Daily Links Archives: December, 2024
Crane 100 Index Drops 7 Bps to 4.27%
Money fund yields (7-day annualized) fell by 7 basis point to 4.27% on average during the week ended Friday, Dec. 27 (as measured by our Crane 100 Money Fund Index), after falling 7 bps the week prior and 2 bps two weeks prior. Fund yields are over half-way through digesting the Federal Reserve's 25 basis point cut from December 18, and they should continue to move lower in coming days. They've declined by 79 bps since the Fed first cut its Fed funds target rate by 50 bps percent on Sept. 18, and they've declined by 36 bps since the Fed cut rates by 1/4 point on 11/7. Yields were 4.45% on 11/30, 4.65% on average on 10/31, 4.75% on 9/30, 5.10% on 8/31, 5.13% on 7/31 and 6/28, 5.14% on 3/31 and 5.20% on 12/31/23. The broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 678), shows a 7-day yield of 4.19%, down 5 bps in the week through Friday. Prime Inst money fund yields were down 8 bps at 4.36% in the latest week. Government Inst MFs were down 5 bps at 4.30%. Treasury Inst MFs were down 4 bps at 4.24%. Treasury Retail MFs currently yield 4.02%, Government Retail MFs yield 4.00%, and Prime Retail MFs yield 4.16%, Tax-exempt MF 7-day yields were up 30 bps to 3.27%. Assets of money market funds rose by $78.5 billion last week to $7.163 trillion, seeing a new record high on Thursday, 12/26 at $7.165 trillion, according to Crane Data's Money Fund Intelligence Daily. For the month of December, MMF assets have jumped by $100.3 billion, after increasing by $200.5 billion in November, $97.5 billion in October and $149.8 billion in September. Weighted average maturities were up 1 day at 38 days for the Crane MFA and unchanged at 38 days for the Crane 100 Money Fund Index. According to Monday's Money Fund Intelligence Daily, with data as of Friday (12/27), 22 money funds (out of 790 total) yield under 3.0% with $10.2 billion in assets, or 0.1%; 218 funds yield between 3.00% and 3.99% ($285.1 billion, or 4.0%), 550 funds yield between 4.0% and 4.99% ($6.868 trillion, or 95.9%) and following the recent rate cut there continue to be zero funds yielding 5.0% or more. Our Brokerage Sweep Intelligence Index, an average of FDIC-insured cash options from major brokerages, was unchanged at 0.44%, after dropping 2 basis points the week prior. The latest Brokerage Sweep Intelligence, with data as of Dec. 27, shows one change over the past week. Merrill Lynch lowered rates once again for their advisory accounts; they're now at 4.29% (down 11 bps from the week prior). Three of the 10 major brokerages tracked by our BSI still offer rates of 0.01% for balances of $100K (and lower tiers). These include: E*Trade, Merrill Lynch and Morgan Stanley.
Yellen on Treasury Debt Ceiling
Bloomberg writes, "Yellen Says Treasury to Hit New Debt Limit in Mid-January." The article says, "Treasury Secretary Janet Yellen said her department is likely to begin taking special accounting maneuvers sometime in mid-January to avoid breaching the US debt limit, and urged lawmakers to take action defending the 'full faith and credit' of the US. 'On Jan. 2, 2025, the new debt limit will be established at the amount of outstanding debt,' Yellen wrote in a letter on Friday to House Speaker Mike Johnson and other congressional leaders. The Treasury will be given a short reprieve, however, because outstanding debt is scheduled to decrease by $54 billion on Jan. 2, thanks to the expected redemption of securities held by a federal trust fund." Bloomberg's piece explains, "The extra headroom is likely to be exhausted by Jan. 14 to 23, Yellen said. At that point, the Treasury will resort to special accounting maneuvers to help keep the government funded.... Goldman Sachs Group Inc. economist Alec Phillips wrote in a Dec. 21 note that the ultimate 'deadline for debt limit action is likely not until Jul.-Aug. 2025.'" It adds, "Some strategists have anticipated an easier path to an agreement to suspend or lift the cap given Republicans' unified control of Congress. Yet last week, Trump failed to get a debt-ceiling measure attached to the latest temporary federal spending bill when members of his own party shot down a House version that included a two-year suspension. A showdown over the debt ceiling could strain financial markets and put upward pressure on already-elevated US borrowing costs."
ICI: MMF Assets Break Record $6.8T
ICI's latest "Money Market Fund Assets" report shows money funds jumping $54.7 billion to a new record of $6.806 trillion in the latest week, their first time over the $6.8 trillion level, after falling $19.6 billion the previous week. Three weeks prior, assets jumped $95.9 billion to the previous record of $6.771 trillion. Money fund assets have risen in 15 of the last 21, and 26 of the last 36, weeks, increasing by $502.2 billion (or 8.0%) since the Fed cut on 9/18 and increasing by $828.2 billion (or 13.9%) since April 24. MMF assets are up by $919 billion, or 15.6%, year-to-date in 2024 (through 12/24/24), with Institutional MMFs up $496 billion, or 13.8% and Retail MMFs up $424 billion, or 18.5%. Over the past 52 weeks, money funds have risen by $841 billion, or 14.3%, with Retail MMFs up by $386 billion (16.9%) and Inst MMFs rising by $455 billion (12.7%). ICI's weekly release says, "Total money market fund assets increased by $54.70 billion to $6.81 trillion for the six-day period ended Tuesday, December 24, the Investment Company Institute reported.... Among taxable money market funds, government funds increased by $47.70 billion and prime funds increased by $4.95 billion. Tax-exempt money market funds increased by $2.05 billion." ICI's stats show Institutional MMFs increasing $37.5 billion and Retail MMFs increasing $17.2 billion in the latest week. Total Government MMF assets, including Treasury funds, were $5.592 trillion (82.2% of all money funds), while Total Prime MMFs were $1.079 trillion (15.9%). Tax Exempt MMFs totaled $134.2 billion (2.0%). It explains, "Assets of retail money market funds increased by $17.17 billion to $2.71 trillion. Among retail funds, government money market fund assets increased by $11.54 billion to $1.73 trillion, prime money market fund assets increased by $3.68 billion to $859.43 billion, and tax-exempt fund assets increased by $1.96 billion to $123.02 billion." Retail assets account for over a third of total assets, or 39.9%, and Government Retail assets make up 63.8% of all Retail MMFs. They add, "Assets of institutional money market funds increased by $37.53 billion to $4.09 trillion. Among institutional funds, government money market fund assets increased by $36.17 billion to $3.86 trillion, prime money market fund assets increased by $1.27 billion to $219.99 billion, and tax-exempt fund assets increased by $95 million to $11.18 billion." Institutional assets accounted for 60.1% of all MMF assets, with Government Institutional assets making up 94.4% of all institutional MMF totals. According to Crane Data's separate Money Fund Intelligence Daily series, money fund assets have risen by $54.1 billion in December through 12/24 to $7.117 trillion. On December 5, assets hit an all-time high of $7.124 trillion. But they've inched lower since. Assets rose by $200.5 trillion in November, $97.5 billion in October, $149.8 billion in September, $109.7 billion in August, $16.6 billion in July, $15.7 billion in June and $91.4 billion in May. They declined by $15.8 billion in April and $68.8 billion in March. They rose $72.1 billion in February, $93.9 billion in January and $32.7 billion last December. Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data, so they're about $340 billion lower than Crane's asset series.
WSJ on Chasing the Highest Yields
The Wall Street Journal asks about, "Chasing the Highest-Yield Savings Account: More Trouble Than It's Worth?" They explain, "Even dedicated rate-chasers are finding that there isn't much reason to hop from bank to bank in search of higher yields. Interest offers aren't quite as competitive as they were before the Federal Reserve started cutting rates in September. Because banks tend to lower their interest rates quicker than they raise them, today's highest rate might not be tomorrow's. The highest yield on a savings account tracked by Bankrate this month was 4.85%, down from 5.55% over the summer. The national average rate is far lower at 0.48%. Storing $10,000 in a savings account with a 4.85% annual rate, compounded monthly, would earn about $2,700 in interest over the next five years if the rate stayed constant. Storing it in an identical account that earns half a point less would mean sacrificing just over $300 in interest during that time, according to NerdWallet." They quote Scott Hildenbrand, chief balance-sheet strategist at Piper Sandler, "Consumers have become much more aware of where their money is parked and expect to earn something on it. But that doesn't mean they'll jump at every slight increase. It has to be worth the effort." The piece states, "When the Fed was lifting rates at a rapid clip in 2022 and 2023, bank customers moved hundreds of billions of dollars into accounts that offered better returns than plain old savings accounts. Many kept opening new accounts as banks competed with each other to offer the loftiest rates. Banks often require customers to deposit or maintain certain balances to get the advertised rate. Certificates of deposits, money-market funds and Treasury bills also paid healthy interest. Cash returns were among the biggest financial benefits for Americans when inflation was rapidly driving up the price of groceries." The WSJ adds, "Customers added $119 billion to new and existing high-yield savings accounts at online banks in 2023, according to banking consulting firm Curinos. That is down from $174 billion in 2022. With inflation now more muted and the Fed cutting rates, banks aren't all responding the same. Some hold rates steady for longer to attract or retain deposits, analysts say, while others lower them more quickly. That means today's best-paying bank might not hold that title a month or two from now, says Adam Stockton, managing director at Curinos."
Money Fund Yields Drop 5 Bps to 4.34%
Money fund yields (7-day annualized) fell by 7 basis point to 4.34% on average during the week ended Friday, Dec. 20 (as measured by our Crane 100 Money Fund Index), after falling 2 bps the week prior and 1 bp two weeks prior. Yields are just beginning to reflect the Federal Reserve's 25 basis point cut on December 18, so they should continue to move lower in the coming days. They've declined by 72 bps since the Fed first cut its Fed funds target rate by 50 bps percent on Sept. 18, and by 29 bps since the Fed cut rates by 1/4 point on 11/7. Yields were 4.45% on 11/30, 4.65% on average on 10/31, 4.75% on 9/30, 5.10% on 8/31, 5.13% on 7/31 and 6/28, 5.14% on 3/31 and 5.20% on 12/31/23. The broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 678), shows a 7-day yield of 4.24%, down 7 bps in the week through Friday. Prime Inst money fund yields were down 9 bps at 4.44% in the latest week. Government Inst MFs were down 7 bps at 4.35%. Treasury Inst MFs were down 6 bps at 4.28%. Treasury Retail MFs currently yield 4.07%, Government Retail MFs yield 4.05%, and Prime Retail MFs yield 4.24%, Tax-exempt MF 7-day yields were up 75 bps to 2.97%. Assets of money market funds rose by $5.8 billion last week to $7.085 trillion, slowly rebounding after seeing a decrease following the new record high on 12/5 at $7.124 trillion, according to Crane Data's Money Fund Intelligence Daily. For the month of December, MMF assets have jumped by $21.9 billion, after increasing by $200.5 billion in November, $97.5 billion in October and $149.8 billion in September. Weighted average maturities were unchanged at 37 days for the Crane MFA and 38 days for the Crane 100 Money Fund Index. According to Monday's Money Fund Intelligence Daily, with data as of Friday (12/20), 59 money funds (out of 790 total) yield under 3.0% with $36.2 billion in assets, or 0.5%; 164 funds yield between 3.00% and 3.99% ($233.9 billion, or 3.3%), 567 funds yield between 4.0% and 4.99% ($6.815 trillion, or 96.2%) and following the recent rate cut there continues to be zero funds yielding 5.0% or more. Our Brokerage Sweep Intelligence Index, an average of FDIC-insured cash options from major brokerages, was down 2 bps at 0.44%, after dropping 2 basis points five weeks prior. The latest Brokerage Sweep Intelligence, with data as of Dec. 20, shows three changes over the past week. Fidelity lowered rates to 2.19% for all accounts and Schwab lowered rates to 0.05% for all accounts. Merrill Lynch lowered rates once again for their advisory accounts; they're now at 4.40% (down 2 bps from the week prior). Three of the 10 major brokerages tracked by our BSI still offer rates of 0.01% for balances of $100K (and lower tiers). These include: E*Trade, Merrill Lynch and Morgan Stanley.
Morgan Stanley Pushes Against Cash
Morgan Stanley posted a brief titled, "Reconsidering Money Market Funds as the Fed Cuts Rates," which tells us, "With its latest cut, the Federal Reserve has now lowered its benchmark interest rate by a full percentage point since September -- and more cuts are expected. How might this affect you? If you're among the many investors with excess portfolio cash in money market mutual funds, it may be time to consider moving that money into other assets. A key reason: Yields on money market funds historically have tracked the Fed's rate path, meaning these products are likely to return less going forward. Here's what to know and how you can prepare." They write, "With the rate rise, money market assets under management have soared, totaling more than $7 trillion for the first time ever in November 2024. Now, with inflation having receded, the Fed is expected to keep lowering rates. After cutting by a half percentage point in September and a quarter point in November, Fed officials slashed the policy rate another quarter point in December to a target range of 4.25%-4.50%. Their December projections show the rate declining to around 3.9% by the end of 2025 and 3.4% in 2026 -- down markedly from the 5.4% peak reached in July 2023. That likely means returns on money market funds will drop steadily from here, as their yields historically have moved in tandem with the fed funds rate." Morgan Stanley adds, "To be sure, cash and cash equivalents like money market funds still play important roles for investors -- for example, in supporting day-to-day spending needs, savings goals and even strategic allocations in your portfolio, where such assets may act as diversifiers or risk reducers. Ultimately, the amount of money market assets you hold should reflect your personal financial goals and investment strategy—not simply what the interest-rate environment might be doing at a given moment."
Bond Fund Symposium, March 27-28
As we wrap up our Money Fund University in Providence Friday, Crane Data preparing for our eighth annual ultra-short bond fund event, Bond Fund Symposium, which will take place March 27-28, 2025 at the Hyatt Regency in Newport Beach, Calif. Crane's Bond Fund Symposium offers a concentrated and affordable educational experience, as well as an excellent networking venue, for bond fund and fixed-income professionals. Registrations are now being accepted ($1,000) and sponsorship opportunities are available. See the preliminary agenda here and details below. Portfolio managers, analysts, investors, issuers, service providers, and anyone interested in expanding their knowledge of bond funds and fixed-income investing will benefit from our comprehensive program. A block of rooms has been reserved at the Hyatt Regency. We'd like to thank our past sponsors and exhibitors -- Wells Fargo Securities, Fitch Ratings, Fidelity Investments, J.P. Morgan Asset Management, Allspring Global, S&P Global Ratings, StoneX, Invesco, BofA Securities, Northern Trust, Bloomberg Intelligence, Goldman Sachs, Federated, Payden & Rygel, PIMCO and Dechert -- for their support. (We'd also love to get some new ones!) E-mail us for more details. We'll also soon be making plans for our next "big show," Money Fund Symposium, which will be held June 23-25, 2025, at The Renaissance Boston Seaport in Boston. (Let us know if you'd like details on speaking or sponsoring.) Finally, mark your calendars for next year's European Money Fund Symposium, which will be held Sept. 25-26, 2025 in Dublin, Ireland. Watch for details on these shows in coming weeks and months.
Fed Cuts Rates Another 1/4 to 4.375%
A press release titled, "Federal Reserve issues FOMC statement" tells us, "Recent indicators suggest that economic activity has continued to expand at a solid pace. Since earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low. Inflation has made progress toward the Committee's 2 percent objective but remains somewhat elevated. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate." The piece explains, "In support of its goals, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 4-1/4 to 4-1/2 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage backed securities. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective." Finally, the Fed's statement adds, "In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments."
Barron's: Brokerages Cutting Payouts
Barron's writes, "Brokerage Firms Are Cutting Payouts on Uninvested Cash. What To Do Now." They tell us, "Cash has been king ever since the Fed began hiking rates two years ago, but it’s getting a little harder lately for investors to earn a nice return off idle dollars. That's not just because interest rates have fallen on certain short-term investing and savings products as the Fed cuts its benchmark rate. Investors and advisors also have to keep close tabs on where brokerage firms are putting uninvested cash that is held in so-called sweep accounts. Case in point: Next year, Fidelity Investments will move client cash held in nonretirement brokerage accounts overseen by independent financial advisors into FCash, Fidelity's in-house sweep account. FCash's interest rate was 2.32% as of Nov. 11. That's about two percentage points less than investors could earn in Fidelity's Government Money Market Fund (SPAXX), which was previously available as a default sweep option for advisors." The article explains, "Fidelity's FCash doesn't yield as much as a money-market fund, but it still pays out more than other brokerage firms on cash held in sweep accounts. It's a common practice at many brokerage firms to pay paltry interest rates on cash held in sweep accounts." Barron's adds, "Following recent Fed rate cuts, Charles Schwab lowered the rate it pays on cash in sweep accounts to just 0.1% from 0.48%. The company pays a higher yield of 4.23% in managed accounts, and advisors and investors can choose to move money from sweep accounts to higher-paying options such as money-market funds and certificates of deposit. But, again, the onus is on the advisor or individual investor. The company has previously said it encourages clients to review their cash needs and allocations.... Meager rates paid on sweep accounts have prompted some investors to sue brokerage firms, such as LPL Financial, Morgan Stanley, and Schwab. The lawsuits filed in federal courts generally accuse the companies of breach of fiduciary duty, arguing that the brokerage firms have an obligation to put clients in higher-paying products. The companies deny the allegations, and the cases are ongoing."
Money Fund Yields Down to 4.41%
Money fund yields declined by 2 basis point to 4.41% on average during the week ended Friday, Dec. 13 (as measured by our Crane 100 Money Fund Index), after falling 1 bp the week prior and 1 bp two weeks prior. Yields reflect almost all of the Federal Reserve's 25 basis point cut on November 7, and they should move lower again following the Fed's Dec. 18 meeting (if the Fed cuts as expected). They've declined by 65 bps since the Fed cut its Fed funds target rate by 50 bps percent on Sept. 18 and they've declined by 22 bps since the Fed cut rates by 1/4 point on 11/7. Yields were 4.65% on average on 10/31, 4.75% on 9/30, 5.10% on 8/31, 5.13% on 7/31 and 6/28, 5.14% on 5/31, 5.13% on 4/30, 5.14% on 3/31 and 2/29/24, 5.17% on 1/31/24, and 5.20% on 12/31/23. The broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 678), shows a 7-day yield of 4.31%, down 2 bps in the week through Friday. Prime Inst money fund yields were down 1 bps at 4.53% in the latest week. Government Inst MFs were down 2 bps at 4.42%. Treasury Inst MFs were down 3 bps at 4.34%. Treasury Retail MFs currently yield 4.13%, Government Retail MFs yield 4.12%, and Prime Retail MFs yield 4.32%, Tax-exempt MF 7-day yields were up 17 bps to 2.22%. Assets of money market funds fell by $28.1 billion last week to $7.079 trillion, decreasing after seeing a new record high on 12/5 at $7.124 trillion, according to Crane Data's Money Fund Intelligence Daily. For the month of December, MMF assets have jumped by $16.0 billion, after increasing by $200.5 billion in November, $97.5 billion in October and $149.8 billion in September. Weighted average maturities were up 1 bp at 37 days for the Crane MFA and up 1 bp at 38 days for the Crane 100 Money Fund Index. According to Monday's Money Fund Intelligence Daily, with data as of Friday (12/13), 113 money funds (out of 790 total) yield under 3.0% with $137.4 billion in assets, or 1.9%; 84 funds yield between 3.00% and 3.99% ($78.7 billion, or 1.1%), 593 funds yield between 4.0% and 4.99% ($6.863 trillion, or 96.9%) and following the recent rate cut there continues to be zero funds yielding 5.0% or more. Our Brokerage Sweep Intelligence Index, an average of FDIC-insured cash options from major brokerages, was unchanged at 0.46%, after dropping 2 basis points four weeks prior. The latest Brokerage Sweep Intelligence, with data as of Dec. 13, shows that there was one change over the past week. Merrill Lynch lowered rates once again for their advisory accounts; they're now at 4.42% (down 3 bps from the week prior). Three of the 10 major brokerages tracked by our BSI still offer rates of 0.01% for balances of $100K (and lower tiers). These include: E*Trade, Merrill Lynch and Morgan Stanley.
ICI's MMF Portfolio Holdings Summary
ICI's latest monthly "Money Market Fund Holdings" summary, which reviews the aggregate daily and weekly liquid assets, regional exposure, and maturities (WAM and WAL) for Prime and Government money market funds, tells us, "The Investment Company Institute (ICI) reports that, as of the final Friday in November, prime money market funds held 41.3 percent of their portfolios in daily liquid assets and 58.7 percent in weekly liquid assets, while government money market funds held 77.6 percent of their portfolios in daily liquid assets and 87.7 percent in weekly liquid assets." Prime DLA was unchanged from October, and Prime WLA was down from 60.4%. Govt MMFs' DLA rose from 76.0% and Govt WLA increased from 86.8% the previous month. ICI explains, "At the end of November, prime funds had a weighted average maturity (WAM) of 32 days and a weighted average life (WAL) of 54 days. Average WAMs and WALs are asset-weighted. Government money market funds had a WAM of 39 days and a WAL of 91 days." Prime WAMs were 3 days longer and WALs were unchanged from the previous month. Govt WAMs were 1 day longer and WALs were unchanged from October. Regarding Holdings by Region of Issuer, the release tells us, "Prime money market funds' holdings attributable to the Americas declined from $518.33 billion in October to $514.59 billion in November. Government money market funds' holdings attributable to the Americas rose from $4,880.05 billion in October to $5,061.10 billion in November." The Prime Money Market Funds by Region of Issuer table shows Americas-related holdings at $514.6 billion, or 48.8%; Asia and Pacific at $200.0 billion, or 19.0%; Europe at $316.3 billion, or 30.0%; and, Other (including Supranational) at $23.9 billion, or 2.3%. The Government Money Market Funds by Region of Issuer table shows Americas at $5.061 trillion, or 91.0%; Asia and Pacific at $124.8 billion, or 2.2%; Europe at $353.0 billion, 6.3%, and Other (Including Supranational) at $22.4 billion, or 0.4%.
ICI: MMF Assets Pause Record Run
ICI's latest "Money Market Fund Assets" report shows money funds inching lower by $0.4 billion to $6.771 trillion in the latest week, after jumping $95.9 billion to a record $6.771 trillion the previous week. Money fund assets have risen in 14 of the last 19, and 25 of the last 34, weeks, increasing by $467.1 billion (or 7.4%) since the Fed cut on 9/18 and increasing by $793.4 billion (or 13.3%) since April 24. MMF assets are up by $884 billion, or 18.7%, year-to-date in 2024 (through 12/11/24), with Institutional MMFs up $482 billion, or 15.8% and Retail MMFs up $402 billion, or 24.0%. Over the past 52 weeks, money funds have risen by $884 billion, or 15.0%, with Retail MMFs up by $425 billion (18.8%) and Inst MMFs rising by $459 billion (12.7%). ICI's weekly release says, "Total money market fund assets decreased by $451 million to $6.77 trillion for the week ended Wednesday, December 11, the Investment Company Institute reported.... Among taxable money market funds, government funds increased by $2.18 billion and prime funds increased by $1.23 billion. Tax-exempt money market funds decreased by $3.86 billion." ICI's stats show Institutional MMFs increasing $0.7 billion and Retail MMFs decreasing $1.2 billion in the latest week. Total Government MMF assets, including Treasury funds, were $5.563 trillion (82.2% of all money funds), while Total Prime MMFs were $1.075 trillion (15.9%). Tax Exempt MMFs totaled $133.3 billion (2.0%). It explains, "Assets of retail money market funds decreased by $1.16 billion to $2.69 trillion. Among retail funds, government money market fund assets decreased by $774 million to $1.72 trillion, prime money market fund assets increased by $2.29 billion to $854.81 billion, and tax-exempt fund assets decreased by $2.67 billion to $121.72 billion." Retail assets account for over a third of total assets, or 39.8%, and Government Retail assets make up 63.7% of all Retail MMFs. They add, "Assets of institutional money market funds increased by $705 million to $4.08 trillion. Among institutional funds, government money market fund assets increased by $2.95 billion to $3.85 trillion, prime money market fund assets decreased by $1.06 billion to $219.82 billion, and tax-exempt fund assets decreased by $1.18 billion to $11.53 billion." Institutional assets accounted for 60.2% of all MMF assets, with Government Institutional assets making up 94.3% of all institutional MMF totals. According to Crane Data's separate Money Fund Intelligence Daily series, money fund assets have risen by $47.4 billion in December through 12/11 to $7.110 trillion. On December 5, assets hit an all-time high of $7.124 trillion. But they've inched lower since. Assets rose by $200.5 trillion in November, $97.5 billion in October, $149.8 billion in September, $109.7 billion in August, $16.6 billion in July, $15.7 billion in June and $91.4 billion in May. They declined by $15.8 billion in April and $68.8 billion in March. They rose $72.1 billion in February, $93.9 billion in January and $32.7 billion last December. Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data, so they're about $340 billion lower than Crane's asset series.
Pymnts: FDIC Looking at FinTech
The website Pymnts writes on "Three Things to Watch as FDIC Tightens Up on FinTech." They tell us, "Several watchdogs and agencies are sharpening their gaze on FinTechs, specifically bank-FinTech relationships and the risks tied to those partnerships. In July, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corp. (FDIC) and the Office of the Comptroller of the Currency (OCC) issued a request for information on those partnerships and a statement that discussed the risks. 'The statement details the potential risks and provides examples of effective risk management practices for these arrangements,' the agencies said in a press release at the time. 'In addition, the statement reminds banks of relevant existing legal requirements, guidance and related resources, and provides insights that the agencies have gained through their supervision.'" It comments, "Although three agencies were involved in the July action, it may be the FDIC that winds up fundamentally altering the nature of the bank-FinTech interactions, certainly when it comes to how those pacts are forged and how they operate day to day. The Synapse bankruptcy helped set that closer examination in motion." The piece adds, "The FDIC does not regulate FinTechs directly, but it oversees banks, so it has a hand in directing how traditional financial institutions work with digital innovators. It also has the ability to monitor FinTechs and has begun more closely tracking FinTechs that partner with banks, aiming to spot potential problems before they affect banks and track FinTechs as they switch banking partners. Beyond monitoring, actions on the part of the FDIC, including proposed rules, give insight into key regulatory themes. As the expanded list of actions that would be required of the banks indicates, banks will more closely vet those partnerships."
VettaFi Discusses Money Market ETFs
VettaFi writes on "Money Market ETFs: An Opportunity to Attract Mutual Fund Assets." They tell us, "Until recently, only one major sector of the U.S. mutual fund market remained safely untouched. That was the $6.6 trillion money market mutual fund segment (MMF). Two months ago, a team at Texas Capital, led by longtime ETF executive Ed Rosenberg, broke through the barriers and launched the first money market ETF, the Texas Capital Government Money Market Fund (MMKT). Although money market funds are perhaps the most generic and boring investment in the world, $6.6 trillion is a lot of money. Half of MMF assets are held by just 20 funds managed by the biggest investment firms, including BlackRock, Schwab, JPMorgan, and Vanguard, among others. The management fees for just those 20 funds total almost $10 billion annually. Now there is a new competitor to those existing funds." VettaFi explains, "To create a money market ETF, some changes to the mechanics of a traditional MMF had to be made. First, anything trading on an exchange will have a bid/ask spread between buyers and sellers. If the money market ETFs had a $1 NAV, then a penny spread would be equal to 1% cost to buy or sell. This is too high. But if the NAV was $100, a penny would only be a 0.01% spread/cost. Texas Capital went with a $100 NAV, and the bid/ask spread since launch averages 1 to 2 basis points. This is a cost that reduces your overall yield, but it's a very small amount. And since investors in money funds look at dollars, and not number of shares, the share count difference between a $1 NAV and a $100 NAV itself is just math that means nothing." They add, "The second change made to accommodate exchange listing is accounting for interest. Every day, the MMF or money market ETF accumulates interest. With an MMF, the fund managers declare the interest as dividends daily and then pay it out at the end of the month. That way, the accumulating interest does not alter the $1.00 daily NAV. The money market ETF skips the daily declaration and lets the interest slightly increase the NAV every day. At the end of the month, the money market ETF declares the dividend and pays it." See our Crane Data News, "BlackRock Debuts First Euro MM ETF" (12/5/24) , "FT on BlackRock Money Market ETFs" (11/18/24), "BlackRock Files for Money Market ETFs" (11/12/24), and "Texas Capital Launches Govt MM ETF" (9/26/24).
Crane 100 Inches Down to 4.43%
Money fund yields declined by 1 basis point to 4.43% on average during the week ended Friday, Dec. 6 (as measured by our Crane 100 Money Fund Index), after falling 1 bp the week prior and 3 bps two weeks prior. Yields reflect most of the Federal Reserve's 25 basis point cut on November 7, but they should inch a little lower ahead of the Fed's Dec. 18 meeting. They've declined by 63 bps since the Fed cut its Fed funds target rate by 50 bps percent on Sept. 18 and they've declined by 20 bps since the Fed cut rates by 1/4 point on 11/7. Yields were 4.65% on average on 10/31, 4.75% on 9/30, 5.10% on 8/31, 5.13% on 7/31 and 6/28, 5.14% on 5/31, 5.13% on 4/30, 5.14% on 3/31 and 2/29/24, 5.17% on 1/31/24, and 5.20% on 12/31/23. The broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 672), shows a 7-day yield of 4.33%, down 2 bps in the week through Friday. Prime Inst money fund yields were down 2 bps at 4.54% in the latest week. Government Inst MFs were down 1 bp at 4.44%. Treasury Inst MFs were down 3 bps at 4.37%. Treasury Retail MFs currently yield 4.16%, Government Retail MFs yield 4.13%, and Prime Retail MFs yield 4.32%, Tax-exempt MF 7-day yields were down 62 bps to 2.04%. Assets of money market funds rose by $44.1 billion last week to $7.107 trillion, decreasing after seeing a new record high the day prior (12/5) at $7.124 trillion, according to Crane Data's Money Fund Intelligence Daily. For the month of December, MMF assets have surged by $44.1 billion, after increasing by $200.5 billion in November, $97.5 billion in October and $149.8 billion in September. Weighted average maturities were down 1 bp at 36 days for the Crane MFA and unchanged at 37 days for the Crane 100 Money Fund Index. According to Monday's Money Fund Intelligence Daily, with data as of Friday (12/6), 115 money funds (out of 786 total) yield under 3.0% with $141.6 billion in assets, or 2.0%; 75 funds yield between 3.00% and 3.99% ($52.7 billion, or 0.7%), 596 funds yield between 4.0% and 4.99% ($6.913 trillion, or 97.3%) and following the recent rate cut there continues to be zero funds yielding 5.0% or more. Our Brokerage Sweep Intelligence Index, an average of FDIC-insured cash options from major brokerages, was unchanged at 0.46%, after dropping 2 basis points three weeks prior. The latest Brokerage Sweep Intelligence, with data as of Dec. 6, shows that there were two changes over the past week. Merrill Lynch lowered rates once again for their advisory accounts; they're now at 4.45% (down 2 bps from the week prior). UBS lowered rates to 0.10% for accounts between $1M and $1.9M and also to 0.25% for accounts between $4M and $9.9M, this week we also added UBS advisory account rates to the report. Three of the 10 major brokerages tracked by our BSI still offer rates of 0.01% for balances of $100K (and lower tiers). These include: `E*Trade, Merrill Lynch and Morgan Stanley.
Reuters: Chinese MMF Yields Falling
A piece on the website Zawya published by Reuters News titled, "Biggest Chinese money market fund's yield nears record low," tells us, "The yield on China's popular Yu'Ebao money market fund has dropped to near record lows, reflecting lower interest rates and anaemic growth, despite efforts to stabilise the economy. Analysts said the yield on the Tianhong Yu'Ebao, which is China's largest with more than 600 million investors, will likely fall further as the country's economy faces fresh headwinds." They quote Rocky Fan, economist at Guolian Securities, "In the medium term, the yield could go down further if China fails to stabilise the economy." The piece says, "The seven-day, annualised yield of Tianhong Yu'Ebao, the $100 billion fund sold via popular payment app Alipay, has dropped to 1.294%, just above the record low hit during the COVID-19 pandemic in November, 2022. Money market funds, which park most of their assets in bank deposits, have been hard hit by recent rounds of reductions in deposit rates, said Ivan Shi, head of research at fund consultancy Z-Ben Advisors, predicting their yields will fall." She tells Reuters, "Fund managers may also be under pressure to lower their fees, now that lower yields have made the cost of holding money market funds relatively higher." The piece adds, "Yu'Ebao was launched in 2013 by Tianhong Asset Management Co, a mutual fund company controlled by Ant Group. Its seven-day yield of less than 1.3% compares with a peak of around 7% a decade ago, and the downward trend could continue. Wang Honglin, professor of the Shanghai Advanced Institute of Finance, suggested China should cut lending rates by around 150 basis points in the face of 'unprecedented challenges facing Chinese exporters' as a trade war looms."
Cash Blizzard: MMFs Jump $95.9 Billion
ICI's latest "Money Market Fund Assets" report shows money funds jumping $95.9 billion to a record $6.771 trillion in the latest week, after rising $26.8 billion the previous week. Money fund assets have risen in 14 of the last 18, and 25 of the last 33, weeks, increasing by $467.5 billion (or 7.4%) since the Fed cut on 9/18 and increasing by $793.6 billion (or 13.3%) since April 24. MMF assets are up by $885 billion, or 18.7%, year-to-date in 2024 (through 12/4/24), with Institutional MMFs up $481 billion, or 15.7% and Retail MMFs up $403 billion, or 24.0%. Over the past 52 weeks, money funds have risen by $873 billion, or 14.8%, with Retail MMFs up by $429 billion (19.0%) and Inst MMFs rising by $444 billion (12.2%). ICI's weekly release says, "Total money market fund assets increased by $95.86 billion to $6.77 trillion for the eight-day period ended Wednesday, December 4, the Investment Company Institute reported.... Among taxable money market funds, government funds increased by $89.40 billion and prime funds increased by $5.14 billion. Tax-exempt money market funds increased by $1.31 billion." ICI's stats show Institutional MMFs increasing $74.7 billion and Retail MMFs rising $21.2 billion in the latest week. Total Government MMF assets, including Treasury funds, were $5.560 trillion (82.1% of all money funds), while Total Prime MMFs were $1.073 trillion (15.9%). Tax Exempt MMFs totaled $137.1 billion (2.0%). It explains, "Assets of retail money market funds increased by $21.19 billion to $2.69 trillion. Among retail funds, government money market fund assets increased $14.86 billion to $1.72 trillion, prime money market fund assets increased by $5.72 billion to $852.53 billion, and tax-exempt fund assets increased by $611 million to $124.39 billion." Retail assets account for over a third of total assets, or 39.8%, and Government Retail assets make up 63.7% of all Retail MMFs. They add, "Assets of institutional money market funds increased by $74.67 billion to $4.08 trillion. Among institutional funds, government money market fund assets increased by $74.55 billion to $3.84 trillion, prime money market fund assets decreased by $578 million to $220.88 billion, and tax-exempt fund assets increased by $700 million to $12.72 billion." Institutional assets accounted for 60.2% of all MMF assets, with Government Institutional assets making up 94.3% of all institutional MMF totals. According to Crane Data's separate Money Fund Intelligence Daily series, money fund assets have risen by $53.4 billion in December through 12/4 to $7.116 trillion. The day prior (12/3), assets hit an all-time high of $7.121 trillion. Assets rose by $200.5 trillion in November, $97.5 billion in October, $149.8 billion in September, $109.7 billion in August, $16.6 billion in July, $15.7 billion in June and $91.4 billion in May. They declined by $15.8 billion in April and $68.8 billion in March. They rose $72.1 billion in February, $93.9 billion in January and $32.7 billion last December. Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data, so they're about $340 billion lower than Crane's asset series.
BlackRock Debuts First Euro MM ETF
The Financial Times published an article titled, "BlackRock launches active short-term money market ETF," which discusses a new European-domiciled Euro-denominated money market ETF. They tell us, "BlackRock has rolled out an actively managed short-term money market exchange traded fund. The iShares € Cash Ucits ETF offers investors 'the quality and liquidity of regulated money market funds within the convenience of the ETF wrapper,' according to the worlds largest asset manager. The product was the first actively managed short-term money market fund regulated ETF in Europe, the company said. It provided access to 'highly rated short-term money market instruments that follow the strict guidelines of European [money market fund] regulation', BlackRock added." They quote Jane Sloan, head of global product solutions for Europe, the Middle East and Africa at BlackRock, "Bringing the regulatory guidelines of the [money market fund] to the ETF ecosystem should help a broader range of investors actively manage their cash. The product enables individual investors, such as those using a digital investment platform, to access income using high credit quality securities with no minimum holding periods from as little as €1. The ETF combines the flexibility and access of the ETF wrapper, including continuous pricing and the ability to trade seamlessly throughout the day, with the security of money market fund regulation, delivering a first-to-market solution to investors who want to do more with their money." The FT says, "The ETF has a total expense ratio of 0.1 per cent and will be listed on the Xetra segment of Frankfurt's stock exchange." Beccy Milchem, BlackRock's global head of cash distribution, adds, "Demand for money market funds has surged in the higher rate environment and investors have sought to more actively manage their cash holdings."
Weekly MF 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. 29) includes Holdings information from 46 money funds (down 27 from a week ago), or $2.780 trillion (down from $3.899 trillion) of the $7.063 trillion in total money fund assets (or 39.4%) tracked by Crane Data. (Our Weekly MFPH are e-mail only and aren't available on the website. See our latest Monthly Money Fund Portfolio Holdings here and our Nov. 13 News, "Nov. Money Fund Portfolio Holdings: Treasuries Surge, Reclaims Top Spot.") Our latest Weekly MFPH Composition summary shows Government assets dominating the holdings list with Treasuries totaling $1.328 trillion (down from $1.864 trillion a week ago), or 47.8%; Repurchase Agreements (Repo) totaling $925.6 billion (down from $1.310 billion a week ago), or 33.3%, and Government Agency securities totaling $271.9 billion (down from $359.0 billion), or 9.8%. Commercial Paper (CP) totaled $95.4 billion (down from a week ago at $144.9 billion), or 3.4%. Certificates of Deposit (CDs) totaled $60.2 billion (down from $80.1 billion a week ago), or 2.2%. The Other category accounted for $66.6 billion or 2.4%, while VRDNs accounted for $31.7 billion, or 1.1%. The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $1.328 trillion (47.8% of total holdings), Fixed Income Clearing Corp with $272.4B (9.8%), the Federal Home Loan Bank with $185.5 billion (6.7%), BNP Paribas with $69.1B (2.5%), Citi with $62.8B (2.3%), JP Morgan with $61.9B (2.2%), Federal Farm Credit Bank with $59.6B (2.1%), RBC with $52.7B (1.9%), Goldman Sachs with $48.0B (1.7%) and Mitsubishi UFJ Financial Group Inc with $37.0B (1.3%). The Ten Largest Funds tracked in our latest Weekly include: JPMorgan US Govt MM ($288.8B), Goldman Sachs FS Govt ($259.9B), JPMorgan 100% US Treas MMkt ($229.0B), Fidelity Inv MM: Govt Port ($213.6B), Morgan Stanley Inst Liq Govt ($174.0B), State Street Inst US Govt ($165.3B), Fidelity Inv MM: MM Port ($139.9B), Dreyfus Govt Cash Mgmt ($127.3B), Allspring Govt MM ($122.7B) and First American Govt Oblg ($98.7B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary.)
DWS on Record Money Fund Levels
DWS asks, "What now for record U.S. money market funds?" They comment, "Holdings of U.S. money market funds have grown strongly over the past two years, breaking record after record. The question has been whether rate cuts by the Federal Reserve (Fed) would bring their rise to a halt. Not so far. Since the Fed's first interest rate cut in September, the amount invested in these funds has risen by a further $40 billion [sic] to $6.65 trillion. Depending on the source, some reports even put the figure above $7 trillion. Although there was a slight setback last week according to the data provider ICI, we do not believe there is any reason to expect any major change and a wave of withdrawals from money market funds in the near future. Investors still seem to be comfortable with these short-term investments, especially as the Fed has recently scaled back expectations of rate cuts this year and next." DWS explains, "In our CIO Special from May 21, 2024, we had already suggested that rapid outflows were unlikely. However, we have to admit that we did not anticipate the further rise in inflows that we have seen recently. Since Donald Trump's victory in the U.S. presidential election at the beginning of November, the question marks surrounding U.S. political developments and market reactions have not diminished. As a result, we do not expect any major changes to the status quo for U.S. money market funds in the short term. The conclusions of our Special therefore remain valid. In our view, U.S. money market funds remain an attractive haven for investors in times of nervous markets."
Northern Trust Asset Management recently published "Global Investment Outlook 2025." The section on "U.S. Money Markets," titled, "Money fund assets up while rates go down," tells us, "For 2025, there is significant uncertainty over the economic outlook and monetary policy. A fairly wide range of outcomes with respect to the federal funds target range are possible. Accordingly, we favor a neutral position for our portfolios. Importantly for money market investors, we and the markets see little chance rates return to the zero lower bound anytime soon -- a welcome change from much of the past 15 years of very low yields on cash." It explains, "While the federal funds target range is the biggest driver of money market fund yields, money markets also exhibited signs of normalization in 2024, with more rate volatility within the federal funds target range. Credit spreads were generally little changed, to slightly tighter. While participation in the Fed’s reverse repurchase agreement operations (RRP) peaked at $2.3 trillion in 2023, it has trended substantially lower to as low as $150 billion. This is a consequence of balance sheet reduction by the Fed. While money market rate volatility is normal, rates near or above the top of the target range may be a sign of reserve scarcity. The Fed's balance sheet reduction may need to end, a dynamic we'll be monitoring closely." Northern adds, "While intuition may suggest that as yields on money market funds move lower along with policy rates they would be less attractive and drive outflows, we've seen the opposite in 2024, consistent with historical experience. Money market fund industry assets have increased by more than $500 billion this year ..., setting all-time-high records. Assets have been going up even as rates are going down, as money market funds remain an attractive alternative to other cash management options like deposits or Treasury bills."
