News Archives: October, 2021

The Investment Company Institute released its latest weekly "Money Market Fund Assets" report, as well as its latest monthly "Trends in Mutual Fund Investing" and "Month-End Portfolio Holdings of Taxable Money Funds" for September 2021 yesterday. The weekly report shows assets jumping after falling slightly for three weeks in a row. ICI's first release says, "Total money market fund assets increased by $41.21 billion to $4.56 trillion for the week ended Wednesday, October 27, the Investment Company Institute reported today. Among taxable money market funds, government funds increased by $39.11 billion and prime funds increased by $2.93 billion. Tax-exempt money market funds decreased by $828 million."

Money fund assets are up by $262 billion, or 6.1%, year-to-date in 2021. Inst MMFs are up $353 billion (12.7%), while Retail MMFs are down $91 billion (-6.0%). ICI's stats show Institutional MMFs increasing $42.6 billion and Retail MMFs decreasing $1.4 billion in the latest week. Total Government MMF assets, including Treasury funds, were $4.013 trillion (88.0% of all money funds), while Total Prime MMFs were $458.6 billion (10.1%). Tax Exempt MMFs totaled $87.6 billion (1.9%). Over the past 52 weeks, money fund assets have increased by $211 billion, or 4.8%, with Retail MMFs falling by $97 billion (-6.3%) and Inst MMFs rising by $308 billion (10.9%). (Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data, so they're almost $400 billion lower than Crane's asset series.)

ICI explains, "Assets of retail money market funds decreased by $1.39 billion to $1.43 trillion. Among retail funds, government money market fund assets increased by $555 million to $1.15 trillion, prime money market fund assets decreased by $1.34 billion to $210.36 billion, and tax-exempt fund assets decreased by $606 million to $77.33 billion." Retail assets account for just under a third of total assets, or 31.5%, and Government Retail assets make up 79.9% of all Retail MMFs.

They add, "Assets of institutional money market funds increased by $42.60 billion to $3.12 trillion. Among institutional funds, government money market fund assets increased by $38.55 billion to $2.87 trillion, prime money market fund assets increased by $4.27 billion to $248.24 billion, and tax-exempt fund assets decreased by $222 million to $10.29 billion." Institutional assets accounted for 68.5% of all MMF assets, with Government Institutional assets making up 91.7% of all Institutional MMF totals.

ICI's monthly "Trends" report shows that money fund assets increased $6.4 billion in September to $4.543 trillion. This follows an increase of $25.5 in August, a decrease of $24.4 billion in July and $73.4 billion in June, and increases of $78.6 billion in May, $31.9 billion in April, $129.4 billion in March and $39.4 billion in February. MMFs decreased $5.2 billion in January, $10.0 billion in December and $12.0 billion in November, and assets also fell $47.6 billion in October. For the 12 months through Sept. 30, 2021, money fund assets have increased by $138.5 billion, or 3.1%. (Month-to-date in October through 10/27, MMF assets have increased by $33.3 billion according to Crane's MFI Daily.)

Their monthly release states, "The combined assets of the nation's mutual funds decreased by $700.34 billion, or 2.6 percent, to $25.92 trillion in September, according to the Investment Company Institute's official survey of the mutual fund industry. In the survey, mutual fund companies report actual assets, sales, and redemptions to ICI.... Bond funds had an inflow of $28.52 billion in September, compared with an inflow of $34.26 billion in August.... Money market funds had an inflow of $6.31 billion in September, compared with an inflow of $26.52 billion in August. In September funds offered primarily to institutions had an outflow of $397 million and funds offered primarily to individuals had an inflow of $6.70 billion."

The Institute's latest statistics show that Taxable funds saw gains while Tax Exempt MMFs saw decreases last month. Taxable MMFs increased by $8.2 billion in September to $4.454 trillion. Tax-Exempt MMFs decreased $1.9 billion to $88.8 billion. Taxable MMF assets increased year-over-year by $163.1 billion (3.8%), while Tax-Exempt funds fell by $24.3 billion over the past year (-21.4%). Bond fund assets decreased by $4.9 billion in September to a $5.600 trillion; they've risen by $632.2 billion (12.7%) over the past year.

Money funds represent 17.5% of all mutual fund assets (up 0.4% from the previous month), while bond funds account for 21.6%, according to ICI. The total number of money market funds was 307, the same number as the prior month and down from 350 a year ago. Taxable money funds numbered 247 funds, and tax-exempt money funds numbered 60 funds.

ICI's "Month-End Portfolio Holdings" confirms yet another plunge in Treasuries and surge in Repo last month. Repurchase Agreements again became the largest composition segment in September; repos jumped by $254.7 billion, or 14.1%, to $2.056 trillion, or 46.2% of holdings. Repo holdings have increased $1.057 trillion, or 105.8%, over the past year. (See our Oct. 13 News, "Oct. MF Portfolio Holdings: Repos Surpass Treasuries as Largest Slice.")

Treasury holdings in Taxable money funds fell to become the second largest composition segment. Treasury holdings plunged $233.1 billion, or -12.8%, to $1.591 trillion, or 35.7% of holdings. Treasury securities have decreased by $684.1 trillion, or -30.1%, over the past 12 months. U.S. Government Agency securities were the third largest segment; they decreased $27.8 billion, or -5.9%, to $447.5 billion, or 10.0% of holdings. Agency holdings have fallen by $252.5 billion, or -36.1%, over the past 12 months.

Certificates of Deposit (CDs) remained in fourth place; they decreased by $26.2 billion, or -14.7%, to $152.3 billion (3.4% of assets). CDs held by money funds shrank by $28.1 billion, or -15.6%, over 12 months. Commercial Paper took fifth place, down $4.0 billion, or -2.6%, to $149.6 billion (3.4% of assets). CP has decreased by $23.1 billion, or -13.4%, over one year. Other holdings decreased to $25.1 billion (0.6% of assets), while Notes (including Corporate and Bank) were down to $3.4 billion (0.1% of assets).

The Number of Accounts Outstanding in ICI's series for taxable money funds increased to 46.217 million, while the Number of Funds was flat at 247. Over the past 12 months, the number of accounts rose by 6.394 million and the number of funds decreased by 25. The Average Maturity of Portfolios was 34 days, down three days from August. Over the past 12 months, WAMs of Taxable money have decreased by 11.

We've been quoting from last week's European Money Fund Symposium for much of this week, and today we again excerpt from the "Senior Portfolio Manager Perspectives" session. Tuesday, we quoted Deborah Cunningham of Federated Hermes, Joe McConnell of J.P. Morgan Asset Mgmt. and Paul Mueller of Invesco on supply and portfolio strategies in USD, EUR and GBP money funds. But below, we take their comments on potential and pending regulatory changes in both Europe and the U.S. (Note. In case you missed it, our European MFS recording is available here and the Powerpoints and materials are available here.)

Cunningham comments, "From an FSB standpoint, I think we're looking at ... that as basically nothing new. They're continuing to go down rabbit holes that we think will produce no good endings, such as swing pricing and capital buffers. But we also know that what ultimately comes about from an FSB standpoint only represents guidelines for how other jurisdictions then actually regulate the products. So, when we look to our products that are domiciled either in the U.K. or in Ireland, just speaking with the regulators in those countries gets us to a more optimistic and positive approach to what we think will be regulatory reforms that kind of begin to have a clearer ending sometime in 2022 or later."

She tells our webinar, "It doesn't seem to us, for at least the countries that we're operating in, that anyone is putting it at the top of their priority list. It's below ESG measures, below other types of disclosure updates that they're doing. And yet, as such, we can't ignore it and assume it will eventually go away.... We're being very proactive in engaging with the various members of the ECB, the next president, ... with the UK and Her Majesty's Treasury, etc., in order to get in front of anything that could be problematic to all types of funds continuing to exist going forward."

McConnell says, "It's hard to predict how it's all going to play out.... It'd probably be foolish if I tried. But I'm relatively optimistic. I think certainly that one thing that's come out of the discourse over the last year or year-and-a-half is, I think, regulators and central banks probably got a lot closer to the money fund community. I think there's been a lot of engagement, whether it's kind of bilaterally or through organizations, the great work IMMFA is doing.... So I think there is a very good level of dialogue there, and I think that they've got a much better appreciation of what money funds actually do and how we manage money.... [In the FSB report], I think there is an acknowledgment that there's demand for the products that we have. They serve a purpose. They're very popular among the end users. But they also extend a lot of funding to various different segments and parts of the right economy. So, I'd be optimistic that they're not looking to kill and just quash the funds because they do serve that purpose."

He adds, "So hopefully, some sort of balance will come out of this. Also, the point has been made before, but looking at the [broader] ecosystem, as well and recognizing that money funds weren't in isolation the problem. [They were] part of a much, much bigger phenomenon, and the solution has to be more holistic than just pointing at money funds and tweaking some rules.... So certainly, engagement with different parts of the market in an attempt to try and improve the ecosystem of short-term markets is certainly something that is a very worthwhile objective, and something that we should all look to take part in.... I think looking at some of the weaknesses in the short term markets and how we might address things like fragmentation and transparency ... only helps to actually make the market stronger going forwards."

Invesco's Mueller states, "The difference with Europe versus U.S. was really around the treatment of government funds. In Europe, the government funds were still required to do fees and gates whereas in the US, they weren't.... In the U.S., you saw that big shift out of prime funds and into government funds. That wasn't the situation in Europe, which I think was a positive for Europe.... I definitely agree with Debbie and Joe that there is more optimism this time. [But] I'm still a little bit concerned about the LVNAV's and whether there's a threat to those disappearing."

He continues, "We're also aware that money fund regs have a sunset clause after five years -- so that comes up next year. They [regulators] wanted to review the LVNAV. It felt like at the time they weren't happy about having the LVNAV. They very much wanted to remove that. So, I think that's still a risk. It almost might be that we have to give up something to push back on some of the other proposals, which definitely do not think make sense [like] the capital buffers [and] swing pricing.... We may have to have [a little] give and take. Maybe that's one of the areas where we have to give a bit. I would hope not, but that's a risk."

Mueller also says, "I completely agree with the thoughts around the delinking fees and gates and the weekly liquidity.... I think we, like a lot of our peers, weren't able to use that weekly liquidity because we knew that if we did start to use it, clients would get a bit nervous that you could impose a fee or a gate.... So we were having to sell to increase our liquidity when really, we had lots of liquidity.... But yeah, I mean, March was tough.... But we were pleased we got through that and kept our liquidity levels comfortably above 30%. And you know, that was that. But it was a very difficult time."

When asked about the timing of U.S. regulatory changes, Federated's Cunningham responds, "I don't think it's in the near-term. Certainly not this year, and I don't even think it will be the first half of next year, Pete. I think we're targeting the second half of next year at the earliest and more than likely into 2023. If you judge what the response was to 2008, the initial responses to that came out in 2010 and were implemented in 2011. Then the follow up work from 2014 to 2016. So, I [don't think there's] an expectation of a fast track at this point in response to the 2020 issues. But I also don't think it's going away without being addressed. So I think you've got time to prepare your arguments."

She tells us, "From our standpoint, we think obviously there's a couple of things that need to happen. Delinking of gates and fees is at the top of everyone's list. We also believe that gates should only be allowed if a fund is dissolving ... to help a fund wind up its life cycle. But we don't think it should used as a temporary measure. On the fees side, we don't have any problem with fees. But it's the linkage back to the liquidity levels that poses problems. So, you know, delinking and having those fees be more discretionary with board requirements ... and having those board approved procedures also reviewed from a regulatory standpoint to make sure they're solid and not in any way, shape or form, you know, misused [is the way to go]."

Cunningham explains, "We also think better disclosure from ... intermediaries would be a helpful thing. Right now, we have portals that disclose who underlying clients are, and we have portals that don't disclose who the underlying clients are. If it was a requirement for everyone, including all intermediary types, to better disclose who the underlying investors are, I think that's another thing that could be helpful with regards to understanding and knowing who the shareholders are and best positioning products in order to assist with shareholder flows."

She adds, "Then, ultimately, what we've talked about a couple times, the 'all-to-all' ecosystem for high-quality, short-term securities. So not just commercial paper, not just CDs, but municipal securities, government securities, dollar currencies, euro currencies, sterling currencies.... You'd have not just a buyer and a single seller, but rather multiple sellers, multiple issuers, many different types of buyers, guarantors, etc. There [would be] other parties that could enter into this process with a much more open architectural platform so that the market can continue to function even during stressful times that liquidity levels are high.... So, we think all of those things will be things to engage the regulators on, and we're optimistic that the outcome will well be a positive one going forward."

Finally, we asked JPMAM's McConnell about the timing of European regulatory changes. He answers, "I think what we saw through the first round of reforms is that it's not a quick process. There are a lot of countries involved and it can get a little bit politicized at times. They go through this thing called trilogue. Once the European Commission comes out with its recommendations, you've got ... the European Council and the Parliament to weigh in with their views as well. So there are many different iterations along the way ... and that does extend the timeline somewhat. So, I wouldn't expect it to be quick.... `I think we're looking at least a couple of years before we get close to having sort of an end recommendation or policy that's going to be put in place."

A new Prospectus filing for the State Street Institutional Investment Trust announced the pending launch of two new D&I share classes, State Street Institutional Treasury Plus Money Market Fund Blaylock Van Class (BVYXX) and State Street Institutional U.S. Government Money Market Fund Blaylock Van Class (BUYXX). It says, "The Funds offer one class of shares through this Prospectus: Blaylock Van Class is available to you subject to the eligibility requirements set forth below. The Fund's Blaylock Van Class is offered only to clients of Blaylock Van, LLC and its affiliates (collectively, Blaylock Clients). The Blaylock Van Class may not be purchased directly from the Funds."

It continues, "Instead Blaylock Clients may purchase the Blaylock Van Class shares through accounts maintained with Blaylock Van, LLC or its affiliates. Blaylock Van, LLC may impose policies, limitations and fees which are different than those described herein. All classes of a Fund share the same investment objective and investments, but the different share classes have different expense structures and eligibility requirements. You should choose the class with the expense structure that best meets your needs for which you are eligible. In choosing a share class, you should consider the amount you plan to invest. Your investment professional can help you choose the share class that best suits your investment needs."

Crane Data currently tracks 26 Social, ESG, Minority or Veteran-affiliated MMFs with $72.2 billion (as of 9/30/21), representing 1.5% of the total $4.89 trillion in taxable MMFs. Social or "Impact" MMFs (all Govt MMFs) total $25.8 billion and include: Dreyfus Govt Sec Cash Instit (DIPXX, $4.2B), Federated Hermes Govt Ob Tax-M IS (GOTXX, $7.3B), Goldman Sachs FS Fed Instr Inst (FIRXX, $2.7B) and Morgan Stanley Inst Liq Govt Sec Inst (MUIXX, $15.8B). ESG MMFs (All Prime) total $9.0B and include: BlackRock LEAF Direct (LEDXX, $1.1B), BlackRock Wealth LEAF Inv (PINXX, $1.6B), DWS ESG Liquidity Inst (ESGXX, $633M), Morgan Stanley Inst Liq ESG MMP I (MPUXX, $3.5B), State Street ESG Liq Res Prem (ELRXX, $1.4B) and UBS Select ESG Prime Inst Fund (SGIXX, $809M).

Social and Veteran-Affiliated MMF Share Classes (Prime and Govt) total $37.4B and include: BlackRock Lq FedFund Mischler (HUAXX, $1.3B), Goldman Sachs FS Govt Drexel Hamilton (VETXX, $6.7B), Goldman Sachs FS Prm Ob Drexel Hamilton (VTNXX, $31M), Invesco Govt & Agency Cavu (CVGXX, $4.3B), Invesco Liquid Assets Cavu (CVPXX, $1M), Invesco Treasury Cavu (CVTXX, $727M), JPMorgan 100% US Trs MM Academy (JACXX, $134M), JPMorgan Prime MM Academy (JPAXX, $988M), JPMorgan Prime MM Empower (EJPXX, $15M), JPMorgan US Govt MM Academy (JGAXX, $7.5B), JPMorgan US Govt MM Empower (EJGXX, $3.6B), JPMorgan US Trs Plus MM Academy (JPCXX, $1M), Morgan Stanley Inst Liq ESG MMP CastleOak (OAKXX, $255M), Morgan Stanley Inst Liq Govt CastleOak (COSXX, $497M) and Northern Instit Govt Select SWS (WCGXX, $11.0B). (Some other funds are pending, including: HSBC ESG Prime and Goldman's Loop Capital shares.)

For more on ESG and "Social" MMFs, see these Crane Data News pieces: "BlackRock Expands ESG Lineup; Files for New Bancroft, Cabrera Shares" (8/19/21); "Northern Renames Diversity Shares Siebert Williams; Safened Platform" (4/20/21); "Morgan Stanley Files for CastleOak Shares; Bond Fund Symposium Today" (3/25/21); "JP Morgan Launches "Empower" Share Class to Support Minority Banks" (2/24/21); "Invesco Files for Cavu Secs Class" (12/18/20); "ESG and Social MMF Update: Mischler News, Green Deposits, Reg Debate" (12/4/20); "Goldman Launches Social Class; Tiedemann Adds FICA; CS Green ABCP" (1/24/20); "Mischler Financial Joins "Impact" or Social Money Market Investing Wave" (12/5/19); and "Dreyfus Launches "Impact" or Diversity Government Money Market Fund" (11/21/19).

Click here to see the Federal Home Loan Bank Office of Finance's list of D&I or diversity and inclusion, dealers. The page explains, "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. To become a member of the OF's Diversity and Inclusion (D&I) Dealer Group, you are invited to apply to be an authorized dealer for FHLBank debt securities, and your firm should be certified by a nationally-recognized certifying organization, by a national, state, or local government agency, or be self-certified as meeting one of the diversity criteria for inclusion. To learn more about becoming a member of the Office of Finance's D&I Dealer Group, contact us."

The current "D&I Dealer Group" includes: Academy Securities, Inc., Alamo Capital, ASL Capital Markets Inc., Bancroft Capital, LLC, Blaylock Van, LLC, Cabrera Capital Markets, LLC, CastleOak Securities, L.P., Drexel Hamilton, LLC, Great Pacific Securities, Loop Capital Markets LLC, MFR Securities, Inc., Mischler Financial Group, Inc., Multi-Bank Securities, Inc., Penserra Securities LLC, R. Seelaus & Co., LLC, Rice Securities, LLC, Samuel A. Ramirez & Company, Inc., Siebert Williams Shank & Co., LLC (SWS), Stern Brothers & Co. and Tribal Capital Markets, LLC.

In other news, The Wall Street Journal takes another shot at stablecoins in "Crypto Is Shedding Its Tether." The Opinion piece by the Journal's Andy Kessler explains, "Crypto had a big October, with bitcoin rising from almost $44,000 to a $66,000 peak in anticipation of the ProShares Bitcoin Strategy ETF, which actually doesn't buy bitcoin -- it buys bitcoin futures. Meanwhile the stablecoin issuer Tether Ltd. paid a $41 million penalty after the Commodity Futures Trading Commission found the company had falsely claimed it had adequate dollars in reserve to back its tokens. The New York attorney general's office ran a similar investigation over Tether's claim of 1-to-1 backing with U.S. dollars. It ended, unsatisfactorily if you ask me, with an $18.5 million settlement paid in February and an agreement to produce reports on reserves for tether. Why not dig further? Tether neither admitted nor denied the attorney general's findings."

Kessler continues, "I wanted to know more, so I submitted a Freedom of Information Law request with the New York attorney general's office requesting reserve statements, ledgers and bank records from Tether. It was denied, citing disclosure that would 'constitute an unwarranted invasion of personal privacy' and 'interfere with law-enforcement investigations or judicial proceedings.' Thanks for nothing."

He explains, "Tether released vague pie charts of its $42 billion in 'reserves' in May. Only 5% was in cash or Treasurys, and around half of the backing of Tether was unnamed commercial paper. Is it AAA-rated paper from JPMorgan Chase or an IOU backed by Dogecoin? They don't say. When Coindesk filed a FOIL request for documents detailing Tether's reserves, Tether attempted to block it, arguing: 'The competitive advantages Tether gains from its investment strategy would be wiped away if competitors had full visibility into Tether's investments.'"

The Journal piece tells us, "The attorney general's office did release details of a fascinating cat-and-mouse game in its settlement agreement after stating that 'Bitfinex and Tether deceived clients and market by overstating reserves.' Until Sept. 15, 2017, an account at the Bank of Montreal held most of Tether's cash, some $61.5 million backing the 442 million tethers then in circulation. Not 1 to 1. Sister company Bitfinex held $382 million in a 'comingled [sic] account' that Tether called a 'receivable.' Tether was claiming money on another company's balance sheet as its own reserves."

They ask, "Can we trust Tether, which has grown from 21 billion to 69 billion tethers in circulation this year? Doesn't it sound a bit like John Law's Banque Royale issuing bank notes? And what is Tether buying? It isn't clear. The most recent disclosure from an independent accountant in the Cayman Islands -- not an audit -- for Tether reserves shows a lot of commercial paper and certificates of deposit and secured loans. Only about a third of its reserves are cash and Treasurys."

Kessler adds, "Like Law, are stablecoins being issued willy-nilly and increasing volatility in bitcoin and other crypto? How much leverage is there in crypto world? Bahamas-based crypto exchange FTX allowed 100 times leverage for margin trading, though in July the company trimmed it to a still insane 20 times. According to Bloomberg, part of Tether reserves includes a $1 billion loan to Celsius, a crypto-lending startup. If cryptocurrencies are to become the backbone of a modern financial system, let's open them up for scrutiny before a Banque Royale-esque bubble bursts into the real world."

For more, see these Crane Data News stories: "MFI International Assets Dip, August Portfolio Holdings; WSJ on Tether" (8/16/21), "WSJ on Tether CP Reserves" (8/11/21), "Tether Hits Keep Coming: WSJ, PWG, CNBC; Taming Wildcat Stablecoins" (7/21/21), "Fitch Looks at Tether Risks" (7/13/21) and "Bloomberg Opinion Hits Tether CP" (6/2/21).

As we wrote yesterday, Crane Data's recent European Money Fund Symposium discussed issues involving euro, pound sterling and U.S. dollar money funds domiciled in Ireland, Luxemburg and France. The final session of the webinar, "Senior Portfolio Manager Perspectives," which features Deborah Cunningham of Federated Hermes, Joe McConnell of J.P. Morgan Asset Mgmt. and Paul Mueller of Invesco, discusses supply and portfolio strategies. We excerpt from their session below. (Note. See the European MFS recording here and the handouts here.)

Mueller tells us, "The biggest thing in the Sterling market right now is the Bank of England.... We've seen some pretty incredible moves in the last few weeks. I think these are the biggest, sharpest changes in short term rates we've seen outside of the global financial crisis in fact. You probably have to go back to the mid-1990s to see market expectations move so quickly. So, I think in the sterling market, it's all about price discovery and issuers trying to work out what levels they can issue at and obviously, investors working out what makes sense to buy here."

He comments, "I think the market, in my view, is just getting a little bit excessive on the rate hike prices now. Certainly, I can expect a little of taking away, perhaps the emergency rate cut and maybe a little bit more. But getting to 1.0% by August next year seems a little bit toppy. But clearly inflation caught a lot of people by surprise. You've only got to look at the speed of breakeven rates to see the market certainly wasn't pricing this. There are numerous factors for that, not just U.K. specific ones. `But the Bank of England has been pretty hawkish in its comments on the whole in the last few weeks, and certainly hasn't pushed back on market expectations."

Asked about year end, Mueller replies, "It's going to be tricky ... it always is. You know, we've endeavored to purchase ... securities that will fall into the first week of January. We've also bought more sovereign supranational agency, government guaranteed securities, which under the regs will count as weekly liquidity. That's helpful. And we work closely with all our bank counterparties, as I'm sure our peers do ... to sort of lock in [supply] for year-end.... But you can never tell. If you get a large inflow on the last day of the year, that can always be a little bit tricky. But yeah, so far, we've always got through it, but it does seem to get harder each year."

On the euro money markets, McConnell tells us, "Gross rates are around negative 0.55%, but they've been slowly ticking down through the course of the year. You know, the big challenge in the euro area really is just the amount of liquidity in the system. Excess liquidity is at record highs and continues to grow, and will continue growing. [T]he ECB is still very much active through their ... asset purchase programs, extending a lot of liquidity to the banking sector through long term refi operations.... Banks have very attractive levels, which has seen a huge uptake. So there's just a lot of liquidity in the system, which is really kind of keeping the money market curve incredibly flat."

He continues, "We're even seeing the market pricing around 10 basis points of hikes to the deposit rate by the end of 2022. And then, in 2023, some more hiking of the deposit rates. That certainly is an interesting development and sits at odds with the forward guidance that the ECB have been giving. So, arguably maybe it looks a little overdone in euros. I would agree that maybe Sterling could be getting a bit choppy as well.... Unfortunately, it's not really near term enough for it to make much of an impact on the money market curve.... I think the decision about whether they retire the very attractive rates that banks get -- banks effectively borrowing money at negative one percent currently -- that's due to run out in June.... It's possible that we start to see banks repaying some of that liquidity mid-next year.... I'd love to see that happen because all this ... money in the system the banks have been taking does crowd out the need for the European banks to issue short term money market securities such as CP and CD. So maybe that starts to normalize the equation a little bit and we see a little bit of supply come back to the market."

Cunningham says, "We're all operating in various currencies and money markets, and we all have issues that are slightly different. Certainly, in the U.S. dollar market, the debt ceiling has been front and center. It's very annoying that they kicked the can down the road six to eight weeks, which just means it continues to be [an issue]. At this point, with the early December timeframe associated with it, [it's] interfering to some degree with year-end. It's even more complicated in the U.S. market because we have this whole debt ceiling issue to deal with in addition to what the normal year-end intricacies are around liquidity and flows and trading specials, and that sort of thing."

She explains, "So debt ceiling stuff aside, supply is definitely still, you know, sort of driving where rates are and what's happening from a curve standpoint.... We did have triparty, DTCC or FICC sponsored repo open up about a month ago. That's helped a little bit from a supply perspective, yet you continue to see RRP balances that are very substantial, a trillion and a half. I would not be surprised at all if we exceed the $2 trillion mark for the first time as we get closer to year-end."

Cunningham also says, "The banks that are out there that are financing in the repo market are, because of the supply demand imbalance, kind of price drivers at this point. So they are offering, in many instances, rates that are below that five basis points floor. We all know that not everybody can get that 5 basis point floor from the RRP. There are only a set number of counterparties. And although the Fed increased the number of counterparties about counterparty, it's still a binary set.... Our offshore funds obviously are unable to access the RRP, but ... we can save the repo that's at or above 5 bps so that it is ... helpful to the offshore products."

She tells us, "When we look at the commercial banks' CD curve, it has started to back up. It's probably back up anywhere from two to almost 10 basis points, depending on whether you're looking at the 6-month part of the curve over the 12-month part of the curve.... Buying into that as it's happening, we think has been a pretty successful strategy."

When asked what he's buying, Mueller answers, "Our aim is to have well-diversified issuer exposure [with a range] of maturity structure. You know, we also take account of country risks. So we like to see that nicely spread. I mean, for a while, we'd been buying SONIA floaters.... We hope we go beyond the negative rate expectations. We've been buying a few floating rate notes. We continue to like asset-backed ... particularly the front end of a curve. As I said earlier, with the WLA, we like to buy sovereign, supranational agency paper where we can. [So] nothing specific, but ... we're focusing on ... as wide a range of issuers as possible."

McConnell adds, "In the euro space, ... there's less European banks in the portfolio than you'd seen in the past. You know what we're buying? Instead of that, we continue to like the asset-backed CP sector. That does give us some value, and certainly some supply in the short part of the curve. But we look across sort of like one week to six months, at least the same regular supply there has given us a decent pick up versus, you know, those banks that do post levels.... We look at other regions ... to diversify, but also to replace some of that European issuance that's not there. We're seeing, you know, some trends which are interesting. We've seen some of the sort of Swiss cantons or banks come into the market.... We like them, they have a sort of a degree of state backing ... and they've certainly increased their footprint quite notably."

Finally, he tells us, "What else are we seeing? We also like the sort of SSA space for the reasons Paul outlined, counting them towards our weekly liquid assets bucket. You know, we see a fair amount of issuance out of them.... We see a lot of issuance out of the likes of the French agencies, and they come up [with] levels that are pretty attractive versus T-bills. But we're also seeing some new issuance as well. We've seen the EU issue bills in the last month or so.... They've had a decent amount of issuance already and will continue through the rest of this year.... So, you know, a welcome entrant to those sort of high quality, safe space, which we we've also taken a look at."

Last Thursday, Crane Data hosted its latest European Money Fund Symposium, a 2 1/2 hour virtual event which discussed money funds denominated in euro, pound sterling and U.S. dollars and domiciled in Ireland, Luxemburg and France. Our latest European MFS featured several sessions, including one entitled, "Regulatory, ESG & Ultra-Short Issues." Veronica Iommi, Secretary General of IMMFA, the Institutional Money Market Funds Association, spoke first during this segment and reviewed the latest on European MMFs and potential regulatory changes. We quote from her talk below, and watch for more EMFS excerpts in coming days. (For those that missed our European MFS, the recording is available here and Powerpoints are available here. Mark your calendars for next year too, Sept. 28-29, 2022 in Paris.)

Iommi explains, "Those of you who are not familiar with IMMFA, ... originally formed over 22 years ago, our core objective is to promote and support the development and integrity of the money market funds industry in Europe. We do this by engaging with policymakers, regulators, educating investors, providing regular data on various funds and overall, providing a centralized point of contact, information and expertise."

She says, "Let's look at where the industry currently is [and] reminding ourselves of the range of funds categories available in Europe. As you know, the 2017 Money Market Funds Regulation introduced new fund categories and enhanced investor protections. [It introduced] two new constant NAV fund types, low volatility NAV and public debt constant net asset value money market funds.... You will see in particular [the] minimum daily 10% and weekly 30% ... and linked to these liquidity thresholds, fees and redemption gates for LVNAV and PDCNAV funds."

Iommi tells us, "As a share of total European fund assets under management (in euros), IMMFA currently represents approximately 58%. Over 95% of these IMMFA funds are low volatility funds (LVNAV), with some public debt CNAV funds.... Another point to note ... is IMMFA funds specifically are triple-A rated." By currency, she says, "You'll see that US dollars were the largest with about 50%, sterling about one-third, and euros about 15%.... Growth in assets under management continues across the three main currencies."

She comments, "Perhaps unsurprisingly, the U.K. accounts for a high percentage of IMMFA funds distribution, over 40%. Just under 25% sold to investors elsewhere in Europe [including 13% in Benelux, 3% in Ireland and 4% in Germany/Switzerland].... Approximately 18% of funds were sold outside of Europe.... Corporates represent the largest investor type, accounting for a third of all distribution.... Pension funds are a significant part.... Third party, 20%, is where money market funds are sold via platforms in Europe. And as you can see, insurance companies are also very active, constituting 7%, and financial institutions (9%), which can be entities such as private banks and securities lenders.... Public sector investors [are another 5%]."

Iommi asks, "How did money market funds fare in the Covid storm? As mentioned earlier, the 2017 Money Market Fund Regulation in Europe introduced a number of measures designed to make funds more robust. Of course, the events of March last year put these mechanisms to the test. We're pleased to report that money market funds proved resilient in this storm, despite the exceptional and adverse market conditions.... Money market funds met all redemptions on time and no gates or fees were imposed. In other words, they continued to serve their purpose in protecting capital and providing liquidity. At the same time, the crisis highlighted some areas where regulation did not work as intended and above all, the interconnectivity of short-term markets. Most importantly, notwithstanding the challenges, once the markets normalized, assets increased again, reflecting investor confidence in the underlying structure including the dominant LVNAV category."

She states, "You may be wondering what is on the horizon. Well, in the aftermath of the storm, and taking into consideration that all financial markets experienced great stress due to the pandemic. Several workstreams were set up at an international level, led by the FSB in collaboration with IOSCO to evaluate the effectiveness of the post global financial crisis reform. The aim of these workstreams being to assess the ongoing resilience in all financial markets and draw lessons from the crisis and the roles played by markets, investors and regulation, with a view to proposing potential reforms where needed. And of course, among the areas up for review are money market funds."

Iommi continues, "The FSB money market funds policy work started at the beginning of this year, involving prudential market authorities.... This resulted in a consultation report issued by the FSB on the 30th of June, setting out policy proposals to enhance money market fund resilience. Following closure of this consultation in August, which IMMFA responded to, the FSB, published the final report on the 11th of October, just ahead of the G20 summit at the end of this month. As expected, the policy proposals in the final report are generally in line with those contained in the consultation and are not mandatory. The objective being to inform jurisdictions and any necessary adjustments to policy recommendations for money market funds issued by IOSCO. Now, the shape that any actual reforms may take along with their implementation will be determined by national authorities."

She tells the EMFS, "In Europe, our focus over the next few years will be the review of EU Money Market Fund regulation.... In anticipation, ESMA launched on the 26th of March, its consultation on potential reforms of the regulation. The aim of the consultation being to review the overall regime, including the roles played by markets and investors, take account of lessons learned following market stress experience during March last year. So, what are the current options on the table at the EU level and how do they marry with those contained in the FSB's final report and those being considered in other key jurisdictions? [S]everal of the potential reform options proposed by ESMA are similar to those of the U.S. President's Working Group Report issued in February and the FSB's recent final report."

In focusing on three potential options at an international and European level, Iommi discusses the benefits of de-linking gates and fees, the problems with swing pricing, then explains, "Moving to VNAV is not the solution to systemic liquidity events. The experience of funds during the March crisis does not indicate that VNAV money market funds were more resilient. Indeed, as we witnessed during the March period, fund behavior was not homogenous either by currency or type. U.S. prime funds and euro standard money market funds, which both operate with a floating NAV, also experienced significant redemptions.... Above all, we believe that the investor base in Europe is best served by a spectrum of funds which offers choice."

She says, "Although not a specific option on the table for money market funds per se, there is recognition at the international level that measures should aim at improving the overall functionality of short-term financial markets.... Money market funds operate as part of a complex, short-term ecosystem. Questions of reform should be considered in the context of this broader ecosystem and any proposed solutions should take this into account ... and, in particular, how money market funds were affected by underlying market issues."

The IMMFA leader comments, "Finally, you may be wondering what role we've been playing at IMMFA over this challenging period. Throughout, we've been having a regular dialogue with central banks and regulators, providing intelligence and data from the outset of the crisis. As a voice of the industry, we've been actively contributing to the post-Covid crisis analysis. You'll recall that early of July last year, we issued detailed position paper setting out our assessment of the impact of pandemic on the sector. Our findings helped to shape some of the thinking of key authorities."

She adds, "All along [we're] continuing to engage with regulatory policy stakeholders at European, national and international level. In the beginning of this year, [we] engaged stakeholders in the FSB and IOSCO work. And in doing so, we've involved investors to reinforce our messaging around utility of money market funds and importance of preserving investor choice. And in this regard, we published earlier this year an insight on the utility of money market funds, which is available on the public website should you to wish read it? Likewise, we've responded to the various consultations mentioned. These are also on our website."

The Securities and Exchange Commission's latest monthly "Money Market Fund Statistics" summary shows that total money fund assets rose by $19.9 billion in September to $5.030 trillion. (Month-to-date in October assets are down $12.1 billion through 10/20, according to our MFI Daily.) The SEC shows that Prime MMFs rose by $2.6 billion in September to $869.8 billion, Govt & Treasury funds increased $20.4 billion to $4.063 trillion and Tax Exempt funds decreased $3.1 billion to $97.6 billion. Yields were flat in September again, after their first increase in 24 months three months ago. 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. (Note: Thanks to the those who attended our European Money Fund Symposium yesterday! In case you missed it, the recording is available here.)

September's asset increase follows an increase of $24.9 billion in August, and decreases of $39.9 billion in July and $86.9 billion in June. Assets increased $72.4 billion in May, $46.3 billion in April, $146.1 billion in March, $30.5 billion in February and $35.4 billion in January. Over the 12 months through 9/30/21, total MMF assets have increased by $167.7 billion, or 3.4%, according to the SEC's series. (Note that the SEC's series includes a number of internal money funds not tracked by ICI, though Crane Data includes most of these assets in its collections.) The SEC's stats show that of the $5.030 trillion in assets, $869.8 billion was in Prime funds, up $2.6 billion in September. This follows declines of $8.1 billion in August, $19.4 billion in July, $19.9 billion in June and $14.6 billion in May, and increases of $1.3 billion in April and $7.2 billion in March. Prime funds represented 17.3% of total assets at the end of September. They've decreased by $122.9 billion, or -12.4%, over the past 12 months.

Government & Treasury funds totaled $4.063 trillion, or 80.8% of assets. They increased by $20.4 billion in Sept. and $32.8 billion in August, but decreased $18.7 billion in July and $67.8 billion in June. Govt MMFs also increased $90.3 billion in May, $48.4 billion in April and $140.9 billion in March. Govt & Treasury MMFs are up $314.1 billion over 12 months, or 8.4%. Tax Exempt Funds decreased $3.1 billion to $97.6 billion, or 2.0% of all assets. The number of money funds was 314 in September, down two from the previous month and down 38 funds from a year earlier.

Yields for Taxable MMFs were flat to mixed in September. The Weighted Average Gross 7-Day Yield for Prime Institutional Funds on September 30 was 0.09%, down one bps from the prior month. The Weighted Average Gross 7-Day Yield for Prime Retail MMFs was 0.14%, unchanged from previous month. Gross yields were 0.07% for Government Funds, unchanged from last month. Gross yields for Treasury Funds were also unchanged at 0.06%. Gross Yields for Tax Exempt Institutional MMFs were up two basis points to 0.06% in September. Gross Yields for Tax Exempt Retail funds were up one bp to 0.08%.

The Weighted Average 7-Day Net Yield for Prime Institutional MMFs was 0.06%, unchanged from the previous month but down 5 basis points from 12/31/20. The Average Net Yield for Prime Retail Funds was 0.02%, unchanged from the previous month, and down a basis point since 12/31/20. Net yields were 0.02% for Government Funds, unchanged from last month. Net yields for Treasury Funds were also unchanged from the previous month at 0.01%. Net Yields for Tax Exempt Institutional MMFs were unchanged from August at 0.02%. Net Yields for Tax Exempt Retail funds were unchanged at 0.01% in September. (Note: These averages are asset-weighted.)

WALs and WAMs were mostly lower in September. The average Weighted Average Life, or WAL, was 50.3 days (down 1.8 days) for Prime Institutional funds, and 52.6 days for Prime Retail funds (down 0.2 days). Government fund WALs averaged 76.8 days (down 2.9 days) while Treasury fund WALs averaged 89.0 days (down 1.9 days). Tax Exempt Institutional fund WALs were 16.6 days (down 0.4 days from the previous month), and Tax Exempt Retail MMF WALs averaged 26.7 days (up 0.8 days).

The Weighted Average Maturity, or WAM, was 33.6 days (down 0.8 days from the previous month) for Prime Institutional funds, 42.5 days (down 0.8 days from the previous month) for Prime Retail funds, 30.5 days (down 3.1 days) for Government funds, and 39.7 days (down 1.4 days) for Treasury funds. Tax Exempt Inst WAMs were down 0.4 days to 16.2 days, while Tax Exempt Retail WAMs increased 1.0 day to 26.1 days.

Total Daily Liquid Assets for Prime Institutional funds were 54.2% in September (up 0.7% from the previous month), and DLA for Prime Retail funds was 35.3% (up 1.2% from previous month) as a percent of total assets. The average DLA was 75.3% for Govt MMFs and 96.9% for Treasury MMFs. Total Weekly Liquid Assets was 63.2% (up 0.2% from the previous month) for Prime Institutional MMFs, and 48.5% (down 0.1% from the previous month) for Prime Retail funds. Average WLA was 87.5% for Govt MMFs and 99.5% for Treasury MMFs.

In the SEC's "Prime Holdings of Bank-Related Securities by Country table for Sept. 2021," the largest entries included: Canada with $96.9 billion, Japan with $66.7 billion, France with $65.4 billion, the U.S. with $45.2B, the Netherlands with $36.2B, Germany with $32.4B, the U.K. with $28.1B, Aust/NZ with $26.0B and Switzerland with $7.6B. The gainers among the "Prime MMF Holdings by Country" were: France (up $8.2 billion), the Netherlands (up $5.3B), Canada (up $4.5B) and Aust/NZ (up $0.7B). Decreases were shown by: Germany (down $5.9B), the U.S. (down $3.1B), Switzerland (down $1.5B) and the U.K. (down $0.7). Japan was unchanged.

The SEC's "Prime Holdings of Bank-Related Securities by Region" table shows Europe had $74.5B (down $13.3B from last month), the Eurozone subset had $143.0B (down $19.1B). The Americas had $142.1 billion (up $1.4B), while Asia Pacific had $106.2B (up $1.3B).

The "Prime MMF Aggregate Product Exposures" chart shows that of the $863.6B billion in Prime MMF Portfolios as of Sept. 30, $355.8B (41.2%) was in Government & Treasury securities (direct and repo) (up from $329.0B), $179.9B (20.8%) was in CDs and Time Deposits (down from $210.2B), $172.6B (20.0%) was in Financial Company CP (up from $168.2B), $119.4B (13.8%) was held in Non-Financial CP and Other securities (down from $120.1B), and $35.9B (4.2%) was in ABCP (unchanged).

The SEC's "Government and Treasury Funds Bank Repo Counterparties by Country" table shows the U.S. with $146.0 billion, Canada with $125.4 billion, France with $141.3 billion, the U.K. with $51.8 billion, Germany with $21.1 billion, Japan with $129.3 billion and Other with $28.1 billion. All MMF Repo with the Federal Reserve was up $389.3 billion in September to $1.439 trillion.

Finally, a "Percent of Securities with Greater than 179 Days to Maturity" table shows Prime Inst MMFs 7.2%, Prime Retail MMFs with 6.5%, Tax Exempt Inst MMFs with 2.3%, Tax Exempt Retail MMFs with 4.7%, Govt MMFs with 13.9% and Treasury MMFs with 13.7%.

S&P Global Ratings published quarterly updates yesterday on both U.S. and European money market funds. Their "U.S. Domestic 'AAAm' Money Market Fund Trends (Third-Quarter 2021)" brief tells us, "The third quarter of 2021 for rated U.S. MMFs continued to see a slow bleed out of prime funds, while government funds maintained a near record level of net assets. Prime fund net assets were down to $373 billion or 18% compared to the previous year, just above March 2020 lows of $362 billion. Government fund assets were up to $2,935 billion or 12% over the previous year, around $300 billion higher compared to the market dislocation period of March 2020." (Note: Please join us Thursday morning for our European Money Fund Symposium Online, a free 2 1/2 hour webinar, which takes place Oct. 21 from 9:30am-12:00pm Eastern. Register here to attend and watch for the recordings and coverage in coming days.)

It explains, "There continues to be a massive imbalance of supply and demand, and that will likely continue in the near to medium term. The spread difference between prime funds and government funds is only a few basis points (bps). Across both fund types, yields are flat compared to last quarter. However, there continues to be pressure on yields, driven by the shrinking pool of low-risk assets, debt ceiling noise, the prospect of regulatory reform and continued scrutiny on prime funds. There was some relief through the third quarter following the tweaks to the reverse repurchase agreement (repo) facility in late June by the Federal Reserve."

S&P writes, "In terms of portfolio composition, the purchases of Treasury bills in government MMFs saw its lowest allocation going to back to March 2020, as supply diminished following the Department of the Treasury's efforts to reduce its cash balances. Also, agency issuance has been somewhat limited in recent months, which further reduced exposure to very low levels. This has been offset by fund managers increasing their allocation into repos, with most of being overnight. There was also a modest increase to seven-day liquidity due to the increase in overnight positions."

The piece states, "Similar to last quarter, the Federal Reserve's repo program saw a spike in activity. Prime fund managers increased their allocation to repos and slightly reduced their exposure to commercial paper (CP) and asset-backed commercial paper (ABCP) during the quarter, which is reflected in the small increase in overnight and seven-day liquidity within prime funds. Compared to the previous year, there was an increase in time deposits, CP, and ABCP, with a decrease in exposure to sovereigns, supranationals, and agencies (SSA)."

It says, "Like government funds, supply constraints in the short-term funding markets may have reduced the option to invest in certain asset classes. Yields remained low throughout the quarter. Seven-day and 30-day net yields for government funds were 0.01%, unchanged from the previous quarter and down two basis points (bps) from the previous year. The seven-day net yield for prime funds was 0.01% and the 30-day net yield was 0.04%, unchanged from the last quarter and down 12 bps and 10 bps form the last year, respectively. Fund managers extended their use of fee waivers, which have been a widespread and crucial tool for attracting continued inflows into MMFs."

The trends publication adds, "Among purchases of floating-rate securities, we observed a very limited use of Bloomberg Short Term Bank Yield Index (BSBY) floaters in some rated funds. Most fund managers are no longer adding LIBOR floaters and are letting their exposure roll off by year-end. Managers have been more active in Secured Overnight Financing Rate (SOFR) and Fed fund floaters, but now they are seeing more value in fixed paper."

S&P's other update, "European 'AAAm' Money Market Fund Trends (Third-Quarter 2021)," comments, "In the third quarter of 2021, net assets for rated European-domiciled MMFs denominated in euro and U.S. dollar were range-bound, rising 1.3% to €107 billion for euro MMFs, and falling lower by 1.9% to $492 billion for U.S. dollar MMFs, quarter on quarter. Net assets for sterling MMFs continued their decline since peaking at £252 billion in December 2020, falling 1.1% to £220 billion in the third quarter. While net assets for sterling MMFs are now approaching February 2020, pre-pandemic levels of £212 billion, the net assets for U.S. dollar and euro MMFs remain above their February 2020, pre-pandemic levels of $440 billion and €85 billion, respectively. Thus, cash in the sterling market is being re-deployed at a slightly faster pace than in the euro or offshore U.S. dollar market."

It explains, "Third quarter seven-day net yield averages have remained flat since they hit the lower bound in the first quarter of 2021, yielding -0.65% for euro, 0.00% for sterling, and 0.02% for U.S. dollar MMFs. In September, the Bank of England and the Federal Reserve began sending more hawkish signals, leaving the market to price in sooner-than-expected policy tightening and sending longer yields higher. Nevertheless, with interest rates set to remain at ultra-low levels at least until next year, and the short end of the curve being almost flat, the pressure to avoid net negative fund yields remains high."

S&P writes, "The average level of 'A-1+' credit quality of the rated U.S. dollar MMFs remained steady in the third quarter of 2021 at 75%, yet trended slightly lower for Euro and sterling MMFs, averaging 63%, which is still at a level higher than the minimum 50% required for AAAm-rated MMFs. With ultra-low interest rates and benign markets, WAMs have extended beyond pre-pandemic levels, and there has been a greater proportion invested in credit securities, such as bonds, certificates of deposits, commercial paper, and floating rate notes. They account for close to 60% in euro and sterling MMFs, whereas this is trending at less than 50% in U.S. dollar MMFs, which explains the higher credit quality for U.S. dollar MMFs."

Finally, they tell us, "The third quarter incurred persistent inflation pressures and increased rhetoric for tighter monetary conditions, starting with the initial discussions of easing central bank asset purchases. Despite this backdrop, our rated MMFs have maintained or lengthened their WAMs and are not positioned for any rate hike soon. In fact, our rated MMF sponsors are planning their year-end strategies during which time liquidity condition can be challenging, which means for some, lengthening their maturities during the quarter to ensure sufficient liquidity over the year-end period. In the past 12 months, all MMFs we rate had their 'AAAm' ratings affirmed. Going forward, we trust that our weekly surveillance and regular interactions with MMF fund managers will continue the affirmative ratings trend."

In other news, Fitch Ratings' published a "Stablecoin Dashboard: 1H21," which states, "Stablecoins, such as Tether and USDCoin, are increasingly relevant participants in the short-term credit markets, says Fitch Ratings, due to their ownership of short-term securities backing outstanding coins. Stablecoins are typically used by cryptocurrency investors to hold realised profits, for conversions between cryptocurrencies, or as a means of payment.... Fitch estimates that total stablecoin market capitalisation growth was around 420% as of 30 September 2021."

Fitch says, "Stablecoins have a broad asset allocation. Tether's assets include precious metals and secured loans, which may be more volatile than short-term securities such as commercial paper (CP). Both USDCoin and Tether focus on investment-grade quality: Tether's minimum credit quality is 'F3' or equivalent, and USDCoin can hold corporate bonds rated 'BBB+' or higher. However, USDCoin materially altered its security portfolio between June and August 2021, shifting the vast majority of its assets into cash equivalents. Tether's portfolio has a maximum maturity of 365 days, while USDCoin can extend maturity up to three years. Estimating the share of assets with very short maturities (i.e. overnight and within one week) is not possible given disclosure limitations. However, available data suggest longer maturities: within Tether's CP and CD portfolio, the bulk of exposures mature beyond six months."

The one-page brief adds, "Fitch estimates that stablecoins had aggregate CP holdings equivalent to 3%–5% of the total onshore US CP market (USD1.1 trillion as of end-June 2021 according to Fed data) -- assuming most stablecoins have a similar underlying asset allocation to Tether and USDCoin. Given the growth rate of the stablecoin market, and the relatively stable US CP market, stablecoins could soon hold a more significant part of the US CP market.... Stablecoins had material price volatility in early 2020. The largest daily price move was -5.1% on 13 March 2020 for Tether; however, this is still less volatile than most cryptocurrencies."

As we make final preparations for our virtual European Money Fund Symposium, which will take place this Thursday (10/21) from 9:30am-12:00pm EDT, Crane Data is also making plans for our next live event, Money Fund University. The 12th annual MFU, our "basic training" conference, will take place at the Hyatt Regency in Boston, Mass., January 20-21, 2022. Crane's Money Fund University is designed for those new to the money market fund industry or those in need of a concentrated refresher on the basics. The event also focuses on hot topics like money market fund regulations, money fund alternatives, offshore markets, and other recent industry trends. Our educational conference features a faculty of the money fund industry's top lawyers, strategists, and portfolio managers, and the Boston show will include an extended free training session (and lunch) for Crane Data clients. We review the MFU agenda, and also the upcoming AFP conference in Washington, below. (We hope to see many of you at AFP in November -- come visit us at booth #1136!)

Money Fund University offers a 2-day crash course on money market mutual funds, educating attendees on the history of money funds, the Fed, interest rates, ratings, rankings, and money market instruments such as commercial paper, Treasury bills, CDs and repo. We also cover portfolio construction and credit analysis. Registrations are now being taken, and the latest agenda is available here. (E-mail us to request the latest brochure.)

The morning of Day One (1/20/21) of the 2022 MFU agenda includes: History & Current State of Money Market Mutual Funds with Peter Crane of Crane Data; The Federal Reserve & Money Markets with Mark Cabana of BofA Securities; Ratings, Monitoring & Performance with Greg Fayvilevich of Fitch Ratings and Guyna Johnson of S&P Global; and, Instruments of the Money Markets Intro with Teresa Ho of J.P. Morgan Securities.

Day One's afternoon agenda includes: Repurchase Agreements with Jake Kruk of J.P. Morgan Securities; Treasuries & Govt Agencies with Sue Hill of Federated hermes and Matt Lachance of TD Securities; Tax-Exempt Securities & VDRNs with John Vetter of Fidelity Investments; Commercial Paper & ABCP with Rob Crowe and Ryan Kesapyan of Citi Global Markets and CDs, TDs & Bank Debt with Vanessa McMichael of Wells Fargo Securities; and, Credit Analysis & Portfolio Management with Sean Lussier and Peter Hajjar of SSGA.

Day Two's (10/21/21) agenda includes: Money Fund Regulations: 2a-7 Basics & History with Brenden Carroll of Dechert LLP and Jamie Gershkow of Stradley Ronon; European MMF Reforms & Offshore Money Funds with Peter Crane of Crane Data, John Hunt of Sullivan & Worcester LLP and Barry Harbison of HSBC Global AM; Ultra-Short Bond Funds & SMAs with `James McNerny of J.P. Morgan A.M.; and, Money Fund Data & Wisdom Demo/Training with Peter Crane. The conference ends with its annual MFU "Graduation" ceremony (where diplomas are given to attendees).

New portfolio managers, analysts, investors, issuers, service providers, and anyone interested in expanding their knowledge of "cash" investing should benefit from our comprehensive program. Even experienced professionals may enjoy a refresher course and the opportunity to interact with peers in an informal setting. Attendee registration for Crane's Money Fund University is just $500, exhibit space is $2,000, and sponsorship opportunities are $3K (Bronze), $4K (Silver), and $5K (Gold). A block of rooms has been reserved at the Boston Hyatt Regency.

We'd like to thank our past and pending MFU sponsors -- Dreyfus/BNY Mellon CIS, J.P. Morgan Asset Management, Fitch Ratings, TD Securities, S&P Global Ratings, Dechert LLP, Fidelity Investments and Federated Investors -- for their support, and we look forward to seeing you in Boston in January. E-mail Pete Crane ( for the latest brochure or visit to register or for more details.

Crane Data is also preparing the preliminary agenda for our next Bond Fund Symposium, which will be held March 28-29, 2022, at the Hyatt Regency in Newport Beach, Calif. Our Bond Fund Symposium offers a concentrated and affordable educational experience, as well as an excellent and informal networking venue. Registration for Bond Fund Symposium is $750; exhibit space is $2,000 (includes 2 tickets); and sponsorship opportunities are $3K, $4K, $5K, and $6K. Our mission is to deliver the best possible conference content at a reasonable price to bond fund professionals and investors.

We'll also soon be making plans for our next "big show," Money Fund Symposium, which will be held June 20-22, 2022, at the Hyatt Regency in Minneapolis. (Let us know if you'd like details on speaking or sponsoring.) Also, mark your calendars for next year's European Money Fund Symposium, which will be held Sept. 27-28, 2022, in Paris, France. Watch for details on these shows in coming weeks and months.

In other news, money market mutual fund distributors and cash managers will be travelling to Washington, DC for AFP 2021, the Association for Financial Professionals' big annual gathering of corporate treasurers, which takes place November 7-9. AFP is the largest gathering of corporate investors in the country, (normally) attracting over 5,000 treasury management professionals, as well as a host of large banks and institutional money fund managers. (It should be about half as big this year.)

At AFP, sessions involving money funds and/or cash investing include: "Inclusion In The Capital Markets Is Spelled MWVBE," with Southern Company's Meredith Bromley and MFR Securities' James Gilligan; "Are Zero Interest Rates Really Different This Time?" with State Street Global Advisors' William Goldthwait, Snowflake Computing's Vaibhav Natu, Fastly's Michael Scott and Creative Artists Agency's Garima Thakur; "The Blockchain Revolution: How A Decentralized Ledger May Disrupt The $5 Trillion Money Market Fund Industry" with Western Asset Management's Jason Straker and Franklin Templeton's Chris Franta; "Deeply Connected: Integrating Cash & Investments For Optimal Efficiency," with ICD Portal's Sebastian Ramos, Summit Utilities' Andrea Guntren and The Coca-Cola Company's Aidan Monahan; "Seeking Yield For A Euro Portfolio In A Negative Rate Environment," with's Cameron Bowen, Neuberger Berman's Patrick Barbe, Bridgebay Financial's Nicholas Zaiko and Celonis' Ivan Troufanov; and, finally, "Why Corporate Treasurers May Consider Bitcoin," with Fidelity Investments' Tom Jessop.

Finally, thank you once again to those who supported last month's Money Fund Symposium, which took place Sept. 21-23 in Philadelphia! The recordings and materials are available to Crane Data subscribers at the bottom of our "Content" page. Let us know if you'd like more details on any of our (or other "cash") events, and we hope to see you in Boston in January, Newport Beach in March, Minneapolis in June or Paris in September in 2022!

ICI released its 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. (For more, see our Oct. 13 News, "Oct. MF Portfolio Holdings: Repos Surpass Treasuries as Largest Slice." Also: Please join us for our European Money Fund Symposium Online this Thursday, Oct. 21 from 9:30am-12:00pm Eastern. Register here for this free, 2 1/2 hour event.)

The MMF Holdings release says, "The Investment Company Institute (ICI) reports that, as of the final Friday in September, prime money market funds held 30.4 percent of their portfolios in daily liquid assets and 47.8% in weekly liquid assets, while government money market funds held 80.8 percent of their portfolios in daily liquid assets and 89.4% in weekly liquid assets." Prime DLA was down from 31.7% in August, and Prime WLA decreased from 48.6%. Govt MMFs' DLA decreased from 81.3% in August and Govt WLA decreased from 89.8% from the previous month.

ICI explains, "At the end of September, prime funds had a weighted average maturity (WAM) of 42 days and a weighted average life (WAL) of 59 days. Average WAMs and WALs are asset-weighted. Government money market funds had a WAM of 33 days and a WAL of 81 days." Prime WAMs were one day lower than August, while WALs were two days lower than the previous month. Govt WAMs and WALs were three days and two days lower than August, respectively.

Regarding Holdings By Region of Issuer, the release tells us, "Prime money market funds' holdings attributable to the Americas rose from $185.34 billion in August to $206.69 billion in September. Government money market funds' holdings attributable to the Americas rose from $3,567.89 billion in August to $3,608.59 billion in September."

The Prime Money Market Funds by Region of Issuer table shows Americas-related holdings at $206.7 billion, or 45.0%; Asia and Pacific at $84.9 billion, or 18.5%; Europe at $162.2 billion, or 35.3%; and, Other (including Supranational) at $5.7 billion, or 1.3%. The Government Money Market Funds by Region of Issuer table shows Americas at $3.609 trillion, or 91.0%; Asia and Pacific at $121.6 billion, or 3.1%; Europe at $228.5 billion, 5.8%, and Other (Including Supranational) at $8.9 billion, or 0.2%.

In related news, in its most recent "Short-Term Market Outlook and Strategy," J.P. Morgan also includes a "September MMF holdings update." The piece tell us, "This September, AUMs of taxable MMFs increased overall by $13bn. As with last month, we continue to see flows into government money funds accompanied by flows out of prime money funds: government MMFs surpassed $4tn in AUMs after a month-over-month increase of just over $20bn, while prime MMF AUMs fell again, falling almost $8bn from August's level to $845bn."

They explain, "With the debt ceiling increased but still looming, MMFs' usage of the Fed's RRP has only expanded, now up 37% to $1.21tn for government MMFs and up 38% to $220bn for prime MMFs since August's end.... This growing exposure continues to overtake other holdings sectors, with government MMFs seeing a continual decline in holdings of T-bills (-$294bn MoM) and Agencies (-$31bn MoM), and prime MMFs less and less exposed to banks (-$30bn MoM) and Treasuries (-$26bn MoM)."

JPM Securities' Teresa Ho, Alex Roever and Holly Cunningham write, "Following the September FOMC announcement that the ON RRP facility's counterparty limit would be doubled from $80bn to $160bn, 2 counterparties have since gone in for above $80bn. The largest counterparty allocated $89bn, versus $66bn in August and $58bn in July. Additionally, there were 6 counterparties that went in for $60-$80bn, 6 counterparties that went in for $40-60bn, 6 counterparties that went in for $20-40bn, and 58 counterparties that went in for less than $20bn (Exhibit 5). In aggregate, the number of Fed RRP MMF counterparties increased by 8 month over month, from 70 to 78."

They continue, "Quarter-end gave way to a large decline in Treasury repo and TD balances among government and prime MMFs, respectively. Prime MMFs saw a decrease of $27bn in TDs month over month, and government MMFs saw a decrease of $60bn or 12% in Treasury repo (excluding RRP), now making up only about 20% of government MMFs' overall repo holdings."

JPM says, "Based on MMF holdings data as of September 30th, MMFs held just under $300bn in T-bills expiring in December, $130bn in January, and $90bn in February, all with a grand majority held by government MMFs. With the debt ceiling officially pushed back to December 3rd, an important question is how MMFs will potentially reposition their portfolios in response -- namely, whether there will be a significant sell-off of Treasuries expiring on-or-after the new drop-dead date. We don't anticipate that MMFs will move to liquidate bills ahead of potential default -- given the amounts they hold in the RRP, they have plenty of liquidity should redemptions increase. Plus, given the limited availability of cash alternatives in the market, we see the risk of shareholder liquidations as minimal."

Finally, they add, "Overall, as anticipated, the Fed's RRP has seen tremendous and increasing use by MMFs as they focus on continuing to build liquidity heading into December. This trend has pushed MMF holdings out of banks and T-bills in comparison, and it could potentially further impact bills expiring soon after the new deadline in anticipation of default-driven shareholder redemptions. On the margin, this could put more pressure on money market yields, but this might open an opportunity for less risk-averse market participants to buy cheap in seeing that a Treasury technical default is, at this point, very likely not to occur."

Crane Data's latest MFI International shows that assets in European or "offshore" money market mutual funds fell slightly over the past month to $1.008 trillion, the third month in a row for asset declines. These U.S.-style money funds, domiciled in Ireland or Luxembourg but denominated in US Dollars, Pound Sterling and Euros, decreased by $8.4 billion over the 30 days through 10/14. They're down $51.7 billion (-4.9%) year-to-date. Offshore US Dollar money funds are up $6.9 billion over the last 30 days but are down $11.4 billion YTD to $524.4 billion. Euro funds are up E1.7 billion over the past month, and YTD they're down E17.5 billion to E139.9 billion. GBP money funds have fallen L12.5 billion over 30 days, and are down by L26.4 billion YTD to L230.2B. U.S. Dollar (USD) money funds (192) account for half (52.0%) of the "European" money fund total, while Euro (EUR) money funds (94) make up 16.3% and Pound Sterling (GBP) funds (116) total 31.6%. We summarize our latest "offshore" money fund statistics and our Money Fund Intelligence International Portfolio Holdings (which went out to subscribers Wednesday), below. (Note: For more on European and offshore money funds, join us for our European Money Fund Symposium Online, a free 2 1/2 hour webinar, which takes place Oct. 21 from 9:30am-12:00pm Eastern. Register here to attend.)

Offshore USD MMFs yield 0.02% (7-Day) on average (as of 10/14/21), down from 0.05% on 12/31/20, 1.59% on 12/31/19 and 2.29% on 12/31/18. EUR MMFs yield -0.67% on average, compared to -0.71% at year-end 2020, -0.59% at year-end 2019 and -0.49% at year-end 2018. Meanwhile, GBP MMFs yielded 0.01%, up from 0.00% on 12/31/20, down from 0.64% on 12/31/19 and 0.64% on 12/31/18. (See our latest MFI International for more on the "offshore" money fund marketplace. Note that these funds are only available to qualified, non-U.S. investors.)

Crane's October MFII Portfolio Holdings, with data as of 9/30/21, show that European-domiciled US Dollar MMFs, on average, consist of 27% in Commercial Paper (CP), 16% in Certificates of Deposit (CDs), 15% in Repo, 28% in Treasury securities, 13% in Other securities (primarily Time Deposits) and 1% in Government Agency securities. USD funds have on average 35.4% of their portfolios maturing Overnight, 7.7% maturing in 2-7 Days, 15.1% maturing in 8-30 Days, 12.4% maturing in 31-60 Days, 8.9% maturing in 61-90 Days, 14.5% maturing in 91-180 Days and 5.9% maturing beyond 181 Days. USD holdings are affiliated with the following countries: the US (37.9%), France (14.2%), Canada (9.7%), Japan (7.2%), Sweden (5.8%), the Netherlands (4.3%), Germany (4.1%), Australia (3.0%), the U.K. (3.0%) and Belgium (2.2%).

The 10 Largest Issuers to "offshore" USD money funds include: the US Treasury with $151.8 billion (28.1% of total assets), BNP Paribas with $20.5B (3.8%), RBC with $13.9B (2.6%), Skandinaviska Enskilda Banken AB with $11.9B (2.2%), Federal Reserve Bank of New York with $11.4B (2.1%), Societe Generale with $11.1B (2.1%), Credit Agricole with $10.4B (1.9%), Toronto-Dominion Bank with $10.1B (1.9%), Rabobank with $9.3B (1.7%), and Canadian Imperial Bank of Commerce with $9.2B (1.7%).

Euro MMFs tracked by Crane Data contain, on average 41% in CP, 23% in CDs, 22% in Other (primarily Time Deposits), 9% in Repo, 4% in Treasuries and 1% in Agency securities. EUR funds have on average 27.6% of their portfolios maturing Overnight, 9.5% maturing in 2-7 Days, 16.8% maturing in 8-30 Days, 14.8% maturing in 31-60 Days, 7.1% maturing in 61-90 Days, 20.0% maturing in 91-180 Days and 4.2% maturing beyond 181 Days. EUR MMF holdings are affiliated with the following countries: France (34.6%), Japan (13.0%), the U.S. (9.5%), Sweden (8.2%), Germany (6.9%), Switzerland (6.0%), the U.K. (3.5%), Canada (3.1%), Belgium (2.2%) and Supranational (2.0%).

The 10 Largest Issuers to "offshore" EUR money funds include: Credit Agricole with E6.8B (5.5%), BNP Paribas with E6.2B (5.0%), Societe Generale with E5.4B (4.4%), BPCE SA with E5.3 (4.3%), Republic of France with E5.2B (4.3%), Zürcher Kantonalbank with E4.3B (3.6%), Nordea Bank with E3.9B (3.2%), Svenska Handelsbanken with E3.7B (3.0%), Natixis with E3.3B (2.7%) and Mizuho Corporate Bank with E3.3B (2.7%).

The GBP funds tracked by MFI International contain, on average (as of 9/30/21): 38% in CDs, 21% in CP, 20% in Other (Time Deposits), 16% in Repo, 5% in Treasury and 0% in Agency. Sterling funds have on average 31.3% of their portfolios maturing Overnight, 12.6% maturing in 2-7 Days, 11.8% maturing in 8-30 Days, 10.1% maturing in 31-60 Days, 5.2% maturing in 61-90 Days, 23.4% maturing in 91-180 Days and 5.5% maturing beyond 181 Days. GBP MMF holdings are affiliated with the following countries: France (18.5%), the U.K. (17.9%), Japan (16.3%), Canada (11.0%), the U.S. (5.4%), Sweden (5.1%), the Netherlands (5.0%), Australia (3.7%), Switzerland (3.0%) and Germany (2.9%).

The 10 Largest Issuers to "offshore" GBP money funds include: the UK Treasury with L20.2B (10.1%), Mitsubishi UFJ Financial Group Inc with L9.3B (4.7%), Sumitomo Mitsui Banking Corp with L9.0B (4.5%), BPCE SA with L8.0B (4.0%), BNP Paribas with L8.0B (4.0%), RBC with L7.7B (3.8%), Mizuho Corporate Bank Ltd with L6.8B (3.4%), Agence Central de Organismes de Securite Sociale with L6.7B (3.3%), Toronto-Dominion Bank with L6.4B (3.2%) and Nordea Bank with 5.5B (2.7%).

In other news, The Federal Reserve Bank of New York's Lorie Logan spoke recently on "Monetary Policy Implementation: Adapting to a New Environment" at an event held by the Money Marketeers of New York University. She comments, "Unsurprisingly, the increase in reserves resulted in downward pressure on overnight interest rates -- including the federal funds rate -- relative to the interest on reserve balances (IORB) rate. As reserve balances rose, some banks perceived a cost to expanding their balance sheets further and lowered their deposit rates. In response, depositors and other investors shifted assets to money market mutual funds (money funds), which raised demand for money market investments and put downward pressure on money market rates more broadly. On the year, government money fund assets under management (AUM) have increased by over $320 billion."

Logan explains, "It's important to note that at the same time demand for money market investments rose, the net supply of U.S. Treasury bills -- an essential investment for money funds and other investors -- fell by an historically large amount: over $1.2 trillion so far in 2021.... This combination of increased liquidity and reduced supply of investment options had the potential to put substantial further downward pressure on overnight rates, including the federal funds rate. The ON RRP facility was established as part of the FOMC's ample reserves framework in order to support interest rate control in a wide variety of environments. It offers a broad range of money market investors the option to invest in an overnight reverse repo with the Federal Reserve, which improves their bargaining power for private investments. It also offers an alternative investment when private investments are not available at rates above the ON RRP rate."

She tells us, "In the first quarter of this year, ON RRP facility usage became more regular, and it has increased rapidly since. Recently, reductions in the TGA and Treasury bill supply have accelerated, and the ON RRP facility has exceeded $1.2 trillion consistently since mid-September.... The ON RRP facility is working as intended, even as usage expands to new highs. Just as IORB creates a floor for rates on bank lending activity, the ON RRP facility supports control of the federal funds rate by providing a soft floor for the overnight money market activity of a broader set of money market participants."

Logan says, "An essential feature of the ON RRP facility is that it has a fixed rate and therefore its size is determined by the interest rate environment. Just as usage of the facility grew in response to downward pressure on money market rates, it should decline in response to increases in them. For example, if Treasury were to expand Treasury bill supply and interest rates on these instruments rose above the ON RRP rate, investors should naturally reallocate out of the facility and back into these assets. Similarly, if the supply of reserves declines and rates rise relative to the IORB rate, ON RRP balances should naturally recede."

She states, "The Federal Reserve implemented a technical adjustment to administered rates in June, lifting the IORB and ON RRP rates by five basis points each, shifting up their position in the target range. This was a normal adjustment in response to evolving money market conditions, intended to help maintain the federal funds rate well within the target range. Lifting the ON RRP rate above zero also helped support the smooth functioning of money markets. With secured rates near zero, money funds with stable net asset values (NAVs) could have experienced challenges covering operating costs and limited inflows, increasing the potential for further downward pressure on rates."

Finally, Logan adds, "The ON RRP facility's per-counterparty limit has also been adjusted this year. In March, the FOMC lifted the limit to $80 billion to account for changes in the size and concentration of the money fund industry since 2014, and to ensure sufficient capacity to maintain an effective floor under the federal funds rate. Most recently, as ON RRP usage steadily increased, the FOMC raised the limit again, this time to $160 billion. Since the increase, some counterparties have participated in ON RRP operations for more than $80 billion, including on the September quarter-end date."

The October issue of our Bond Fund Intelligence, which was sent to subscribers Friday morning, features the lead story, "Worldwide Bond Fund Assets Rise in Q2'21 to $13.5 Trillion," which reviews global bond fund markets; and "PMs Talk Ultra-Shorts, SMAs at Money Fund Symposium," which shares some highlights from our recent money fund conference. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund returns fell in September and yields declined. We excerpt from the new issue below. (Contact us if you'd like to see our latest Bond Fund Intelligence and BFI XLS spreadsheet, or our Bond Fund Portfolio Holdings data.)

BFI's "Worldwide" piece reads, "Bond fund assets worldwide rose in the latest quarter to just under $13.5 trillion. All of the largest markets showed modest gains, with Brazil and China showing the biggest percentage increases. The U.S., Brazil, Ireland, Luxembourg and China showed the largest dollar increases. We review the ICI's 'Worldwide Open-End Fund Assets and Flows, Second Quarter 2021' release, and rank the largest global markets.

The report says, "Worldwide regulated open-end fund assets increased 6.1% to $68.55 trillion at the end of the second quarter of 2021.... The Investment Company Institute compiles worldwide regulated open-end fund statistics on behalf of the International Investment Funds Association (IIFA).... Bond fund assets increased by 4.5% to $13.51 trillion in the second quarter. Balanced/mixed fund assets increased by 7.1% to $8.51 trillion in the second quarter, while money market fund assets increased by 1.1% ... to $8.56 trillion."

The MFS article says of our recent conference, "Crane Data recently hosted its Money Fund Symposium conference in Philadelphia, and while money market funds were of course the main topic, there was a fair amount of talk about investing beyond MMFs. This month, we highlight some of the mentions and we quote from the 'Ultra-Short' session. (Note: The Money Fund Symposium recordings and materials are available to Crane Data Subscribers here.)"

The update explains, "During a panel on 'Major Money Fund Issues,' Invesco's Laurie Brignac comments, 'Clients still want Prime. I'm sure a lot of people have seen the growth of private accounts, separate accounts; those are generally people coming to you trying to get [exposure to credit]. It's all prime. So ... we are seeing growth in Prime, just not 2a-7.... The hard part about separate accounts is that it is more work for the end investor.... It takes a little more time."

Our News brief, "Returns Crash, Yields Drop in Sept," states, "Bond fund returns plunged and yields moved lower last month. Our BFI Total Index fell 0.45% for 1-month but rose 2.86% for 12 months. The BFI 100 returned -0.50% in Sept. and 2.67% over 1-year. Our BFI Conservative Ultra-Short Index was up 0.00% for 1-mo and 0.16% for 1-yr; Ultra-Shorts averaged 0.04% and 1.02%, respectively. Short-Term decreased 0.10% but rose 2.04%, and Intm-Term fell 0.65% in Sept. but rose 1.44% over 1-year. BFI's Long-Term Index fell 1.03% in Sept., but gained 1.22% over 1-year. Our High Yield Index rose 0.11% in Sept. and 9.57% over 1-year."

Another News brief, entitled, "ThinkAdvisor on 'Vanguard Taking Orders for New Core-Plus Bond Fund," tells us, "Vanguard has opened a 10-day subscription period for the launch of its Core-Plus Bond Fund which will begin trading on Oct. 25. It will be the firm's first actively managed mutual fund to launch this year.... Vanguard launched its first ever active bond ETF in April, the Vanguard Ultra-Short Bond ETF (VUSB)."

A third News brief, "ETF Trends Says, 'Short-Term Corporate Bonds May Be Better Than Cash,' tells us, "As fixed income investors increasingly fret about the notion of an interest rate hike ... some are leaving or reducing exposure.... The problem is that money market funds, CDs and the like have barely noticeable yields, meaning that investors are taking on some risk by abandoning bonds. One way to solve for rate risk while keeping income on the table is with short-term corporate bonds." They mention WisdomTree U.S. Short-Term Corporate Bond Fund (SFIG).

A BFI sidebar "Chartwell Launches Short Duration Bond Fund," comments, "A press release entitled, 'Chartwell Investment Partners Launches Short Duration Bond Fund (CWSDX)' explains, 'Chartwell Investment Partners announced the launch of its Chartwell Short Duration Bond Fund (CWSDX). The Fund will be available to individual investors and through major investment platforms including, but not limited to, Charles Schwab, Fidelity, TD Ameritrade, Vanguard, and Pershing. CWSDX is a short duration, fixed income fund that invests at least 75% of its net assets in investment grade short duration bonds and can allocate up to 25% of the fund to short duration high yield bonds. The investment objective of the Fund is to maximize current income by investing in high quality, short maturity fixed income securities while also preserving capital.'"

Finally, a sidebar entitled, "BF Inflows Stall in October," tells readers, "Strong bond fund inflows and asset gains continued in September, but stalled in the first week of October. ICI's 'Combined Estimated Long-Term Fund Flows and ETF Net Issuance,' says, 'Bond funds had estimated inflows of $931 million for the week [ended Oct. 6], compared to estimated inflows of $6.04 billion during the previous week. Taxable bond funds saw estimated inflows of $296 million, and municipal bond funds had estimated inflows of $634 million.' Over the past 5 weeks, bond funds and bond ETFs have seen inflows of $44.0 billion."

As we mentioned in Tuesday's Link of the Day, the Financial Stability Board, a group of global regulators, published its "Policy Proposals to Enhance Money Market Fund Resilience - Final Report earlier this week. We've already quoted from the press release, "Policy proposals to enhance money market fund resilience: Overview of the responses to the consultation" and from the FSB's statement, "Policy proposals to enhance money market fund resilience: Final report." But today we excerpt from the summary document, "Policy proposals to enhance money market fund resilience - Overview of the responses to the consultation." (Reminder: Please join us next week for European Money Fund Symposium Online, a free 2 1/2 hour webinar on Oct. 21 from 9:30-12:00pm Eastern. Register here.)

The Introduction states, "The consultation report with policy proposals to enhance MMF resilience was published on 30 June 2021 and the comment period closed on 16 August. The FSB received responses from various stakeholders, the large majority of which came from fund managers and their trade associations (mainly in the US and Europe). The remaining responses came from banks or banking associations, and from other trade associations and think tanks. All non-confidential responses have been published on the FSB's website. In addition, the FSB organized a virtual public workshop on 12 July to gather further feedback on the consultation report."

It explains, "In general, the FSB's view is that substantial changes are not needed to the report in response to consultation feedback, as it did not introduce major new elements to the analysis. Respondents from outside the asset management industry were generally in favor of further MMF reforms. By contrast, responses from the industry were generally against MMF reforms other than the removal of ties between regulatory liquidity thresholds and the ability to impose fees and gates, although many industry respondents expressed agreement with the use of mechanisms to allocate liquidity costs to redeeming investors (and especially anti-dilution levies), and to a lesser extent with the removal of stable net asset value (NAV) MMFs. Most respondents also expressed support for work to enhance the functioning of short-term funding markets (STFMs). This document summarizes the comments raised in the public consultation and sets out the main changes made to the final report in order to address them."

Discussing the "Comments received," the FSB summarizes, "Many of the respondents from the asset management industry argued that problems in MMFs were a symptom rather than a cause of the market dislocations experienced in March 2020. In their view, MMFs were perceived as one of the most liquid instruments to use in order to meet other cash needs and for this reason experienced large flows. Industry respondents argued that MMF redemptions from certain types of funds did not contribute to increasing the cost of short-term funding for borrowers. They also argued that problems were exacerbated by the fact that dealers' balance sheets were under pressure because of the large volume of various assets being sold relative to the dealer capacity."

They tell us, "The same respondents argued that the main issue was the lack of functioning in underlying short-term funding markets rather than problems with MMFs themselves. They pointed out that no MMF had to rely on suspensions and that all redemptions were met. However, one respondent pointed out that the shadow NAV of some funds came close to breaking the 20bp collar in the EU, while in the US one fund's NAV dipped below the 30% Weekly Liquid Assets (WLA) threshold for one day, which allowed this fund to impose a liquidity fee or gate. [`Editor's note: This is incorrect. No funds imposed liquidity fees or gates, though one dipped below 30% WLA.] Respondents highlighted the crucial role of the link, present in the US and in Europe, between the breaching of liquidity thresholds and the ability of funds to impose liquidity fees or gates. One respondent provided results from a simulation that, it argued, shows that if liquidity thresholds in US MMFs were not linked to the possibility of fees and gates, the funds would have been better able to use their liquidity buffers and meet redemptions for five weeks without any central bank interventions."

The FSB summary says, "Some respondents highlighted the different behaviour of government and non-government MMFs and suggested that reforms (if any) should be limited to the latter type of funds which experienced outflows.... Most respondents from outside the industry, however, argued that the March 2020 turmoil highlighted that MMFs are vulnerable, and some argued that they could impose material financial stability costs on society and that they benefit from an implicit government guarantee at least in some jurisdictions. [Note too: There was only one outside the industry submission.] These respondents generally were in favour of reforms to the MMF structure to make sure that these societal costs are borne by MMFs and their investors. Policy options mentioned included swing pricing, the imposition of stricter limits on assets that MMFs can buy, and the use of MBR and of capital requirements."

Regarding the "Response to comments," they state, "Some clarifying edits have been made to the report but the overall narrative has not changed. The consensus of the FSB membership, as reflected in its November 2020 Holistic Review of the March Market Turmoil, is that the March 2020 turmoil highlighted issues in MMFs that were subject to a very high level of redemptions in an illiquid market. The consultation report did not argue that MMFs caused the stress in the underlying markets, but that they contributed to (and were impacted from) it as a result of their structure and the fact that they rely on markets that are not liquid in times of stress to meet investor redemptions. Central banks intervened to re-establish the orderly functioning of markets and not simply to assist MMFs, but MMFs were among the entities that experienced high liquidity pressures during March 2020."

The FSB adds, "The consultation report already referred to potential future work to enhance the resilience of STFMs. In response to the feedback from the public consultation, the FSB and IOSCO intend to carry out follow-up work, complementing MMF policy reforms, to enhance the functioning and resilience of STFMs."

On the "Vulnerabilities in MMFs," they comment, "Some industry respondents rejected the conclusion that the March 2020 turmoil highlighted significant vulnerabilities in MMFs. They pointed out that the stress was mainly due to the lack of liquidity in STFMs (as opposed to the credit crisis of 2008) and argued that MMFs' problems were a result of the problems in STFMs. In their view, central banks did not 'bail out' MMFs and their interventions were not necessary to rescue them. Some respondents argued that institutional MMF outflows are usually large at the end of the quarter and that the graphs presented by the FSB overstate the problem by not taking this feature into account."

The summary also says, "Due to different market and product structures across jurisdictions, respondents confirmed that a one-size-fits-all reform solution would be challenging, and not even desirable.... However, there was near total consensus that a removal of the regulatory linkage of liquidity requirements to fees and gates would be an appropriate policy option to address the pressures MMFs experienced in 2020. Respondents underlined that it would enable MMFs to use their available liquidity to the full, act as a countercyclical release, and eliminate any cliff edge that spurred investors to redeem.... Responses showed some openness to consider the application of a liquidity or anti-dilution fee in stress situations. They largely preferred this option to swing pricing, which was seen as an impractical and unviable way to internalise liquidity costs. There was a strong push among US-based respondents to place the decision when to use this fee and how to calibrate it at fund board level."

The FSB explains, "Some edits to the report have been introduced to help dispel possible misunderstandings on the part of the respondents. A notable one is the fact that the FSB is not advocating the selection of representative options over the alternatives (variants), but rather that the representative options illustrate the mechanisms used to improve MMF resilience and that all options should be considered by jurisdictions.... For example, if swing pricing is particularly difficult to put in place for MMFs in a jurisdiction, it may be appropriate for that jurisdiction to adopt other policies (such as liquidity fees or anti-dilution levies).... For instance, in MMF jurisdictions such as the US and Europe, the possibility of using a liquidity fee is already in place but restricted to specific circumstances and almost never used. A proper implementation of such a policy without creating incentives for pre-emptive runs should allow fund managers to use it regularly."

Finally, they write, "A minority of responses disagreed that similarities in MMF portfolios may present contagion risk, noting that larger issuers benefit from greater liquidity by being able to sell their paper to MMFs and that high standards in credit risk management are sufficient to mitigate this risk.... A significant minority of respondents argued that central bank facilities that have been used as emergency measures should be formalised and be made available at all times. These respondents specifically mentioned having a permanent repo facility accessible to MMFs, including MMFs' assets in central bank asset purchase programmes, and even central banks acting as market makers of last resort in short-dated government bills during stress periods."

For more, see these Crane Data News stories: "More Comment Letters to FSB: HSBC AM, BNP Paribas, Amundi and Aviva" (9/7/21), "Federated Tells FSB: Eliminating Central Bank Intervention Unrealistic" (9/1/21), "BlackRock's FSB Comment: Address STFM Root Causes, 15% Daily Liquid" (8/26/21), "Fidelity to FSB: Narrowly Construct" (8/25/21), "JPMAM's Donohue to FSB: Reform Must Be Calibrated and Contextualized" (8/24/21), "Vanguard Comment Letter to FSB Urges Floating NAV, More Liquidity for Prime MMFs" (8/23/21), "ICI Comments on Financial Stability Board's Report; ICI MMF Holdings" (8/18/21) and "FSB Policy Proposals for Money Fund Resilience; Broad Range of Options" (7/1/21).

Crane Data's October Money Fund Portfolio Holdings, with data as of Sept. 30, 2021, show Repo jumping for the 8th month in a row and Treasury holdings plunging for the 6th straight month. Money market securities held by Taxable U.S. money funds (tracked by Crane Data) decreased by $26.0 billion to $4.853 trillion in September, after increasing $47.4 billion in August and decreasing $89.1 billion in July. Assets also rose $1.5 billion in June, $30.2 billion in May and $29.1 billion in April. Repo reclaimed the largest portfolio segment, the first time since March 2020, while Treasuries slid down to No. 2. MMF holdings of Fed repo rose to over $1.4 trillion. Agencies were the third largest segment, CP remained fourth, ahead of CDs, Other/Time Deposits and VRDNs. Below, we review our latest Money Fund Portfolio Holdings statistics. (Note: Please join us for our upcoming European Money Fund Symposium Online, a free 2 1/2 hour webinar, which takes place Oct. 21 from 9:30-12:00pm Eastern.)

Among taxable money funds, Treasury securities plummeted $262.4 billion (-13.5%) to $1.681 trillion, or 34.6% of holdings, after falling $113.8 billion in August, $200.6 billion in July, $134.5 billion in June and $135.0 billion in May. Repurchase Agreements (repo) jumped $299.8 billion (15.4%) to $2.248 trillion, or 46.3% of holdings, after rising $169.6 billion in August, $62.9 billion in July, $251.0 billion in June and $200.9 billion in May. Government Agency Debt was down $31.3 billion, or -6.4% to $460.9 billion, or 9.5% of holdings, after decreasing $8.1 billion in August, rising $3.8 billion in July, and decreasing $26.7 billion in June. Repo, Treasuries and Agency holdings totaled $4.389 trillion, representing a massive 90.4% of all taxable holdings.

Money funds' holdings of CP, CDs and Other (mainly Time Deposits) were mixed in September as Prime MMF holdings of Other/TDs plunged, while CP inched higher and CDs inched lower. Commercial Paper (CP) increased $3.1 billion (1.3%) to $241.5 billion, or 5.0% of holdings, after increasing $3.2 billion in August and $8.2 billion in July (but decreasing $36.1 billion in June). Other holdings, primarily Time Deposits, declined by $32.7 billion (-27.2%) to $87.4 billion, or 1.8% of holdings, after declining $4.7 billion in August, jumping $39.9 billion in July, and dropping $35.9 billion in June. Certificates of Deposit (CDs) fell by $3.8 billion (-3.1%) to $120.2 billion, or 2.5% of taxable assets, after rising $1.9 billion in August and dropping $1.5 billion in July and $14.9 billion in June. VRDNs increased to $13.8 billion, or 0.3% of assets. (Note: This total is VRDNs for taxable funds only. We will post our Tax Exempt MMF holdings separately late Monday.)

Prime money fund assets tracked by Crane Data remained flat at $851 billion, or 17.1% of taxable money funds' $4.853 trillion total. Among Prime money funds, CDs represent 14.1% (down from 14.6% a month ago), while Commercial Paper accounted for 28.4% (up from 27.7% in August). The CP totals are comprised of: Financial Company CP, which makes up 20.1% of total holdings, Asset-Backed CP, which accounts for 4.1%, and Non-Financial Company CP, which makes up 4.2%. Prime funds also hold 2.5% in US Govt Agency Debt, 8.4% in US Treasury Debt, 27.6% in US Treasury Repo, 1.2% in Other Instruments, 7.0% in Non-Negotiable Time Deposits, 8.4% in Other Repo, 2.2% in US Government Agency Repo and 0.8% in VRDNs.

Government money fund portfolios totaled $2.784 trillion (57.4% of all MMF assets), down from $2.805 trillion in August, while Treasury money fund assets totaled another $1.218 trillion (25.1%), down from $1.222 trillion the prior month. Government money fund portfolios were made up of 15.7% US Govt Agency Debt, 11.3% US Government Agency Repo, 28.3% US Treasury Debt, 44.4% in US Treasury Repo, 0.2% in Other Instruments. Treasury money funds were comprised of 67.5% US Treasury Debt and 32.3% in US Treasury Repo. Government and Treasury funds combined now total $4.002 trillion, or 82.5% of all taxable money fund assets.

European-affiliated holdings (including repo) fell by $88.5 billion in Sept. to $492.4 billion; their share of holdings fell to 10.2% from last month's 11.9%. Eurozone-affiliated holdings decreased to $354.8 billion from last month's $413.0 billion; they account for 7.3% of overall taxable money fund holdings. Asia & Pacific related holdings decreased to $212.2 billion (4.4% of the total) from last month's $223.9 billion. Americas related holdings jumped to $4.144 trillion from last month’s $4.070 trillion, and now represent 85.4% of holdings.

The overall taxable fund Repo totals were made up of: US Treasury Repurchase Agreements (up $325.7 billion, or 21.2%, to $1.865 trillion, or 38.4% of assets); US Government Agency Repurchase Agreements (down $26.5 billion, or -7.4%, to $332.6 billion, or 6.9% of total holdings), and Other Repurchase Agreements (up $0.6 billion, or 1.2%, from last month to $50.2 billion, or 1.0% of holdings). The Commercial Paper totals were comprised of Financial Company Commercial Paper (up $4.5 billion to $170.9 billion, or 3.5% of assets), Asset Backed Commercial Paper (down $0.2 billion to $34.8 billion, or 0.7%), and Non-Financial Company Commercial Paper (down $1.1 billion to $35.8 billion, or 0.7%).

The 20 largest Issuers to taxable money market funds as of Sept. 30, 2021, include: the US Treasury ($1.681 trillion, or 35.8%), Federal Reserve Bank of New York ($1.435T, 30.5%), Federal Home Loan Bank ($259.0B, 5.5%), BNP Paribas ($105.1B, 2.2%), RBC ($95.5B, 2.0%), Fixed Income Clearing Corp ($90.9B, 1.9%), Federal Farm Credit Bank ($85.9B, 1.8%), Federal National Mortgage Association ($69.3B, 1.5%), JP Morgan ($67.3B, 1.4%), Sumitomo Mitsui Banking Co ($56.7B, 1.2%), Bank of America ($44.6B, 0.9%), Federal Home Loan Mortgage Corp ($43.1B, 0.9%), Mitsubishi UFJ Financial Group Inc ($41.1B, 0.9%), Citi ($38.2B, 0.8%), Societe Generale ($37.8B, 0.8%), Bank of Montreal ($35.2B, 0.8%), Barclays ($35.0B, 0.7%), Toronto-Dominion Bank ($34.8B, 0.7%), Canadian Imperial Bank of Commerce ($33.3B, 0.7%) and Credit Agricole ($31.0B, 0.7%).

In the repo space, the 10 largest Repo counterparties (dealers) with the amount of repo outstanding and market share (among the money funds we track) include: Federal Reserve Bank of New York ($1.435T, 63.8%), BNP Paribas ($91.8B, or 4.1%), Fixed Income Clearing Corp ($90.9B, or 4.0%), RBC ($75.5B, or 3.4%), JP Morgan ($62.6B, or 2.8%), Sumitomo Mitsui Banking Corp ($43.9B, or 2.0%), Bank of America ($41.6B, or 1.8%), Mitsubishi UFJ Financial Group Inc ($33.1B, or 1.5%), Citi ($32.5B, or 1.4%) and Societe Generale ($30.9B, or 1.4%). The largest users of the $1.435 trillion in Fed RRP included: JPMorgan US Govt MM ($89.4B), BlackRock Lq FedFund ($84.0B), Morgan Stanley Inst Liq Govt ($79.8B), Fidelity Govt Money Market ($74.5B), Fidelity Govt Cash Reserves ($66.5B), Vanguard Federal Money Mkt Fund ($65.2B), BlackRock Lq T-Fund ($65.0B), Federated Hermes Govt Obl ($62.3B), Vanguard Market Liquidity Fund ($53.8B) and Fidelity Cash Central Fund ($51.5B).

The 10 largest issuers of "credit" -- CDs, CP and Other securities (including Time Deposits and Notes) combined -- include: RBC ($20.0B or 5.2%), Toronto-Dominion Bank ($18.9B or 4.9%), Canadian Imperial Bank of Commerce ($16.5B or 4.3%), Mizuho Corporate Bank Ltd ($15.7B or 4.1%), Bank of Montreal ($15.2B or 3.9%), Rabobank ($15.0B or 3.9%), Sumitomo Mitsui Trust Bank ($14.0B or 3.6%), Barclays ($13.6B or 3.5%), BNP Paribas ($13.2B or 3.4%) and Sumitomo Mitsui Banking Corp ($12.8B or 3.3%).

The 10 largest CD issuers include: Bank of Montreal ($12.2B or 10.2%), Sumitomo Mitsui Banking Corp $9.4B or 7.8%), Canadian Imperial Bank of Commerce ($8.0B or 6.6%), Sumitomo Mitsui Trust Bank ($7.1B or 5.9%), Rabobank $7.0B or 5.8%), Toronto-Dominion Bank ($6.3B or 5.2%), Mizuho Corporate Bank Ltd $6.1B or 5.1%), Landesbank Baden-Wurttemberg ($5.3B or 4.4%), Mitsubishi UFJ Financial Group Inc ($4.8B or 4.0%) and Natixis ($4.7B or 3.9%).

The 10 largest CP issuers (we include affiliated ABCP programs) include: RBC ($12.8B or 6.3%), Toronto-Dominion Bank ($11.9B or 5.9%), BNP Paribas ($9.6B or 4.7%), Barclays PLC ($7.1B or 3.5%), DNB ASA ($6.2B or 3.1%), Societe Generale ($6.0B or 3.0%), National Australia Bank Ltd ($5.7B or 2.8%), Sumitomo Mitsui Trust Bank ($5.3B or 2.6%), JP Morgan ($5.1B or 2.5%) and Rabobank ($5.0B or 2.5%).

RBC ($13.2B or 6.3%), Toronto-Dominion Bank ($12.3B or 5.9%), BNP Paribas ($11.1B or 5.3%), Societe Generale ($6.8B or 3.3%), Sumitomo Mitsui Trust Bank ($6.8B or 3.3%), Barclays ($6.5B or 3.1%), National Australia Bank Ltd ($6.4B or 3.1%), NRW.Bank ($6.1B or 2.9%), Canadian Imperial Bank of Commerce ($6.0B or 2.9%) or Rabobank ($5.7B or 2.7%).

The largest increases among Issuers include: Federal Reserve Bank of New York (up $387.8BB to $1,434.5B), Rabobank (up $3.8B to $15.0B), NRW.Bank (up $2.9B to $7.0B), Lloyds Banking Group (up $1.8B to $10.0B), Sumitomo Mitsui Trust Bank (up $1.8B to $17.5B), Toronto-Dominion Bank (up $1.5B to $34.8B), Bank of Nova Scotia (up $1.3B to $15.0B), JP Morgan (up $1.1B to $67.3B), National Australia Bank Ltd (up $0.7B to $10.2B) and Bank of Montreal (up $0.5B to $35.2B).

The largest decreases among Issuers of money market securities (including Repo) in September were shown by: the US Treasury (down $262.4B to $1,681.0B), Credit Agricole (down $22.2B to $31.0B), Barclays (down $18.2B to $35.0B), Fixed Income Clearing Corp (down $13.3B to $90.9B), Deutsche Bank (down $10.7B to $13.7B), Federal National Mortgage Association (down $10.1B to $69.3B), Federal Home Loan Bank (down $9.0B to $259.0B), Federal Home Loan Mortgage Corp (down $8.4B to $43.1B), DNB ASA (down $7.0B to $8.1B) and Banco Santander (down $4.2B to $7.8B).

The United States remained the largest segment of country-affiliations; it represents 80.7% of holdings, or $3.918 trillion. Canada (4.7%, $226.3B) moved up to second place, while France (4.4%, $213.9B) fell to No. 3. Japan (4.1%, $201.1B) occupied fourth place. The United Kingdom (1.7%, $80.8B) remained in fifth place. The Netherlands (1.1%, $54.3B) was in sixth place, followed by Germany (1.0%, $46.9B). Sweden (0.7%, $32.8B), Australia (0.6%, $29.3B) and Switzerland (0.3%, $14.3B). (Note: Crane Data attributes Treasury and Government repo to the dealer's parent country of origin, though money funds themselves "look-through" and consider these U.S. government securities. All money market securities must be U.S. dollar-denominated.)

As of Sept. 30, 2021, Taxable money funds held 54.5% (up from 48.4%) of their assets in securities maturing Overnight, and another 8.7% maturing in 2-7 days (unchanged). Thus, 63.2% in total matures in 1-7 days. Another 6.4% matures in 8-30 days, while 8.1% matures in 31-60 days. Note that over three-quarters, or 77.7% of securities, mature in 60 days or less, the dividing line for use of amortized cost accounting under SEC regulations. The next bucket, 61-90 days, holds 8.2% of taxable securities, while 10.8% matures in 91-180 days, and just 4.1% matures beyond 181 days. (Visit our Content center to download, or contact us to request our latest Portfolio Holdings reports.)

Crane Data's latest monthly Money Fund Portfolio Holdings statistics will be sent out Tuesday (we're off Monday for Columbus Day), and we'll be writing our regular monthly update on the September 30 data for Wednesday's News. But we also uploaded a separate and broader Portfolio Holdings data set based on the SEC's Form N-MFP filings on Friday. (We continue to merge the two series, and the N-MFP version is now available via Holding file listings to Money Fund Wisdom subscribers.) Our new N-MFP summary, with data as of Sept. 30, 2021 includes holdings information from 1,010 money funds (the same number as last month), representing assets of $5.000 trillion (down from $5.027 trillion). Prime MMFs now total $863.6 billion, or 17.3% of the total. We review the new N-MFP data below, and we also look at our revised MMF expense data.

Our latest Form N-MFP Summary for All Funds (taxable and tax-exempt) shows Treasury holdings totaled $1.699 trillion (down from $1.962 trillion), or a massive 34.0% of all holdings. Repurchase Agreement (Repo) holdings in money market funds rose again to $2.264 trillion (up from $1.960 trillion), or 45.3% of all assets, and Government Agency securities totaled $474.0 billion (down from $504.8 billion), or 9.5%. Holdings of Treasuries, Government agencies and Repo (almost all of which is backed by Treasuries and agencies) combined total $4.436 trillion, or a stunning 88.7% of all holdings.

Commercial paper (CP) totals $248.6 billion (up from $246.1 billion), or 5.0% of all holdings, and the Other category (primarily Time Deposits) totals $126.3 billion (down from $159.6 billion), or 2.5%. Certificates of Deposit (CDs) total $120.2 billion (down from $124.1 billion), 2.4%, and VRDNs account for $68.4 billion (down from $70.0 billion last month), or 1.4% of money fund securities.

Broken out into the SEC's more detailed categories, the CP totals were comprised of: $172.6 billion, or 3.5%, in Financial Company Commercial Paper; $34.9 billion or 0.7%, in Asset Backed Commercial Paper; and, $41.1 billion, or 0.8%, in Non-Financial Company Commercial Paper. The Repo totals were made up of: U.S. Treasury Repo ($1.880 trillion, or 37.6%), U.S. Govt Agency Repo ($333.9B, or 6.7%) and Other Repo ($49.9B, or 1.0%).

The N-MFP Holdings summary for the Prime Money Market Funds shows: CP holdings of $244.5 billion (up from $241.7 billion), or 28.3%; Repo holdings of $304.9 billion (up from $247.9 billion), or 35.3%; Treasury holdings of $77.7 billion (down from $104.1 billion), or 9.0%; CD holdings of $120.2 billion (down from $124.1 billion), or 13.9%; Other (primarily Time Deposits) holdings of $86.2 billion (down from $112.5 billion), or 10.0%; Government Agency holdings of $22.9 billion (down from $26.5 billion), or 2.7% and VRDN holdings of $7.2 billion (down from $6.5 billion), or 0.8%.

The SEC's more detailed categories show CP in Prime MMFs made up of: $172.6 billion (up from $168.2 billion), or 20.6%, in Financial Company Commercial Paper; $34.9 billion (down from $35.0 billion), or 4.0%, in Asset Backed Commercial Paper; and $37.0 billion (up from $38.5 billion), or 4.3%, in Non-Financial Company Commercial Paper. The Repo totals include: U.S. Treasury Repo ($237.4 billion, or 27.5%), U.S. Govt Agency Repo ($17.7 billion, or 2.1%), and Other Repo ($49.8 billion, or 5.8%).

In other news, money fund charged expense ratios were flat again in September after hitting a record low of 0.06% in May and inching higher in June. Our Crane 100 Money Fund Index and Crane Money Fund Average were both were 0.07% as of Sept. 30, 2021. Crane Data revises its monthly expense data and gross yield information after the SEC updates its latest Form N-MFP data the morning of the 6th business day of the new month. (They posted this info Friday morning, so we revised our monthly MFI XLS spreadsheet and historical craneindexes.xlsx averages file to reflect the latest expenses, gross yields, portfolio composition and maturity breakout yesterday.) Visit our "Content" page for the latest files, and see below for the review of the latest N-MFP Portfolio Holdings data.

Our Crane 100 Money Fund Index, a simple average of the 100 largest taxable money funds, shows an average charged expense ratio (Exp%) of 0.07%, the same as last month's level (and one bps higher than May's record low 0.06%). The average is down from 0.27% on Dec. 31, 2019, so we estimate that funds are waiving 20 bps, or 74% of normally charged expenses. The Crane Money Fund Average, a simple average of all taxable MMFs, also showed a charged expense ratio of 0.07% as of July 31, 2021, the same as the month prior but down from 0.40% at year-end 2019.

Prime Inst MFs expense ratios (annualized) average 0.10% (the same level as last month), Government Inst MFs expenses average 0.05% (unchanged), Treasury Inst MFs expenses average 0.05% (unch). Treasury Retail MFs expenses currently sit at 0.05%, (unch), Government Retail MFs expenses yield 0.05% (the same as in August). Prime Retail MF expenses are 0.12% (unch). Tax-exempt expenses were up one basis point over the month to 0.07% on average.

Gross 7-day yields were unchanged on average for the month ended Sept. 30, 2021. The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 732), shows a 7-day gross yield of 0.08%, the same as the prior month. The Crane Money Fund Average is down 1.64% from 1.72% at the end of 2019. Our Crane 100's 7-day gross yield was down one basis point, ending the month at 0.08%, but down 1.66% from year-end 2019.

According to our revised MFI XLS and Crane Index numbers, we now estimate that annualized revenue for all money funds is approximately $3.374 billion (as of 9/30/21). Our estimated annualized revenue totals decreased from $3.501 last month but are still higher than the record low of $2.927 in May. MMF revenues fell from $6.028 trillion at the start of 2020 and $10.642 trillion at the start of 2019. Charged expenses and gross yields are driven by a number of variables, and the Fed's 0.05% floor on its RRP repo appears to have helped stabilize rates above zero. Nonetheless, severe fee waivers and heavy fee pressure should continue as long as the Fed keeps yields pinned close to the zero floor.

Crane Data's latest Money Fund Market Share rankings show assets were mixed across the largest U.S. money fund complexes in September. Money market fund assets decreased $878 million, or 0.0%, last month to $4.962 trillion. Assets decreased by $13.4 billion, or -0.3%, over the past 3 months, but they've increased by $48.2 billion, or 1.0%, over the past 12 months through Sept. 30, 2021. The largest increases among the 25 largest managers last month were seen by BlackRock, Morgan Stanley, Northern, Federated Hermes and DWS, which grew assets by $11.0 billion, $6.5B, $4.3B, $3.2B and $3.0B, respectively. The largest declines in September were seen by JPMorgan, Invesco, Dreyfus and Wells Fargo, which decreased by $11.3 billion, $6.2B, $5.4B and $3.0B, respectively. Our domestic U.S. "Family" rankings are available in our MFI XLS product, our global rankings are available in our MFI International product. The combined "Family & Global Rankings" are available to Money Fund Wisdom subscribers. We review the latest market share totals below, and we also look at money fund yields in September.

Over the past year through Sept. 30, 2021, BlackRock (up $98.1B, or 22.7%), Morgan Stanley (up $83.3B, or 41.5%), Dreyfus (up $34.7B, or 17.5%), First American (up $23.4B, or 21.1%) and J.P. Morgan (up $20.6B, or 4.7%) were the largest gainers. Goldman Sachs, Morgan Stanley, Dreyfus, Fidelity, and Northern had the largest asset increases over the past 3 months, rising by $18.7B, $17.8B, $5.6B, $5.6B and $5.2B, respectively. The largest decliners over 12 months were seen by: Federated Hermes (down $53.6B), Charles Schwab (down $48.3B), Vanguard (down $27.9B), UBS (down $27.7B), and American Funds (down $21.5B). The largest decliners over 3 months included: Vanguard (down $15.0B), JPMorgan (down $9.3B), Federated (down $9.0B), Wells Fargo (down $6.0B) and SSGA (down $5.4B).

Our latest domestic U.S. Money Fund Family Rankings show that Fidelity Investments remains the largest money fund manager with $895.0 billion, or 18.0% of all assets. Fidelity was up $2.0B in September, up $5.6 billion over 3 mos., and down $4.0B over 12 months. BlackRock ranked second with $527.5 billion, or 10.6% market share (up $11.0B, down $338M and up $98.1B for the past 1-month, 3-mos. and 12-mos., respectively). JPMorgan moved ranked third with $460.8 billion, or 9.3% market share (down $11.3B, down $9.3B and up $20.6B). Vanguard was the fourth largest MMF manager with $460.0 billion, or 9.3% of assets (down $74M, down $15.0B and down $27.9B for the past 1-month, 3-mos. and 12-mos.), while Goldman Sachs remained in fifth place with $368.1 billion, or 7.4% of assets (up $1.8B, up $18.7B and up $919M).

Federated Hermes was in sixth place with $327.0 billion, or 6.6% of assets (up $3.2B, down $9.0B and down $53.6B), while Morgan Stanley was in seventh place with $287.8 billion, or 5.8% (up $6.5B, up $17.8B and up $83.3B). Dreyfus ($230.8B, or 4.7%) was in eighth place (down $5.4B, up $5.6B and up $34.7B), followed by Wells Fargo ($194.7B, or 3.9%, down $3.0B, down $6.0B and down $19.6B). Northern was in 10th place ($183.8B, or 3.7%; up $4.3B, up $45.2B and down $11.8B).

The 11th through 20th-largest U.S. money fund managers (in order) include: Schwab ($145.0B, or 2.9%), SSGA ($141.6B, or 2.9%), American Funds ($134.4B, or 2.7%), First American ($126.3B, or 2.5%), Invesco ($82.4B, or 1.7%), T. Rowe Price ($53.5B, or 1.1%), UBS ($47.9B, or 1.0%), DWS ($38.2B, or 0.8%), HSBC ($36.2B, or 0.7%) and Western ($31.4B, or 0.6%). Crane Data currently tracks 64 U.S. MMF managers, the same number as last month.

When European and "offshore" money fund assets -- those domiciled in places like Ireland, Luxembourg and the Cayman Islands -- are included, the top 10 managers are the same as the domestic list, except Goldman moves ahead of Vanguard to the No. 4 spot, Morgan Stanley moves ahead of Federated to the No. 6 spot, and Northern moves ahead of Wells for the No. 9 spot. Global Money Fund Manager Rankings include the combined market share assets of our MFI XLS (domestic U.S.) and our MFI International ("offshore") products.

The largest Global money market fund families include: Fidelity ($907.3 billion), BlackRock ($716.0B), JP Morgan ($664.0B), Goldman Sachs ($482.0B) and Vanguard ($459.7B). Morgan Stanley ($343.6B) was sixth, Federated Hermes ($336.8B) was in seventh, followed by Dreyfus/BNY Mellon ($254.1B), Northern ($213.0B) and Wells Fargo ($194.9B), which round out the top 10. These totals include "offshore" U.S. Dollar money funds, as well as Euro and Pound Sterling (GBP) funds converted into U.S. dollar totals.

The September issue of our Money Fund Intelligence and MFI XLS, with data as of 9/30/21, shows that yields were flat in September for our Crane Money Fund Indexes. The Crane Money Fund Average, which includes all taxable funds covered by Crane Data (currently 732), remained at 0.02% for the 7-Day Yield (annualized, net) Average, the 30-Day Yield also was flat at 0.02%. The MFA's Gross 7-Day Yield was flat at 0.09%, and the Gross 30-Day Yield was flat at 0.08%.

Our Crane 100 Money Fund Index shows an average 7-Day (Net) Yield of 0.02% (unchanged) and an average 30-Day Yield (also unchanged) at 0.02%. The Crane 100 shows a Gross 7-Day Yield of 0.09% (unch), and a Gross 30-Day Yield of 0.09% (unch). Our Prime Institutional MF Index (7-day) yielded 0.03% (unch) as of Sept. 30. The Crane Govt Inst Index remained at 0.02% and the Treasury Inst Index was unchanged at 0.01%. Thus, the spread between Prime funds and Treasury funds remains at two basis points, and the spread between Prime funds and Govt funds is one basis point. The Crane Prime Retail Index yielded 0.01% (unch), while the Govt Retail Index was 0.01% (unch), the Treasury Retail Index was also 0.01% (unchanged from the month prior). The Crane Tax Exempt MF Index yielded 0.01% (unch) as of Sept. 30.

Gross 7-Day Yields for these indexes to end September were: Prime Inst 0.14% (unch), Govt Inst 0.07% (unch), Treasury Inst 0.06% (unch), Prime Retail 0.13% (unch), Govt Retail 0.07% (up one bps) and Treasury Retail 0.06% (unch). The Crane Tax Exempt Index remained at 0.08%. The Crane 100 MF Index returned on average 0.00% over 1-month, 0.00% over 3-months, 0.01% YTD, 0.02% over the past 1-year, 0.98% over 3-years (annualized), 0.98% over 5-years, and 0.52% over 10-years.

The total number of funds, including taxable and tax-exempt, was unchanged in September at 884. There are currently 732 taxable funds, the same number as the previous month, and 152 tax-exempt money funds (unchanged from last month). (Contact us if you'd like to see our latest MFI XLS, Crane Indexes or Market Share report.

The October issue of our flagship Money Fund Intelligence newsletter, which was sent to subscribers Thursday morning, features the articles: "ESG & Social Trend Reaches Frenzy as Funds Go All-In," which discusses the latest news and moves by managers to burnish their sustainability or diversity credentials; "Money Fund Symposium Flies in Philly; Regulations Focus," which reviews the highlights from our return to conferences; and, "Worldwide MF Assets Higher in Q2'21 Led by China, U.S.," which examines the latest global MMF market rankings. We also sent out our MFI XLS spreadsheet Thursday a.m., and have updated our Money Fund Wisdom database query system with 9/30/21 data. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our October Money Fund Portfolio Holdings are scheduled to ship on Tuesday, Oct. 12, and our October Bond Fund Intelligence is scheduled to go out next Friday, Oct. 15.

MFI's lead article says, "Dreyfus is the latest money market fund manager to integrate ESG criteria into its overall portfolio management credit analysis, joining Federated Hermes, Goldman Sachs, J.P. Morgan and others. A spokesperson for BNY Mellon Investment Management says, 'Dreyfus Cash Investment Strategies has announced the formal integration of environmental, social, and governance (ESG) considerations into its credit analysis process. We define ESG integration as the explicit inclusion of ESG factors in our credit evaluation where available and, ultimately, investment decisions. There is no change to our core investment process and many of the factors embedded within ESG are part of our credit analysis already."

It continues, "CIO John Tobin comments, "We believe the integration of ESG into our fundamental credit process where available makes us better investors and supports our mission of protecting our clients' future financial wellbeing. In our view, issuers that are environmentally aware, socially responsible, and well governed are often better positioned to manage risks and capitalize on opportunities."

Our "MFS" piece reads, "Crane Data hosted its latest Money Fund Symposium conference in Philadelphia recently, and the 250+ attendees gathered for our big show for first time since June 2019 in Boston. We excerpt from some of the sessions, below. (Note: Thanks to those who supported MFS! The recording and materials are available here for Attendees and Crane Data subscribers.)

The recap explains, "The opening session, 'Keynote: Adapting to Regulations, Tech & ESG,' featured BlackRock's Tom Callahan and Federated Hermes' Debbie Cunningham. Callahan comments, 'Here is what I believe the correct narrative for the cash management industry through the current crisis is: Our clients collectively, as everyone knows, are the largest and most sophisticated clients in the world, and they were thrust quite unexpectedly in March of 2020 into the most challenging operating environment that any of them had ever seen. In response, they did the logical thing. They raised liquidity. They raised a biblical amount of liquidity. And much of that, over $1.25 trillion, was invested in money funds in three weeks at the end of March 2020 and at the beginning of April.'"

The "Worldwide" article tells readers, "The Investment Company Institute published, 'Worldwide Regulated Open-Fund Assets and Flows, Second Quarter 2021,' which shows that money fund assets globally rose by $86.0 billion, or 1.0%, in Q2’21 to $8.565 trillion. The increase was driven by gains in Chinese and U.S. money market fund assets, but French and Australian MMF assets declined. MMF assets worldwide increased by $404.9 billion, or 5.0%, in the 12 months through 6/30/21, and money funds in the U.S. now represent 52.9% of worldwide assets."

ICI's release says, "At the end of the second quarter of 2021, 47% of worldwide regulated open-end fund assets were held in equity funds. The asset share of bond funds was 20% and the asset share of balanced/mixed funds was 12%. Money market fund assets represented 12% of the worldwide total.... Money market funds worldwide experienced an inflow of $79 billion in the second quarter of 2021 after registering an inflow of $263 billion in the first quarter of 2021."

MFI also includes the News brief, "Money Funds Celebrate 50 Years!" We write, "While we said one year ago that money market funds marked their 50th birthday, one could argue that 1971 was the actual launch date of Reserve Primary Fund, the first money fund. (It filed in October 1970 but went live in October 1971.) So Happy 50th Birthday, again!"

Another News brief, "Assets Flat in Sept.," explains, "MMFs decreased $878 million to $4.964 trillion in Sept. according to MFI XLS. ICI's weekly 'MMF Assets' report shows assets jumping for the second week in a row, following a tax-related drop on Sept. 15. ICI says, 'Total MMF assets increased by $29.11 billion to $4.54 trillion for the week ended Sept. 29.'"

Our October MFI XLS, with Sept. 30 data, shows total assets decreased $878 million to $4.964 trillion, after increasing $27.9 billion in August, but decreasing $12.4 billion in July and $73.0 billion in June. They increased $74.0 billion in May and $62.2 billion in April. Assets rose $151.0 billion in March, $30.8 billion in February and $5.6 billion in January. Assets decreased $6.7 billion in December, $11.7 billion in November and $46.8 billion in October. Our broad Crane Money Fund Average 7-Day Yield was flat at 0.02%, and our Crane 100 Money Fund Index (the 100 largest taxable funds) also remained flat at 0.02%.

On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA and the Crane 100 both stood at 0.09%. Charged Expenses averaged 0.07% for the Crane MFA and the Crane 100. (We'll revise expenses Friday once we upload the SEC's Form N-MFP data for 9/30.) The average WAM (weighted average maturity) for the Crane MFA was 35 days (down 2 days) while the Crane 100 WAM fell one day to 35 days). (See our Crane Index or craneindexes.xlsx history file for more on our averages.)

Today, we again excerpt highlights from our recent Money Fund Symposium conference in Philadelphia. This time we quote from the "Senior Portfolio Manager Perspectives" session, which featured Mike Kitchen of Cavanal Hill Investment Management, Pia McCusker of State Street Global Advisors and Peter Yi of Northern Trust Asset Management. They tell us about Treasury, repo and credit markets, and comment on what they're buying and not buying. (Note: The Money Fund Symposium recordings and materials are available to Attendees and Crane Data Subscribers here. Mark your calendars for the next Crane's Money Fund Symposium, which is scheduled for June 20-22, 2022 in Minneapolis, Minn.)

Kitchen comments, "We had a Prime fund until the reforms kicked in in 2016 and we converted that to Government fund. We already had a Treasury fund. And at times the two seemed to be almost the same, because there was not a lot of value out in the agency sector, or anywhere, for that matter.... I'm not aggressively buying in October right now. I think there probably will be a cascade of supply a little bit after that. We are kind of looking forward to that. In the Government fund, we've been concentrating a lot in SOFR-based floaters, usually at FHLB or Farm Credit.... Right after the March of 2020, they were really attractively priced, and you're still getting a basis point or two over repo."

He continues, "We stay away from ultra-short Treasuries normally. There's just no yield kick to them. One thing about our funds; they're heavily institutional. Almost all of our shareholders come from within the bank.... So, we keep a lot of liquidity. We always keep probably more repo than most funds, because we can have very large swings in cash. We work closely with the relationship managers that know the shareholders, and we get a heads-up, usually early in the morning before there any major cash flows. But we like liquidity a lot."

Yi talks about repo, saying, "We think about repo in four different categories. The biggest one, the most notable, and probably the highest profile at this point is the Fed's reverse repo facility. For us, we think that's probably the best place to park your liquidity right now. Obviously, it's floored at five basis points. You think about all the supply technicals that we're going to see once the debt ceiling is addressed. We're expecting there to be a lot more Treasury bills that are going to come online. So, again, to Mike's point, Treasury bills ... are not yielding a whole lot. We're all raking in the little breadcrumbs here trying to get some yield. But at least the way we think about it, we think it's the best trade right now, the RRP. It gives us a little place to invest our liquidity and wait for things to back up once we start to see more supply to come along."

He states, "The second part is FICC repo. That product has kind of evolved a little bit.... Supply has gone away, and it's really because of the economics of it. The sponsors that are most active in this product ... it's just become more difficult to make those economics make sense. So, I think balances across the industry have really been dropping pretty dramatically. The third repo sleeve ... is your normal traditional dealer repo. It's no surprise ... those balances have been dropping, because, dealers just don't have as much in Treasury bills that are sitting on their balance sheet. Balance sheets are valuable."

McCusker tells us about CP issuance, "From my perspective, it's one bright spot in the entire industry ... the issuance has grown year-to-date. They've been very active this year. Yet global issuers continue to remain well funded, whether it's deposits, central bank or strong deposit base or efficient balance sheet optimization. But we are seeing issuers taking advantage of USD dollar CD and CP markets. Obviously, they see better opportunities in terms of funding here rather than in their local currencies. You're probably seeing some of the issues replace some of their more expensive notes ... and reissue that into shorter duration offerings because of the insatiable demand we have here in the short-term funding markets."

She says, "We've been participating in overnights, weekly, inside of one month credit names, [which give] a pickup in yield over a traditional repo.... I grew up in ABCP land, so I'm appreciative of the innovation that this asset class continue to build. For instance, you saw the conduits and new programs out there, obviously taking advantage of the ability to securitize repo balances and help out with dealers in terms of their addressing their liquidity and leverage ratios. This asset class could potentially be sizable going forward, and it's definitely helpful for the industry. But again, [we're] just appreciative of the fact that ABCP still continues to grow. I like to think that [we're] thinking outside the box in terms of our focus on that."

Yi tells the MFS crowd, "RRP is one of the best trades we can do out there right now for liquidity.... Maybe it's easier just to kind of say what we're not buying, we're not buying Evergrande.... I say that jokingly, but money market investors are kind of conditioned to think about contagion.... We really have not been buying Chinese banks, really, ever. These are the times where transparency is critical, and some of the challenges, just thinking about Evergrande. Again, it's a high yield issuer. But we are still unclear on what's going on behind the scenes."

He adds, "If there's a hint of headline risk, we think about secondary liquidity. We think about what this can mean towards, 'Are these issuers going to be active? Are they going to be backing up their spreads?' So far, I haven't seen a whole lot. But again, those are the things that ... you think back to the European debt crisis.... Investors were looking at all these bank exposures in the countries that were really under stress.... Now, we don't know the extent of the contagion with Evergrande. So, again, it's just another example of us just kind of looking at the market and seeing if there's any stresses within the infrastructure."

In other news, Fitch Ratings recently published "Local Government Investment Pools: 2Q21," which says LGIP asset hit record highs last quarter. They write, "Based on observed cyclical patterns, the second quarter of the year has historically been a period of strong net asset growth, and 2Q21 was no exception. Cumulative assets for the Fitch Liquidity LGIP Index and the Fitch Short-Term LGIP Index reached a new high of $423 billion at the end of the quarter, an increase of $28 billion qoq and $55 billion yoy."

The report states, "The Fitch Liquidity LGIP Index and the Fitch Short-Term LGIP Index ended the quarter with average net yields of 0.04% (a drop of 32 basis points from the year prior) and 0.61% (down 54 bps from June 2020), respectively. LGIP managers continued to cautiously extend their exposure out the curve during the quarter, with the weighted average (WA) maturity of the Fitch Liquidity LGIP Index increasing to 50 days. This marks the third consecutive quarterly extension to the maturity profile of the index as managers look for opportunities to put excess cash proceeds to work amid the current low rate environment."

Finally, Fitch says, "During the coronavirus pandemic-related market volatility in the spring of 2020, LGIP managers actively shifted their portfolios toward more of a defensive asset allocation. With the worst of the market volatility now a full year removed, managers have continued the trend of slowly adding more corporate exposure back into their portfolios. Yoy, combined allocation to asset-backed securities (ABS), CDs and CP, specifically with the Fitch Liquidity LGIP Index, increased to approximately 32% of the index as of June 2021, up from 22% as of June 2020. Conversely, combined exposure to U.S. Treasury and agency debt dropped to 37% of the index, down from 44% as of June 2020."

Two weeks ago, Crane Data hosted its Money Fund Symposium conference in Philadelphia, attracting over 250 people to our first in-person event since January 2020. One of the highlights was the "Major Money Fund Issues 2021" session, which featured a panel made up of Dreyfus CIS's John Tobin, Invesco's Laurie Brignac, and UBS Asset Management's Rob Sabatino. Moderated by Ed Baldry of EPBComms, the segment discussed potential regulatory reforms, Prime MMFs, separate accounts and digital assets, among other things. We excerpt some of the highlights below. (See our Sept. 29 Crane Data News, "Callahan, Cunningham Money Fund Symposium Keynote Talks ESG, Regs," and watch for coverage in the next issue of Money Fund Intelligence. Note: For those that couldn't make it, our Money Fund Symposium recordings and materials are available here.)

When asked about SEC reforms, Brignac comments, "I feel like we did the hard reforms already, quite honestly.... I am a little bit more optimistic [that] we're going to hopefully take care of the fees and gates situation. But I also know there's no way they're going to come in and just make that change and de-link fees and gates. So, there are going to be some other things, and I think we've talked about them -- additional liquidity, etc. I think the more draconian [measures] aren't really going to go anywhere.... We'll see what we get, but I know there's a push for consistency across the globe. [But I'm hoping] regulators recognize the differences and the nuances between the U.S. and the rest of world."

Describing Invesco's comment letter, she says, "We really kept it simple, because in working with all the different industry bodies ... ultimately, we were pretty much, for the most part, saying the same thing. We wanted to hammer home not only the fees and gates [de-linking], but also the market structure. Because one of the experiences that we had during the crisis is we had clients come to us, and they were having trouble selling. It was clear it was not just a money fund problem, but a front-end problem [that] impacts all of our clients, whether they are corporates or asset owners themselves."

Sabatino responds, "[We're] all feeling a little more positive.... I think a tremendous amount of work has been done over the last decade educating the regulators. So this go-around, we're seeing that they are more informed. They understand the issues and [the fact] that it's not money market funds but it's the money markets. It's worked. So that's really positive from my standpoint. I think having a solution that makes money market funds even more resilient, but then also addressing some shortcomings in the market would be the way to go."

He continues, "So, I'm hopeful that we are not going to have some huge sea-change, and the usefulness of money market funds the way we know it doesn't change. We've talked to a lot about keeping all the flavors and being able to offer investors what they want, and it sounds like you've made a lot of headway there. So, I think things are good. It's great to hear that it's not around the corner. While we'll hear something from FSB soon, it seems the regulation and change specifically in the U.S. seems to be a ways off.

Tobin warns, "I think one of the flaws, unfortunately, when working in a group, is you need to meet [at the lowest] common denominator. And the common denominator [in earlier reform rounds] was, 'We should ask [regulators] to do nothing'.... But when you don't hold the power, that's probably not the right approach. So, we told the SEC we're good, but the SEC didn't agree with it, and we got gates and fees. So, I think it's something to think about if we face such an endeavor on a relatively nearer term.... We certainly asked to 'de-couple,' I think that was clear.... You think about weekly liquid assets.... We also asked for a 10% [holding] in Treasuries."

Baldry asked, "What are the odds the SEC does nothing?" Brignac responds, "Ultimately, no, they're not going to just get rid of fees and gates. There's going to be a pound of flesh. So let's give them something that is more palatable.... Ultimately, holding more liquidity is fairly easy, because we're doing it already.... But some of the stuff, minimum balance at risk, etc. [is a nonstarter].... I think the more complicated you make these products, the [more problematic it is]. Clients don't know what to expect. I think that was one of the best things that they had done in terms our regulation is really the increased transparency."

When asked if he's sticking with Prime, Tobin answers, "Yeah, absolutely.... Obviously, we need to see what reform looks like. There are certain provisions in there, like swing pricing, capital buffers, etc., that could fundamentally change the product or ... the financials of the product.... There [could be] aspects of reform that basically snuffs out the product. So, we need to see the detail. But philosophically, all-in."

Brignac adds, "Clients still want Prime. I'm sure a lot of people seen the growth of private accounts, separate accounts, those are generally people coming to you trying to get around private funds. It's all prime. So, you know, it's interesting. We are seeing growth in prime just not 2a-7.... The hard part about separate accounts is that it is more work for the end investor.... It takes a little more time."

Finally, on SMAs, Sabatino states, "As yields decline, investors are more interested in, 'How do I get an extra 5, 10, 20 basis points?' Those are the conversations we're having, assessing the risk tolerance. How much you really need in cash on a daily, weekly, or monthly basis. Can you park those further out the yield curve? Can you go down in credit quality? What is your ultimate objective? If it's yield, will you consider, a hybrid strategy? ... It becomes more dynamic. It's based on obviously the end goal of the investor. But as Laurie said, it's a little more time intensive.... There are many factors in there, but there is a zero rate environment, that's what the smart cash is looking at."

We haven't written much about money fund liquidations and consolidations this year, and haven't featured an article in our Money Fund Intelligence newsletter since March 2021 ("Liquidations, Changes Slowly Reshape Manager Landscape"). But we just learned of another small fund family preparing to liquidate. A filing for Delaware Ivy Cash Management Fund tells us, "[O]n September 13, 2021, the Boards of Trustees of the Ivy Funds ... unanimously voted and approved a proposal to liquidate and dissolve [the] Delaware Ivy Cash Management Fund, Delaware Ivy VIP Government Money Market [and a number of other Delaware Ivy funds]. The liquidations and dissolutions are expected to take effect on or about November 15, 2021. Retirement accounts, as applicable, within these Funds will be liquidated on or about the Effective Date.... For Fund accounts with automated purchases, exchanges, and/or withdrawals established, these transactions will cease prior to liquidation if no action is taken."

The filing continues, "As noted in the supplement dated September 14, 2021, the Funds will be closed to new investors and all sales efforts will cease as of September 30, 2021. However, the Funds will continue to accept purchases from existing shareholders (including reinvested dividends or capital gains) until five (5) business days before the Liquidation Date." Delaware Ivy is the 54th largest manager of money market funds (out of 64) with just $652 million.

It tells us, "Until the liquidation of the Funds, shareholders of the Funds will have the opportunity to exchange their shares for shares of the same class of any other legacy Ivy Fund. Any exchange would be made at the current net asset values of a Fund and the selected legacy Ivy Fund. A Fund's shareholders would not incur front-end or contingent deferred sales charges upon these exchanges, as applicable. Additionally, no applicable contingent deferred sales charge will be assessed in connection with any redemption of your shares from a Fund prior to the Liquidation Date. Exchanges are not available with legacy Delaware Funds at this time."

A separate SEC filing explains, "Macquarie Asset Management is committed to continually enhancing its business in ways that are in the best interest of fund shareholders, clients, and funds. With this in mind, as part of our integration efforts relating to the Waddell & Reed Financial, Inc. acquisition, we have completed a thoughtful review of the combined investment resources from Ivy Investments and Macquarie Asset Management and made the decision to integrate our investment platform by making a number of changes to the portfolio management of certain legacy Ivy Funds. The changes, which will be effective on or about November 15, 2021, include a range of actions, including changes to who manages a fund, benchmark changes and, in some cases, investment strategy modifications and liquidations."

It adds, "As a shareholder, you will receive a prospectus supplement with this letter. We believe both fund shareholders and Macquarie will benefit from access to a more diversified product lineup with the strength of Macquarie's global platform. Importantly, there are no changes to the structure of our firm or the way we manage money for clients. We believe the addition of new capabilities and investment teams will result in a compelling combined platform and an enhanced client experience for our shareholders."

For more on liquidations, see these CD News pieces: "AIG Govt MMF, MuniFund Liquidate (8/3/21), "Western Files to Liquidate Tiny MMFs (6/7/21), "BlackRock Liquidates Ready Assets (2/11/21), "Delaware Liquidates Govt Cash Mgmt" (1/11/21); "DWS Liquidating Govt CR (BIRXX)" (11/25/20); "BMO Liquidating Inst Prime MMF" (11/17/20); "Morgan Stanley NY Muni MM Gone" (10/5/20); "SEC's Blass on Push for More MMF Reforms; Vanguard Liquidating PA, NJ" (9/28/20) and "Franklin, Legg Mason Deal Signals More Consolidation; More Liquidations (2/20/20).

In other news, Treasury Today wrote recently on "MMF industry pushes back against post-Covid reforms," which reviews a recent webinar from the OMFIF. They comment, "Money market funds (MMFs) should not be penalised by policymakers as a response to the market shock in March 2020, and efforts to 'fix' the industry could end up doing more harm than good. That is the view presented in an Official Monetary and Financial Institutions Forum (OMFIF) report and in a webinar that was hosted last week. In 'The future of money market funds' OMFIF states that proposals, such as capital buffers for MMFs, could be tackling problems that don't exist and the danger is that investors could seek systemically-riskier alternatives."

The piece explains, "On the question of whether MMFs should be regulated in a bank-like way with capital requirements, Hester Peirce, Commissioner, Securities and Exchange Commission (SEC) -- who was speaking in a personal capacity -- said in the webinar, 'I don't understand why we would need capital buffers in funds that are 100% capitalised.... I'm looking at it as a securities regulator and these are funds, which means that shareholder equity is on the line -- they're not banks where you have depositors who are creditors."

Treasury Today writes, "Peirce also noted how the events of March 2020, when pandemic panic gripped the financial markets, was an opportunity to test whether reforms that were introduced in the wake of the global financial crisis had the desired effect. 'I was someone who was a proponent of fees and gates and thought that was a good mechanism to put in place after 2008,' she said."

They tell us, "David Marsh, Chairman of OMFIF, who moderated the webinar, commented on how it is still debated whether MMFs are to be blamed for causing, or adding to, upsets in the market or whether they have been the victim of them.... MMFs seem to get blamed when they are not actually the culprit, Marsh noted."

Finally, the article adds, "Deborah Cunningham, Executive Vice President, Federated Hermes, commented on how the views of regulators and industry participants are converging: 'I do think progress has been made on the understanding of what happened in March 2020.' This is contrasted with the events of 2008, when MMFs were also under stress. The major difference, she noted, is that this time the crisis was beyond the control of the financial industry and was caused by a government shutdown that affected all sectors."

Earlier this week, staffers from the Federal Reserve Bank of Boston and the Federal Reserve Bank of New York published a paper on "The Money Market Mutual Fund Liquidity Facility," which reviews the Fed's emergency support measures from March 2020. Authors Ken Anadu, Marco Cipriani, Ryan Craver, and Gabriele La Spada explain, "In this article, we discuss the run on prime money market funds (MMFs) that occurred in March 2020, at the onset of the COVID-19 pandemic, and describe the Money Market Mutual Fund Liquidity Facility (MMLF), which the Federal Reserve established in response to it. We show that the MMLF, like a similarly structured Federal Reserve facility established during the 2008 financial crisis, was an important tool in stemming investor outflows from MMFs and restoring calm in short-term funding markets. The usage of the facility was higher by funds that suffered larger outflows. After the facility's introduction, outflows from prime MMFs decreased more for those funds that had a larger share of illiquid securities. Importantly, following the introduction of the MMLF, interest rates on MMLF-ineligible securities decreased at a slower rate than those on MMLF-eligible securities, even after controlling for credit risk."

They write, "In March 2020, at the onset of the Covid-19 pandemic, investors redeemed their shares en masse from dollar-denominated prime money market funds (MMFs). The large redemptions occurred both in U.S. MMFs registered with the Securities and Exchange Commission (SEC) and governed by its Rule 2a-7 ('domestic' funds) and in dollar-denominated MMFs domiciled in Europe and governed by European rules ('offshore' funds). In percentage terms relative to the size of the industry, the run was remarkably similar to that experienced by MMFs in September 2008, during the Global Financial Crisis, notwithstanding the starkly different natures of the shocks that precipitated the runs. As was the case in 2008, the 2020 run amplified strains in the short-term funding markets, a key source of liquidity for businesses, as rates on several money market securities increased steeply." (Note: The study uses a smaller subset of money fund assets than Crane Data's or the SEC's collections, which make the March 2020 outflows appear larger than they appear in our data. We show the March 2020 asset outflows to be smaller on a percentage basis than those in September 2008.)

The paper tells us, "In mid-March, the Federal Reserve, with approval of the Secretary of the Treasury, established the Money Market Mutual Fund Liquidity Facility (MMLF) to assist MMFs in meeting heightened investor redemptions, stabilize the U.S. short-term funding markets, and support credit provision to the real economy. Under the facility, which was similar in its structure and purpose to the Asset Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF) established in 2008, the Board of Governors authorized the Federal Reserve Bank of Boston to make non-recourse loans to eligible banks to facilitate the purchase of eligible assets from domestic prime, single state, or other tax-exempt MMFs."

It continues, "In this paper, we discuss the March 2020 run on MMFs, describe the MMLF's design and operations, and assess its effectiveness in stemming fund outflows and calming money market rates. First, we discuss the different reasons that led investors to run and document the dislocations in money market rates that accompanied the run. As shown in Cipriani and La Spada (2020) and Li et al. (2020), institutional investors ran more from funds for which the imposition of redemption gates and liquidity fees -- introduced by the 2014 SEC reform -- was more likely due to lower levels of 'weekly liquid assets' (WLA) in their portfolios. The outflows of retail investors, in contrast, were unrelated to fund-level liquidity and reflected other factors, including contagion from the behavior of institutional investors within the same fund family."

Anadu, et. al., state, "Second, we describe the MMLF's structure and compare it with that of the AMLF, highlighting similarities and differences. Both facilities used banks as a conduit to provide liquidity to domestic prime (and, for the MMLF, also tax-exempt) MMFs. A material difference, however, is that the AMLF only facilitated banks' purchases of ABCP from MMFs, whereas the MMLF made loans against a broader set of assets. Third, we describe the usage of the facility. We show that the MMLF was used more by funds that suffered larger outflows, and that funds sold securities with longer maturities, consistent with their incentive to boost their liquidity positions and especially their WLA."

They comment, "Finally, we identify the effect of the MMLF on investor flows by showing that, after the facility's introduction, outflows from prime MMFs decreased more for those funds that were eligible to participate in the MMLF program (i.e., domestic ones), that had a larger share of illiquid securities, and whose investors were more concerned about the funds' liquidity (i.e., institutional ones). Moreover, we show that, after the introduction of the MMLF, the rates of MMLF-ineligible securities declined more slowly than those of MMLF-eligible securities, even after controlling for credit risk. Overall, our analysis shows that, as the AMLF had been in 2008, the MMLF was an important tool in stabilizing prime-MMF flows and short-term funding markets at large."

Describing the "The Money Market Mutual Fund Liquidity Facility (MMLF)" in more detail, the paper tells us, "On March 18, 2020, the Federal Reserve, with approval of the Secretary of the Treasury and $10 bn of credit protection from the Exchange Stabilization Fund, announced the introduction of the MMLF to provide liquidity to MMFs. To do this, the Federal Reserve had to address two challenges. First, the Federal Reserve needed to protect itself from credit risk, for example by offering loans only against high-quality collateral. Second, lending to MMFs is problematic, as it would have increased their leverage, amplifying any losses for the shareholders and increasing their incentive to run. The Federal Reserve faced the same challenges in 2008, when it set up the AMLF in response to the MMF run triggered by Lehman Brothers' default. Although the type of shock was different, it was natural to design the 2020 facility based on its 2008 predecessor."

It explains, "Through the MMLF, which was established under the authority of Section 13(3) of the Federal Reserve Act, the Federal Reserve Bank of Boston made non‐recourse loans to eligible borrowers, taking as collateral eligible assets purchased by the borrowers from eligible MMFs. The eligible borrowers were U.S. depository institutions, U.S. bank holding companies (parent companies incorporated in the U.S. or their U.S. broker-dealer subsidiaries), and U.S. branches and agencies of foreign banks. Eligible collateral was limited to U.S. Treasuries and fully-guaranteed agencies, Government Sponsored Enterprise (GSE) securities, highly-rated CP (including ABCP), negotiable CDs, and short-term municipal debt (including VRDNs that met certain criteria). Eligible funds were limited to domestic prime, single state, or other tax-exempt MMFs."

The paper concludes, "In March 2020, as the Covid-19 pandemic hit the U.S. and Europe, prime MMFs suffered very large investor outflows, of similar percentage magnitude to those experienced in 2008 during the Great Financial Crisis. The Federal Reserve established the MMLF in order to assist 'money market funds in meeting demands for redemptions by households and other investors, enhancing overall market functioning and credit provision to the broader economy' (Federal Reserve Press Release, 3/18/2020)."

It reiterates, "Through the MMLF, the Federal Reserve Bank of Boston made non‐recourse loans to eligible borrowers, taking as collateral eligible assets purchased by the borrowers from eligible MMFs. The facility, which was similar to the AMLF established in 2008, absorbed $58 billion of prime-MMF assets. With the facility's assistance, MMFs sold their most illiquid securities, thereby boosting their liquidity positions while meeting redemptions. In the aftermath of the MMLF's inception, outflows from prime funds abated, and the strains in the broader short-term funding markets subsided."

Finally, the paper adds, "Because the MMLF was established in the midst of a financial crisis and a rapidly changing economic outlook, it is difficult to directly estimate its impact. Nonetheless, we provide evidence that the facility directly helped stem the outflows from prime MMFs and contributed to the easing in money market rates. Because of its positive effect on secondary markets, the facility also had a beneficial impact on offshore prime MMFs, which it did not directly target. By helping prime MMFs meet redemptions and reducing their outflows, the facility improved overall market functioning and supported credit provision to the real economy."

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