News Archives: October, 2006

Money fund industry bellwether Federated Investors (FII) saw its stock jump after releasing its third quarter earnings. Asset growth remains slow and costs related to acquisitions continues to weigh on earnings, but a flat-to-falling rate environment should boost business going forward.

Is volatility in the BMA Muni Swap Index hurting Tax-Exempt Money Funds? We're researching growing volatility in the municipal market for the November issue of Money Fund Intelligence, so if you're a tax-exempt fund manager, dealer, issuer, or investor, e-mail pete@cranedata.us to weigh in!

Assets of money market mutual funds dropped by $7.72 billion to $2.254 trillion in the latest week reported the ICI Thursday evening. Year-to-date, money funds are up by $197 billion, or 9.6%.

The Federal Reserve Open Market Committee left its benchmark Fed funds rate unchanged at 5.25% for a 3rd month. "The extent and timing of any additional firming ... will depend on the evolution of the outlook for both inflation and economic growth," said the Fed. Visit www.federalreserve.gov for more.

"Money Markets Grow Despite New Cash Products," says ignites.com The article mentions Mellon LMS's new "enhanced cash" product (see our "Link of the Day") and the strong growth of both money funds and the new $120 billion money market-plus fund and private placement ("3c-7") sector.

Recently, Bank of America began offering free online trading for investors with over $25,000 in savings or CDs. While this may sound attractive, the math shows that investors could likely earn at least $300 in interest income on a money fund paying 5% vs. the 2% they're likely to earn in the BoA savings account.

"Behind Those Stockpiles of Corporate Cash" from Sunday's N.Y. Times reviews an NBER economics paper, "Why Do Firms Hold So Much More Cash Than They Used To?". The study argues that the dramatic rise in U.S. corporate cash from 1980 to 2004 (from 10.5 to 24% of assets), is due to increased risk overall and not to foreign income or large cash hordes like Microsoft and Exxon Mobil's.

The 2nd largest money fund, Vanguard Prime Money Market Fund, is poised to soon become the largest fund in the Vanguard family lineup. It's $66.8 billion trails Vanguard Index 500 by just $3.4 billion, so a continued surge in money fund assets and/or a dip in the stock market, should push it over the top. Fidelity Investments has already seen its Cash Reserve surpass Fidelity Contrafund and Magellan in assets; Cash Reserves is now $85.1 billion, and is the largest fund in the country. (These totals are when ranked by share class assets.)

ICI money fund assets totals show dip of $3.23 billion to $2.261 trillion for the week ended Oct. 18. Quarterly tax payments and a spike in repo rates caused institutional money to leave temporarily. Money funds are up $204 billion YTD, or 9.9%; asset inflows should resume next week.

Online money market trading portals were again a hot topic at this year's AFP Conference in Las Vegas. Money fund "portals" attracted new entrants, including Citi Online Investments and TreasuryCurve. Click on our Resources page for a full listing and watch for details in the November Money Fund Intelligence.

According to Credit Suisse's Asset Backed Commercial Paper Weekly Newsletter, total ABCP broke above the $1 trillion level for the first time the week ended October 4. "The recent growth in outstandings can be attributed to a number of factors, including quarter end balance sheet trades, continued growth in multi-seller programs and increased issuance of extendible notes," says Credit Suisse.

AFP Story on Accounting for Cash Equivalents The AFP again calls on FASB to clarify definition of cash equivalents. The October issue of AFP Exchange laments the recently removed cash equivalent status of Auction Rate Securities (ARS) and Variable Rate Demand Notes (VRDNs).

Reserve Breaks $50 Billion and American Beacon Breaks $15 Billion in MM Assets. October's asset surge is breaking milestonrs at a number of top-yielding fund complexes.... American Beacon also notes that its cash plus funds are approaching $5 billion in assets.

Weekly Money Fund Assets Up $18 billion Says ICI, Assets are up $207 billion, or 10% year-to-date.

Oct 13 06

Money Fund Assets Up $18 Billion Says ICI. Assets are going gangbusters, up $47 billion in the past 2 weeks. While seasonal factors accounted for much of the gain Assets are going gangbusters, up $47 billion in the past 2 weeks. While seasonal factors accounted for much of the gain -- early October sees both quarterly dividend payments and plenty of CD rollover money -- it's clear that money funds are benefiting from 5% yields.

The ABA Endorses Promontory Interfinancial Network's Insured Network Deposits, a brokerage sweep product.

Oct 13 06

The American Bankers Association endorsed Promontory Interfinancial Network's Insured Network Deposits, "a retail sweep service for broker-dealers". LPL Financial has signed up, and Dreyfus has agreed to jointly distribute the product to intermediaries.

OppenheimerFunds entered the institutional money fund market with the launch of Oppenheimer Institutional Money Market Fund.

Oct 06 06

OppenheimerFunds entered the institutional money fund market with the launch of Oppenheimer Institutional Money Market Fund. Money Fund Intelligence