News Archives: December, 2019

After a lengthy delay, the Securities and Exchange Commission finally released its latest "Money Market Fund Statistics" summary, which confirms that total money fund assets jumped in October, rising by $88.6 billion to a record $3.938 trillion. It was the 16th straight month of gains for money fund assets overall. Prime MMFs increased $38.4 billion in October to close at $1.102 trillion, their highest level since July 2016, while Govt & Treasury funds rose by $46.6 billion to a record $2.694 trillion. Tax Exempt funds rose by $3.6 billion to $142.6 billion. Yields fell across the board with Prime MMFs, Govt MMFs and Tax-Exempt MMFs all decreasing in October. The SEC's Division of Investment Management summarizes monthly Form N-MFP data and includes asset totals and averages for yields, liquidity levels, WAMs, WALs, holdings, and other money market fund trends. We review their latest numbers below.

October's big asset gains follow increases of $82.9 billion in September, $76.3 billion in August, $75.6 billion in July, $41.9 billion in June, $78.2 billion in May, $690 million in April, $87.9 billion in March, $76.9 billion in February and $31.4 billion in January. Over the 12 months through 10/31/19, total MMF assets have increased $782.4 billion, or 24.7%, according the SEC's series. (Note that the SEC's series includes a number of internal money funds not reported to ICI or others, though Crane Data tracks most of these.) (Note: Crane Data's separate monthly series shows money fund assets increased by $40.9 billion in November 2019.)

The SEC's stats show that of the $3.938 trillion in assets, $1.102 trillion was in Prime funds, which rose $38.4 billion in October after increasing $11.7 billion in September, $10.6 billion in August, $22.3 billion in July, $9.6 billion in June and $8.9 billion in May. Prime funds represented 28.0% of total assets at the end of October. They've increased by a stunning $358.2 billion, or 48.2%, over the past 12 months.

Government & Treasury funds totaled $2.694 trillion, or 68.4% of assets. They rose $46.6 billion in October, $72.9 billion in September, $66.0 billion in August, $53.5 billion in July, $31.8 billion in June and $67.3 billion in May. Govt & Treas MMFs are up $411.7 billion over 12 months, or 18.0%. Tax Exempt Funds increased $3.6B to $142.6 billion, or 3.6% of all assets. The number of money funds was 372 in October, up three from the previous month and down 9 funds from a year earlier.

Yields for Taxable MMFs were lower in October for the 8th month in a row. This year's declines follow almost 24 months of straight increases. The Weighted Average Gross 7-Day Yield for Prime Institutional Funds on Oct. 31 was 1.99%, down 14 basis points from the previous month. The Weighted Average Gross 7-Day Yield for Prime Retail MMFs was 2.06%, down 12 basis points. Gross yields fell to 1.89% for Government Funds, down 14 bps from last month. Gross yields for Treasury Funds decreased 17 basis points to 1.86%. Gross Yields for Muni Institutional MMFs fell from 1.58% in September to 1.22%. Gross Yields for Muni Retail funds fell from 1.56% to 1.26% in October.

The Weighted Average 7-Day Net Yield for Prime Institutional MMFs was 1.90%, down 15 bps from the previous month and down 35 bps since 10/31/18. The Average Net Yield for Prime Retail Funds was 1.80%, down 12 bps from the previous month an down 0.32% since 10/31/18. Net yields fell to 1.62% for Government Funds, down 13 bps from last month. Net yields for Treasury Funds decreased 17 basis points to 1.64%. Net Yields for Muni Institutional MMFs fell from 1.45% in September to 1.10%. Net Yields for Muni Retail funds decreased from 1.28% to 0.98% in October. (Note: These averages are asset-weighted.)

WALs and WAMs were predominately up in October, with only Govt Fund WALs falling. The average Weighted Average Life, or WAL, was 65.7 days (up 3.6 days from last month) for Prime Institutional funds, and 76.7 days for Prime Retail funds (up 3.9 days). Government fund WALs averaged 97.7 days (down 0.4 days) while Treasury fund WALs averaged 98.7 days (up 3.5 days). Muni Institutional fund WALs were 19.5 days (up 3.3 days), and Muni Retail MMF WALs averaged 41.7 days (up 3.3 days).

The Weighted Average Maturity, or WAM, was 34.1 days (up 3.2 days from the previous month) for Prime Institutional funds, 43.5 days (up 2.8 days from the previous month) for Prime Retail funds, 31.8 days (up 2.0 days) for Government funds, and 40.9 days (up 4.1 days) for Treasury funds. Muni Inst WAMs were up 3.1 days to 19.1 days, while Muni Retail WAMs increased by 3.3 days to 39.2 days.

Total Daily Liquid Assets for Prime Institutional funds were 37.7% in September (up by 0.1% from the previous month), and DLA for Prime Retail funds was 25.1% (down 0.4% from previous month) as a percent of total assets. The average DLA was 47.0% for Govt MMFs and 91.9% for Treasury MMFs. Total Weekly Liquid Assets was 52.5% (down 1.3% from the previous month) for Prime Institutional MMFs, and 39.2% (down 2.7% from the previous month) for Prime Retail funds. Average WLA was 70.5% for Govt MMFs and 98.6% for Treasury MMFs.

In the SEC's "Prime MMF Holdings of Bank-Related Securities by Country table for October 2019," the largest entries included: Canada with $148.6 billion, the U.S. with $124.6 billion, Japan with $113.4 billion, France with $85.0B, the UK with $54.5B, Germany with $52.8B, New Zealand/Australia with $50.0B, the Netherlands with $47.2B and Switzerland with $23.1B. The biggest gainers among the "Prime MMF Holdings by Country" include: the UK (up $15.6B), the Netherlands (up $9.9B), France (up $9.7B), Japan (up $8.3B), Australia/New Zealand (up $5.3B) and Switzerland (up $1.5B). The biggest decreases were Canada (down $9.8B), the US (down $8.3B) and Germany (down $3.2B).

The SEC's "Trend in Prime MMF Holdings of Bank-Related Securities by Major Region" table shows Europe had $326.9B (up $39.1B from last month), the Eurozone subset had $197.1B (up $18.6B). The Americas had $273.7 billion (down $18.1B), while Asia Pacific had $189.9B (up $14.1B).

The "Prime MMF Portfolio Composition" chart shows that of the $1.102 trillion in Prime MMF Portfolios as of October 31, $332.7B (30.2%) was in CDs and Time Deposits (up from $316.3B), $322.1B (29.2%) was in Government & Treasury securities (direct and repo) (down from $326.3B), $150.0B (13.6%) was held in Non-Financial CP and Other securities (up from $141.7B), $236.4B (21.5%) was in Financial Company CP (up from $226.7B) and $62.9B (5.7%) was in ABCP (down from $63.5B).

The SEC's "Government and Treasury MMFs Bank Repo Counterparties by Country" table shows the U.S. with $183.1 billion, Canada with $146.5 billion, France with $235.7 billion, Germany with $20.3 billion, Japan with $149.3 billion, the U.K. with $73.5 billion and Other with $41.0 billion. All MMF Repo with the Federal Reserve fell by $4.2 billion in October to $2.9 billion.

Finally, a "Percent of Securities with Greater than 179 Days to Maturity" table shows Prime Inst MMFs with 11.0%, Prime Retail MMFs with 11.3%, Muni Inst MMFs with 3.4%, Muni Retail MMFs 10.0%, Govt MMFs with 18.8% and Treasury MMFs with 17.6%.

The December issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Friday morning, features the articles: "MMF Assets Kill It in 2019; Signs of Slowdown in '20?," which discusses torrid but slowing money fund asset growth; "Cavanal Hill's Kitchen: There Will Be Yield," which profiles VP & Senior Money Market Portfolio Manager Mike Kitchen; and, "Dreyfus 'Impact' Govt MMF Opens Social Front vs. ESG," which discusses the newest breed of social money funds. We've also updated our Money Fund Wisdom database with Nov. 30 statistics, and sent out our MFI XLS spreadsheet Friday a.m. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our December Money Fund Portfolio Holdings are scheduled to ship on Tuesday, Dec. 10, and our Dec. Bond Fund Intelligence is scheduled to go out Friday, Dec. 13.

MFI's "MMF Assets Kill It" article says, "Money fund assets moved higher again in November, and they're on pace to have their best year in a decade. But there are signs of a slowdown, and flat to lower rates in 2020 should begin tempering 2019's smoking inflow pace. Instead of 20% returns like we've seen this year, we should be lucky to get 10% in '20."

It continues, "Crane Data shows money fund assets increasing by $40.9 billion in November to $3.918 trillion, following gains of about $80 billion the previous 4 months in a row. While we've still got a shot at breaking $4.0 trillion by year end, it'll take a big December to do it."

Our "Cavanal Hill" piece reads, "This month, MFI interviews Cavanal Hill Investment Management VP & Senior Money Market Portfolio Manager Mike Kitchen, who runs Cavanal Hill's Government Securities Money Market Fund and U.S. Treasury Fund, Senior Tax Free Fixed Income Manager Rich Williams, and Repo Trader Ryan Friedl. They tell us about the history and latest priorities at Cavanal Hill, whose new tagline is 'Long live your money.' We also discuss the outlook and challenges facing money market funds in general. Our Q&A follows."

MFI says, "Give us some history. Kitchen responds, "Cavanal Hill began managing its first money market fund in the '90s. Our wealth management group itself traces its roots back to 1910, when Harry Sinclair, of Sinclair Oil, and some other oil men, founded what's now called Bank of Oklahoma. What we at BOK's Wealth Management Division, which Cavanal Hill is part of, traditionally do is, we manage money for ultra-wealthy clients and institutions, including one of the nation's oldest charitable trusts. We've got over 35 investment strategies, taxable fixed income, tax free, fundamental and quantitative equity and, of course, cash management."

He continues, "Cavanal Hill itself has about $8.0 billion under management and roughly $3.0 billion of that is in money market funds. According to MFI, we're the 36th largest out of 67 money fund families. So we're bigger than one might think.... There's a presence not just in Oklahoma, but places like Arkansas, Arizona, Texas and Colorado. We've got a big footprint in the heartland.... I've been here 20 years and this is all I've done here, manage the money market funds."

When asked, "What's your major priority?" Kitchen tells us, "It's always the same. It's the classic money fund value proposition -- balancing safety, liquidity and yield. We're always responsive to the competitive environment. As you know, right now we have a Government fund and a Treasury fund. Before 2016, we had a Prime fund and a Treasury fund. But like so many others, we transitioned the Prime to a government security or 'govie,' due to the 2016 Money Fund reforms."

Our "Impact" update says, "Dreyfus recently filed to change one of its Government money market mutual funds into a new breed of 'impact' or socially responsible funds, making it the second fund to date to funnel business through minority and other 'diversity' dealers. In related news, one of these diversity dealers, Mischler Financial, is ramping up its presence in 'cash'. (See yesterday's News, 'Mischler Financial Joins 'Impact' or Social Money Market Investing Wave.')"

The Prospectus Supplement for the $4.6 billon Dreyfus Government Securities Cash Management Fund tells us, "BNY Mellon Investment Adviser, Inc. generally will seek to place, over time, a majority of the aggregate dollar value of purchases and sales orders for Dreyfus Government Securities Cash Management's portfolio securities with dealers that are owned by minorities, women, disabled persons, veterans and members of other qualified and recognized diversity and inclusion groups, subject to the Adviser's duty to seek the best execution for the fund's orders."

The latest MFI also includes the News brief, "MMF Yields Flatten at 1.5%." It tells us, "Rates on money funds and brokerage sweep accounts are flattening out after declining in the weeks after the Fed's third, and possibly final, rate cut on Oct. 30. Our flagship Crane 100 MF Index inched down 0.01% to 1.50% over the past month. The Crane 100 is down from 1.81% on Sept. 30 and down from 2.18% June 30 and 2.23% at the start of 2019."

A second News piece, "SEC Warns on Brokerage Sweeps," reads, "Stephanie Avakian, the SEC's Co-​Director, Division of Enforcement, commented in a recent speech, "We are also looking at cash sweep arrangements. Cash in advisory accounts is often automatically swept into a money market mutual fund or a bank deposit sweep program. A dually-registered adviser or an adviser with an affiliated broker-dealer may have a financial interest, a conflict, in recommending one cash investment over another."

Our December MFI XLS, with Nov. 30 data, shows total assets rose by $40.9 billion in November to $3.917 trillion, after rising $85.2 billion in October, $80.2 billion in September and $86.9 billion in August. Our broad Crane Money Fund Average 7-Day Yield fell to 1.36% during the month, while our Crane 100 Money Fund Index (the 100 largest taxable funds) was down 17 basis points to 1.50%.

On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA fell 16 basis points to 1.76% and the Crane 100 fell to 1.76%. Charged Expenses averaged 0.40% (down one basis point from last month) and 0.26% (unchanged), respectively for the Crane MFA and Crane 100. The average WAM (weighted average maturity) for the Crane MFA and Crane 100 was 34 and 37 days, respectively (up one day for both the Crane MFA and Crane 100). (See our Crane Index or craneindexes.xlsx history file for more on our averages.)

A press release entitled, "Mischler Expands Cash Management & Liquidity Solutions Platform; Former BofA Execs to Lead Initiative," and subtitled, "Nation's Oldest Veteran-Owned Broker-Dealer Marks 25th Anniversary and Grows Institutional Cash Management Products & Services," tells us, "Mischler Financial Group, Inc. ('Mischler'), the financial industry's oldest diversity-certified investment bank owned and operated by service-disabled veterans today announced a further expansion of the firm's institutional cash management services and ESG-powered money market fund platform that partners with the financial industry's top fund managers. The firm's liquidity solutions group will be led by former Bank of America executives La-Yona Rauls and Christopher Walsh."

Mischler CEO Dean Chamberlain comments, "As we celebrate our 25th anniversary, our imperative is to always remain relevant to our institutional and corporate treasury clients by having domain experts deliver the best quality products and services that are germane to our clients' specific needs. This latest expansion of our team with highly-regarded industry veterans who can introduce clients to a broad menu of ESG-centric money market funds, and further complemented by our offering a matrix of liquidity solutions for cash market strategies enables us to stay true to our mission."

He adds, "We know that clients have many options within the context of firms they look to for value-added solutions. The corporate treasury executives and asset managers who are already acquainted with La-Yona and Chris know they can be counted on to provide a truly bespoke approach for any client who requires objective guidance for cash market products and smart liquidity management strategies."

The release continues, "La-Yona Rauls joins Mischler as Managing Director, Head of Corporate Cash Strategies. She brings the firm and its clients more than two decades of experience and product fluency across the spectrum of domestic/offshore money market mutual funds, rates, money markets, structured products, municipals and IG Corporate debt. Prior to joining Mischler, Ms. Rauls held successively senior roles for Bank of America Merrill Lynch, where she most recently served as Director, Western Region Sales.... Ms. Rauls is also credited with creating and hosting an annual round-table event for Fortune 100 finance executives and securities industry thought leaders focused on ESG and Green investing themes, governance, as well as Diversity and Inclusion best practices."

Mischler's announcement explains, "Chris Walsh joins Mischler as Head of Short-Term Fixed Income and Global Liquidity Solutions. A 25-year cash markets veteran, Mr. Walsh has held senior roles for BGC Partners and Bank of America Merrill Lynch, where he was Head of Short-Duration Sales and Global Investment Solutions. Mr. Walsh was also Director of Fixed Income Institutional Sales for Credit Suisse."

Walsh states, "As my career evolves, I wanted to join an organization that blends the highest quality service and talent with a strong, value-based mission. Mischler's boutique-style firm combines these elements in a unique way, and I'm very excited to join a team that has become forefront in the industry."

Mischler is the latest to jump aboard the "impact" or social money market bandwagon (which follows a flurry of "ESG" (environmental, social, governance) offerings. We wrote on November 21, "Dreyfus Launches "​Impact" or Diversity Government Money Market Fund," which explains, "Dreyfus recently filed to change one of its Government money market mutual funds into a new breed of "impact" or socially responsible funds, making it the second fund to date to funnel business through minority and other "diversity" dealers. A Prospectus Supplement for the $4.6 billon Dreyfus Government Securities Cash Management Fund tells us, "BNY Mellon Investment Adviser, Inc. generally will seek to place, over time, a majority of the aggregate dollar value of purchases and sales orders for Dreyfus Government Securities Cash Management's portfolio securities with dealers that are owned by minorities, women, disabled persons, veterans and members of other qualified and recognized diversity and inclusion groups, subject to the Adviser's duty to seek the best execution for the fund's orders."

The article cited the Federal Home Loan Bank's "Dealer Page," which says, "The Office of Finance is committed to diversity and inclusion in our authorized dealer group, and actively seeks opportunities to work with dealers that are owned by minorities, women, disabled persons, veterans, and members of the lesbian, gay, bisexual, and transgender (LGBT) community. The Office of Finance promotes diverse dealer opportunities through increased access to debt programs, focused training for dealer sales and trading staff, and co-marketing programs with fixed-income investors." Examples of the FHLB's D&I Dealer Group include: Academy Securities, Blaylock Van, CastleOak Securities, Loop Capital Markets, MFR Securities, Mischler Financial Group and Stern Brothers.

In addition to minority money market broker-dealer services, Mischler is expected to offer an online money market fund trading "portal". The platform is reported to be a white-labelled version of State Street's Fund Connect offering.

For more on Impact and ESG Money Market Funds, see our recent Crane Data News: BNP Insticash Adds ESG Overlay (11/29/19), Goldman Adds ESG Screen (11/14/19), Aviva Investors Discusses ESG MMFs; Fitch Rates MS ESG (11/6/19), UBS Asset Mgmt Files to Launch Select ESG Prime Institutional Fund (11/4/19), BlackRock Launches First Offshore ESG MMF; ICS LEAF in EUR, GBP, USD (7/22/19), SSGA Goes Live with ESG Money Market Fund (7/3/19) and Academy Securities, JPMAM Launch First Veteran-Affiliated Money Fund (5/16/19).

Franklin, the 20th largest manager of money market funds with $22.3 billion, merged two of its Government MMFs, follows its recent filing for a Blockchain money market fund. A Prospectus Supplement filing for Franklin Templeton U.S. Government Money Market Fund, a series of Franklin Templeton Money Fund Trust, tells us, "On May 21, 2019, the Board of Trustees of Franklin Templeton Money Fund Trust, on behalf of Franklin Templeton U.S. Government Money Fund (the 'Fund'), approved a proposal to reorganize the Fund with and into the Franklin U.S. Government Money Fund." We look at the brief below, and we also quote from a Bloomberg article on repo and summarize our latest Weekly Money Fund Portfolio Holdings below.

Franklin's filing explains, "It is anticipated that in the third calendar quarter of 2019, shareholders of the Fund will receive a Prospectus/Information Statement detailing the reasons for, and other matters relating to, the reorganization. The reorganization does not require the approval of shareholders. The transaction is currently expected to be completed on or about October 18, 2019. The Fund will not accept any additional purchases after the close of market on or about October 16, 2019. The Fund reserves the right to change this policy at any time."

A notice on Franklin's website entitled, "Franklin Templeton U.S. Government Money Fund Reorganization Effective 10/18/19 - Read More," comments, "Effective 10/18/19, this fund reorganized into Franklin U.S. Government Money Fund. Please contact your financial advisor or call Shareholder Services for more information."

Franklin continues to offer the $19.5 billion Franklin Inst Fiduciary Trust US Govt MM (INFXX) and the $2.8 billion Franklin US Govt Money Market Fund (FMFXX), but there is no sign yet of the pending Franklin Blockchain Enabled U.​S. Government Money Fund. (See Crane Data's Sept. 4 News, "Franklin Files for Blockchain Enabled U.S. Govt Money Market Fund.")

In other news, Yahoo Finance posted a Bloomberg article, entitled, "Repo Fretting Shifts to Treasuries as Market Faces Next Test." It explains, "Flare-ups in the repo market could still cause worries across the global banking system, more than two months after chaos subsided in this vital corner of finance. Of particular concern: U.S. Treasuries, the world's biggest bond market and the place where the federal government funds its escalating deficit. If repo rates become jumpy again -- and many are girding for that to happen in the middle and end of this month -- some of those leveraged investors may have to unwind Treasury holdings."

The piece tells us, "Mid-December will see a recurrence of the same circumstances that apparently led to the September eruption -- quarterly corporate tax payments that drained cash from the banking system, coupled with Treasury settlements that prompted a rush for scarce reserves. Also, many analysts believe banks, particularly those based in Europe, will retreat around New Year's Eve from the repo market, driving up rates by pulling cash from the system as others try to secure financing. European banks face slightly different capital rules, encouraging them to reduce their end-of-year footprint and the amount of equity financing they need to back up their assets."

Bloomberg writes, "While the Fed has taken steps to bring order back to repo, adding liquidity by buying Treasury bills and doing overnight repo operations, many fret that won't be enough to keep rates under control. For those still scarred by the financial crisis a decade ago, the spike in repo rates in September triggered painful memories of the credit contagion in 2008 that took down some of the largest U.S. banks. The risk has since shifted to hedge funds and independent broker-dealers, the primary users of short-term repos used to finance positions in U.S. government debt."

They quote Scott Skyrm of Curvature Securities LLC, "As banks got smaller in the repo market, non-bank dealers like us filled the void. We absorbed what used to go to the banks, and it's all divvied up among lots of small firms. Banks are still active, but they're not as big as they used to be."

The article adds, "Hedge funds and broker-dealers aren't the only buyers of U.S. government debt, of course. There are also cash buyers, such as mutual funds, foreign central banks and sovereign wealth funds, who buy the Treasuries with money they have, without any need to borrow. But leveraged buyers have gained importance as others slowed their purchases."

Finally, Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics and summary yesterday. Our weekly holdings track a shifting subset of our monthly Portfolio Holdings collection. The most recent cut (with data as of Nov. 29) includes Holdings information from 68 money funds (down 25 from last week), which represent $1.725 trillion (down from $2.081 trillion) of the $3.765 trillion (45.8%) in total money fund assets tracked by Crane Data.

Our latest Weekly MFPH Composition summary again shows Government assets dominating the holdings list with Treasury debt totaling $595.7 billion (down from $687.2 billion a week ago), or 34.5%, Repurchase Agreements (Repo) totaling $569.4 billion (down from $703.7 billion) or 33.0%, and Government Agency securities totaling $325.8 billion (down from $385.0 billion), or 18.9%. Certificates of Deposit (CDs) totaled $91.1 billion (down from $104.5 billion), or 5.3%, and Commercial Paper (CP) totaled $79.0 billion (down from $99.8 billion), or 4.6%. A total of $32.3 billion or 1.9%, was listed in the Other category (primarily Time Deposits), and VRDNs accounted for $31.9 billion, or 1.8%.

The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $595.7 billion (34.5% of total holdings), Federal Home Loan Bank with $236.7B (13.7%), Fixed Income Clearing Co with $90.6B (5.3%), BNP Paribas with $52.2 billion (3.0%), Federal Farm Credit Bank with $51.6B (3.0%), RBC with $41.5B (2.4%), Mitsubishi UFJ Financial Group Inc with $31.2B (1.8%), JP Morgan with $28.7B (1.7%), Societe Generale with $28.3B (1.6%) and Natixis with $28.0B (1.6%).

The Ten Largest Funds tracked in our latest Weekly include: JP Morgan US Govt ($155.9B), Fidelity Inv MM: Govt Port ($140.0B), Goldman Sachs FS Govt ($120.9B), BlackRock Lq FedFund ($113.4B), Wells Fargo Govt MM ($87.1B), BlackRock Lq T-Fund ($73.9B), Fidelity Inv MM: MM Port ($73.8B), JP Morgan 100% US Treas MMkt ($70.3B), Goldman Sachs FS Treas Instruments ($69.1B) and Morgan Stanley Inst Liq Govt ($64.5B). (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.)

Rates on money market funds, brokerage sweep accounts and bank accounts are flattening out after declining in the four weeks after the Fed's third, and possibly final, rate cut on Oct. 30. Our Money Fund Intelligence Daily shows that the flagship Crane 100 MF Index inched down 0.01% to 1.50% over the past week. The Crane 100 is down from 1.81% on Sept. 30 and down from 2.18% on June 30 and 2.23% at the start of the year. Our latest Brokerage Sweep Intelligence publication, with data as of Friday, Nov. 29, shows only Wells Fargo lowering rates in the past week. (See our Oct. 31 Link of the Day, "Fed Cuts Rates a Third Time.")

Our broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data, shows a 7-day yield of 1.38%, down 0.01% in the week through 11/29. Treasury Inst and Prime Inst MFs were down by 1 bps to 1.40% and 1.59%, respectively. Government Inst MMFs remained unchanged at 1.46%. Treasury Retail MFs currently yield 1.13%, (down 0.01%), Government Retail MFs yield 1.16% (down 0.01%) and Prime Retail MFs yield 1.42% (down 0.01%). Tax-exempt MF 7-day yields remained unchanged at 0.72%.

Crane's Brokerage Sweep Index inched down to 0.14% from 0.15% in the week ended November 29 (for balances of $100K) as Wells Fargo cut rates across the board by 2 bps to 0.05% (for most tiers). E*Trade and TD Ameritrade currently have the lowest rate for balances at the $100K level (0.01%). Meanwhile, Fidelity continues to have the highest sweep rate (0.82%). (Fidelity also have a higher-yielding money fund option for new accounts.) Morgan Stanley is paying 0.03%. UBS, Merrill and Wells Fargo are all paying 0.05%, and Schwab is paying 0.06%. Raymond James is paying 0.08% and Ameriprise is paying 0.09%. RW Baird is paying 0.33% for balances of $100K.

Crane Data has also started tracking some of the other brokerages beyond the largest ones in our Brokerage Sweep Intelligence, just for internal purposes. (Let us know if you'd like to receive this "shadow" BSI report if you're a subscriber to Brokerage Sweep Intelligence.) Below, we list some of the rates (for balances of $100K) for some of these lesser-known or up-and-coming sweep programs.

LPL currently has the lowest rate for balances at the $100K level (0.10%). Meanwhile, Robinhood has the highest sweep rate (1.80%) (see today's "Link of the Day"). SSN Securities and Securities America are paying 0.12% and 0.13%, respectively. Edward Jones and Folio Institutional both offer rates of 0.15% on 100K balances. Betterment and Commonwealth are both paying 0.25% while TIAA and JPMS Brokerage are paying 0.30%. Cetera is paying 0.40%, Pershing and Ally Bank are paying 0.75%, Pershing Dreyfus is paying 0.79% and JPMS Advisory is paying 1.60% for balances of $100K.

In related news, the Minneapolis Star-Tribune website recently featured an AP story on the Schwab/TD Ameritrde merger, entitled, "This stock trade isn't free: Schwab scoops up rival for $26B." It says, "Beyond commissions, brokerages make money from account fees and from interest earned on customers' cash, among other things. Schwab and TD Ameritrade made a combined $2 billion in net interest revenue in their latest quarters, for example. Rival Fidelity pointed out how Schwab and TD Ameritrade make some of that money by paying customers lower rates for cash in their trading accounts, known as 'sweep accounts.' Fidelity, which is privately held, would still have more in total customer assets than a combined Schwab."

In other news, Federated Investors' Debbie Cunningham asks, "Could Fed voters finally be on the same page?" In her latest commentary, she explains, "'Some,' 'a couple,' 'a few,' 'most.' If you are looking for precise numbers in the minutes of a Federal Open Market Committee (FOMC) meeting, you will be disappointed. They don't mention names at all, and when they refer to how many officials agreed on a given point, they use vague quantifiers."

Cunningham writes, "With the Federal Reserve shifting policy after a summer and fall of rate cuts, scouring the document is still worthwhile. In this case, the minutes from the October FOMC meeting simply confirmed what the statement and Chair Jerome Powell said. Policymakers feel it's time to see what the effect of the rate cuts are on the economy. They are going to rely on the data -- there's the precision! -- to give them direction. With the economy showing moderate growth, underpinned by that remarkable labor market and moderate inflation, they are on hold now unless something drastic alters the economic path. The Fed doesn't generally act on a month’s worth of data."

She continues, "Actually, the last policy-setting meeting of the year on Dec. 10-11 might result in an 'all.' A flurry of speeches by Fed governors and regional presidents in the last few weeks suggest there won't be any dissenters to the vote, which will almost certainly be to leave rates unchanged. If so, that would be the first unanimous vote since May."

Federated's update tells us, "How this all shakes out in 2020 depends on many factors, but fed funds futures aren't predicting any move until the second half. One thing certain is the complexion of the FOMC will change. Every year, four of the regional presidents roll off from being voting members and four new ones take their place. The two who dissented the most this year -- Esther George and Eric Rosengren -- will not have a vote in 2020. However, as best we can tell, the new group will be a mix of hawks and doves, on net not changing the overall policy stance."

It adds, "So where does this put liquidity products? In a good position again. The prevailing expectation this year that the Fed would not take rates to post-financial crisis lows has proven true. With cuts likely behind us for now, money market funds' core attributes of relative safety, liquidity and diversity can play their traditional role for portfolios -- especially as other asset classes have swayed with the state of the U.S.-China trade war and other uncertainties. With the Treasury yield curve no longer inverted and the London interbank offered rate (Libor) positively sloped, investors are getting some risk premium for going out the curve."

Finally, the monthly says, "A few comments on the repo markets. The Fed continues to do everything it can to control the volatility in the overnight rate with temporary and permanent open market operations. It continues to consider creating a repo facility and also issuing a 1-year Treasury bill floater indexed to the Secured Overnight Finance Rate (SOFR). It seems this combination is working, as repo rates held pretty well in the 1.50-1.60% range in November. We were opportunistic with our purchases in November, open to just about any approved investment: asset-back securities, bank instruments, commercial paper, government securities, Treasuries, etc. The target weighted average maturity (WAM) of our funds remained in a range of 35-45 days for government and 40-50 days for prime and municipal."

HSBC Global Asset Management published the paper, "A Big Deal for Retailers this Black Friday – But What to Do with the Cash?" It explains, "For many retailers the months of November and December involve intense pressure and a focus on tight revenue and expenditure management. Hugo Parry-Wingfield, HSBC Global Asset Management, explains that, due to their high level of diversification, Money Market Funds are an investment product that retailers should consider keeping in their arsenal." We review HSBC's latest update below, and we also quote from a piece on DB (defined benefit) plans with comments from Northern Trust on cash.

The website Treasury Management International, which has the full HSBC article, explains, "As December creeps ever closer, for many in the workplace this means finalising year-end performance and setting plans, targets and budgets for the next year; 'top-down,' 'bottom-up' and 'stretch' become the business buzzwords of choice. However, for many retailers the months of November and December mean an intense pressure and focus on tight revenue and expenditure management, because for many around the world, this is the most expensive time of the year. That's right -- it's shopping season!"

It continues, "The retail sector relies heavily on big shopping events in the year with many depending on the key holiday periods to meet their targets. For those corporations used to more stable revenue flows, it can be a significant contrast. For example, the National Retail Federation (NRF) is expecting this year's holiday retail sales in November and December in the US to total up to $730bn, a staggering amount. And lest we fear any lull in consumer confidence, that's a predicted increase of around 4% compared with the same period in 2018. The NRF also estimates that this period is responsible for as much as 30% of a US retailer's sales for the entire year."

HSBC explains, "This period includes the phenomenon of discounted sale events prior to year end, and even more specifically the concept of very short or single-day discounted sales. An explosion of sales after Christmas, often starting on Boxing Day (26 December) or on New Year's Day were the norm in many markets including the US and the UK as recently as a decade ago. While these sales traditions still exist, we now have events such as Black Friday and Cyber Monday enticing consumers with discounted products. Black Friday, which started in the US, but now permeates in various forms to many other markets, is according to McKinsey, the top holiday shopping event in the US, Canada, and the UK."

They tell us, "Contrastingly, Singles' Day in China, which happens earlier in November than Black Friday and Cyber Monday, was the largest shopping event to ever happen globally in 2018. A total of RMB314bn ($45bn) was spent on goods and services in a 24-hour period. To add some perspective -- that's three times the combined value of Black Friday and Cyber Monday online sales in 2018. The immense popularity of Singles' Day shows no sign of abating with another record-breaking year in 2019."

HSBC also comments, "For retailers, a successful sales period means a sharp increase in their cash balances which, at a practical level, can be a mixed blessing. It is critical to place and deploy that cash as efficiently and as safely as possible. This cash may be used to reduce debt, to fund internal or external dividends and to invest in the business. However, there can be a lag for deploying this for its intended use. There may also be excess cash above the levels needed to meet the aforementioned obligations. Problems may present themselves if treasury or investment policies are geared more towards the lower average balances of the year rather than larger seasonal flows. For example, retailers will need to question if there are sufficient counterparty limits, counterparties for the sizeable spikes and whether sufficient diversification can be achieved."

The paper states, "Money market funds (MMFs) -- pooled investment funds that invest in short-dated money market instruments such as bank and government debt -- are well equipped to manage such cash flows and are an example of an investment product that retailers should consider keeping in their arsenal. MMFs typically provide daily liquidity and a high level of diversification. These factors can support the needs of retailers and other investors looking to have their balance professionally managed and spread across counterparties."

Finally, they write, "Those funds with a large scale of assets under management are especially well placed to be able to service investors with seasonal or temporary balance increases as well as more sticky balances, while the fund manager maintains investor concentration limits as an important risk management tool. Global retailers can also look to the truly global asset managers who operate with a consistent risk and investment framework. This ensures, for example, that the proceeds of Singles' Day RMB cash in China is invested to similarly high standards as their Black Friday or Cyber Monday USD cash in the United States, and in turn for GBP and EUR investment in Europe. So, we wish retailers a successful season and a happy end to the year."

In other news, PlanSponsor writes, "DB Plan Cash Flow Needs Are Greater Than Ever." This piece explains, "In these days of low interest rates, and following money market reform, investing strategies are needed to meet cash-flow needs from retiring Baby Boomers and pension risk transfer actions.... Peter Yi, director of short-duration fixed income and head of credit research at Northern Trust Asset Management (NTAM) in Chicago, says his firm is having conversations with DB plan sponsors about how they can be more thoughtful on optimizing cash holdings. 'We are challenging our client to rethink cash and more effectively and efficiently use it. For the time being, DB plans are holding more liquidity and less risk assets,' he says."

It continues, "Money market funds were at one time an effective cash preservation vehicle. NTAM believes the Securities and Exchange Commission (SEC) money market fund reforms requiring higher cash (or similarly liquid vehicle) ratios at daily and weekly intervals redefined 'illiquid' securities, restricted lower quality securities in fund makeup and stricter maturity limits on fund components, resulting in their income levels becoming extremely modest."

PlanSponsor quotes a Northn paper, which says, "Investors are developing a sharper understanding of the tradeoffs among safety of principal, income and access to funds in managing liquidity. Many now recognize a single product solution may no longer be viable. The regulatory and ultra-low rate environment is forcing them to be more open-minded about the broader menu of investment options available in today’s liquidity investing marketplace.... [W]hat most DB plan sponsors do is either raise money every quarter by selling assets from certain funds or maintain a short-term bond fund (duration of 2) and raise money from that."

The article adds, "DB plans don't want to hold too much cash -- if they are raising money once a quarter, they could have at least three months of cash on their balance sheet only earning 1.5% or 2%. [Yi] suggests combining cash and a short-term bond fund customized to the plan with inflows coming in and outflows going out -- a portfolio that provides money as needed month after month. 'If a plan has cash and a short-term bond fund, which most would, take those asset allocations and add some other fixed income allocation to create a special portfolio,' he suggests."

It explains, "The three segments, or portfolio buckets, plans need are Operational, Reserve and Strategic. Yi explains that Operational is the most critical bucket for immediate or very short-term liquidity needs (1 day to 30 days).... The Reserve bucket is for intermediate spending needs (up to 90 days), according to Yi. Investment vehicles used for this bucket offer investors a better balance between risk and reward -- e.g., separately managed accounts (SMAs), conservative ultra-short funds, and prime money market funds.... The Strategic bucket covers a DB plan's longer-term spending needs (six months to 18 months). Yi says investment vehicles are still high-quality but designed to have a better balance of risk and reward. DB plan investors turn to ultra-short bond investment vehicles."

Finally, PlanSponsor adds, "According to Yi, ultra-short product use has been growing. 'Low interest rates and how long they've been low has brought a lot of investors into ultra-short products,' he says.... With cash segmentation, Yi says the goal is to find the right allocation between the buckets. It will create a portfolio optimizing cash but with a better balance of risk and reward across cash holdings."