shows assets down by $137 billion, or -2.9%, year-to-date, with Institutional MMFs down $161 billion, or -5.0% and Retail MMFs up $24 billion, or 1.6%. Over the past 52 weeks, money fund assets are up by $58 billion, or 1.3%, with Retail MMFs rising by $65 billion (4.5%) and Inst MMFs falling by $7 billion (-0.2%). (For the month of August through 8/31, MMF assets increased by $34.0 billion to $5.031 trillion according to Crane's MFI XLS, which tracks a broader universe of funds than ICI. Crane Data's Prime asset total is currently $943.5 billion.) ICI's weekly release says, "Total money market fund assets decreased by $2.47 billion to $4.57 trillion for the week ended Wednesday, August 31, the Investment Company Institute reported.... Among taxable money market funds, government funds decreased by $12.69 billion and prime funds increased by $8.52 billion. Tax-exempt money market funds increased by $1.70 billion." ICI's stats show Institutional MMFs decreasing $6.1 billion and Retail MMFs increasing $3.7 billion in the latest week. Total Government MMF assets, including Treasury funds, were $3.959 trillion (86.7% of all money funds), while Total Prime MMFs were $506.9 billion (11.1%). Tax Exempt MMFs totaled $102.2 billion (2.2%). ICI explains, "Assets of retail money market funds increased by $3.68 billion to $1.49 trillion. Among retail funds, government money market fund assets decreased by $4.14 billion to $1.13 trillion, prime money market fund assets increased by $6.86 billion to $275.87 billion, and tax-exempt fund assets increased by $957 million to $90.88 billion." Retail assets account for just under a third of total assets, or 32.7%, and Government Retail assets make up 75.4% of all Retail MMFs. They add, "Assets of institutional money market funds decreased by $6.14 billion to $3.08 trillion. Among institutional funds, government money market fund assets decreased by $8.55 billion to $2.83 trillion, prime money market fund assets increased by $1.67 billion to $231.00 billion, and tax-exempt fund assets increased by $742 million to $11.32 billion." Institutional assets accounted for 67.3% 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.)

The Investment Company Institute posted a video entited, "Why Investors Use Money Market Funds." They say, "A money market fund is a type of mutual fund that invests in short-term, high-quality debt—including US government securities, municipal securities, repurchase agreements, commercial paper, and other financial instruments. Money market funds pay dividends that generally reflect short-term interest rates, and they are a critical source of financing for organizations of all kinds -- from businesses to nonprofits to governments. Both retail and institutional investors prize money market funds as a practical cash management tool that provides a wide range of benefits. These include a high degree of liquidity, a goal of principal preservation, low costs, and -- in some cases -- tax efficiency. Combine those with a transparent, diversified portfolio, a competitive market-based rate of return, and strict regulation by the Securities and Exchange Commission, and you have one of the world's safest, most valuable investment products." For more basics on money funds, join us for our next Money Fund University educational conference "basic training" event at the Hyatt Regency in Boston, Mass., December 15-16, 2022.

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