News Archives: December, 2022
The Investment Company Institute released its latest monthly "Trends in Mutual Fund Investing" and "Month-End Portfolio Holdings of Taxable Money Funds" for November 2022 Thursday. ICI's monthly "Trends" report shows that money fund assets increased $63.4 billion in November to $4.671 trillion. Meanwhile, bond fund assets bounced back from recent steep declines, increasing by $120.3 billion to $4.565 trillion. Money fund assets, which surpassed bond fund assets in September for the first time since 2010, remain larger than bond funds. have declined by over $1.1 trillion over the past 12 months. (The bond fund totals don't include bond ETFs, which total $1.261 trillion as of 11/30, according to ICI.)
Money funds' November asset increase follows a gain of $36.8 billion in October, $4.2 billion in Sept., a decrease of $6.4 billion in August, and increases of $34.3 billion in July and $25.0 billion in June. MMFs decreased $8.0 billion in May and $71.0 billion in April. They increased $9.6 billion in March, decreased $38.3 billion in February, and decreased $136.1 billion in January. For the 12 months through Nov. 30, 2022, money fund assets increased by $51.6 billion, or 1.1%. (For the month of December through 12/28, MMF assets have increased by $44.4 billion to $5.157 trillion according to Crane's MFI XLS, which tracks a broader universe of funds than ICI. Crane Data's Prime asset totals have increased by $36.0 billion in December to $1.066 trillion.)
ICI's monthly release states, "The combined assets of the nation's mutual funds increased by $958.09 billion, or 4.4%, to $22.83 trillion in November, 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 outflow of $34.52 billion in November, compared with an outflow of $58.68 billion in October.... Money market funds had an inflow of $56.33 billion in November, compared with an inflow of $31.10 billion in October. In November funds offered primarily to institutions had an inflow of $21.66 billion and funds offered primarily to individuals had an inflow of $34.67 billion. "
The Institute's latest statistics show that Taxable funds were higher and Tax Exempt MMFs were lower last month. Taxable MMFs increased by $66.3 billion in November to $4.563 trillion. Tax-Exempt MMFs dropped $2.9 billion to $108.4 billion. Taxable MMF assets increased year-over-year by $30.2 billion (0.7%), and Tax-Exempt funds rose by $21.5 billion over the past year (24.7%). Bond fund assets rose by $120.3 billion (after plummeting by $88.1 billion in Oct.) to $4.565 trillion; they've decreased by $1.064 trillion (-18.9%) over the past year.
Money funds represent 20.5% of all mutual fund assets (down 0.6% from the previous month), while bond funds account for 20.0%, according to ICI. The total number of money market funds was 292, up one from the prior month and down from 307 a year ago. Taxable money funds numbered 237 funds, and tax-exempt money funds numbered 55 funds.
ICI's "Month-End Portfolio Holdings" confirm yet another jump in Repo and plunge in Treasuries last month. Repurchase Agreements remained the largest composition segment in November, increasing $7.1 billion, or 0.3%, to $2.489 trillion, or 54.5% of holdings. Repo holdings have increased $373.5 billion, or 17.7%, over the past year. (See our Dec. 12 News, "` Dec. MF Portfolio Holdings: Agencies Jump; Treasuries and Repo Drop <i:https://cranedata.com/archives/all-articles/9561/>`_.")
Treasury holdings in Taxable money funds fell again, but they remained the second largest composition segment. Treasury holdings plunged $52.1 billion, or -4.5%, to $1.113 trillion, or 24.4% of holdings. Treasury securities have decreased by $584.0 billion, or -34.4%, over the past 12 months. U.S. Government Agency securities were the third largest segment; they increased $37.3 billion, or 7.7%, to $518.8 billion, or 11.4% of holdings. Agency holdings have increased by $116.4 billion, or 28.9%, over the past 12 months.
Certificates of Deposit (CDs) remained in fourth place; they increased by $8.9 billion, or 4.2%, to $218.3 billion (4.8% of assets). CDs held by money funds rose by $37.1 billion, or 20.5%, over 12 months. Commercial Paper remained in fifth place, up $9.1 billion, or 5.4%, to $176.8 billion (3.9% of assets). CP increased $28.5 billion, or 19.2%, over one year. Other holdings decreased to $15.9 billion (0.3% of assets), while Notes (including Corporate and Bank) inched up to $6.0 billion (0.1% of assets).
The Number of Accounts Outstanding in ICI's series for taxable money funds increased to 59.716 million, while the Number of Funds rose by one fund to 237. Over the past 12 months, the number of accounts rose by 12.375 million and the number of funds decreased by 10. The Average Maturity of Portfolios was a record low 15 days, unchanged from October. Over the past 12 months, WAMs of Taxable money have decreased by 22.
We learned from Yahoo Finance, which wrote a piece entitled, "Why stablecoins maintain their dollar peg despite run risk," about an academic paper entitled, "Leverage and Stablecoin Pegs." Yahoo's article says, "Despite the worst crypto crash in history, there has yet to be a run on so-called stablecoins, a form of cryptocurrency backed by real world assets. (Not to be confused with algorithmic stablecoins). In a new paper (pdf) published by the National Bureau of Economic Research, five economists from Yale, the Federal Reserve, and the US Treasury explain why they think stablecoins backed by non-cryptocurrencies have been able to keep their peg despite all the scrutiny."
It adds, "The economists studied the margin lending rates across multiple exchanges and found that stablecoins had the smallest haircuts, the term for how much lower the asset is valued as collateral versus when it's on the market. They also found that stablecoin demand increases when crypto is more volatile and traders can take advantage of more leverage."
The NBER Working Paper's Abstract says, "Money is debt that circulates with no questions asked. Stablecoins are a new form of private money that circulate with many questions asked. We show how stablecoins can maintain a constant price even though they face run risk and pay no interest. Stablecoin holders are indirectly compensated for stablecoin run risk because they can lend the coins to levered traders. Levered traders are willing to pay a premium to borrow stablecoins when speculative demand is strong. Therefore, the stablecoin can support a $1 peg even with higher levels of run risk."
It explains, "Unlike fiat currency, stablecoins are economically equivalent to deposits and subject to runs. The same strategic complementarities for fragile banks and money market funds apply to stablecoin issuers. Stablecoin holders should demand compensation for run risk if they anticipate stablecoin reserves may prove too illiquid to maintain a $1 peg in bad states. But stablecoins do not pay interest, unlike bank deposits and money-market funds. Thus, it is unclear how stablecoins issuers can compensate their borrowers for run risk enough to keep the price fixed at $1."
The paper tells us, "The funding structure of stablecoin issuers is fragile because the liquidation value of its reserves may not be enough to fully cover potential redemptions by all token holders. As such, the stablecoin issuer is exposed to run risk from self-fulfilling beliefs giving rise to multiple equilibria described in the bank run literature."
It continues, "Such a feature is realistic, and several papers empirically study strategic complementarities in money market mutual funds during the Global Financial Crisis and Covid-19 crisis. Chen et al. (2010) and Schmidt et al. (2016) show that outflow behavior and strategic complementarities in open-ended mutual funds and money market funds are consistent with incomplete information games where agents receive private noise signals. Cipriani and La Spada (2020) show how investors produce private information about the money funds' run risks stemming from the illiquidity of the reserve assets, and they bifurcate investors into sophisticated and unsophisticated types."
Finally, the paper concludes, "Privately-produced money can maintain a $1 peg even if it is not no questions asked, but agents will not hold private money unless they are compensated for their risks. Speculative investors will provide that compensation if their expectations are bullish enough. Our model reconciles two important facts: first, stablecoins are not useful as money under their current regulatory regime despite their relative success in maintaining their peg, at least for the most salient coins. Second, stablecoin lending rates are high and tightly correlated with measures of speculative demand."
It adds, "Stablecoins can provide a direct link between speculation and the real economy. Stablecoin issuers invest their reserves to earn profits but must adjust their reserves -- possibly quickly -- to keep their debt trading at par. When speculative demand falls, they can keep their debt trading at par only by moving to a safer portfolio or allowing redemptions. Such reallocation or change in stablecoin supply can cause disruptions in the real economy. Stablecoin issuers will need to adjust quickly if expected returns for cryptocurrencies fall; otherwise, they face the risk of collapse. These adjustments can cause disruptions in the markets they invest in, like the commercial paper market that provides financing to the real economy."
In other news, The Wall Street Journal writes that, "Cash Cushions Dwindle at U.S. Pension Funds." They comment, "Cash holdings are the lowest since the financial crisis at U.S. government pension funds and just above last year's 13-year low for U.S. corporate pensions, heading into a year that many on Wall Street expect to test investors. Cash holdings hit 1.9% of assets at state and local government pension funds and 1.7% of assets at corporate pension funds as of June 30, according to an annual snapshot from Wilshire Trust Universe Comparison Service. Those figures compare with the 15-year average of 2.45% at public pensions and 2.07% at corporate pensions. The recent figures are lower than in 2008, when some retirement funds had to sell whatever they could to pay benefits during the financial crisis."
The article states, "Pension cash might already be rising from June 30 levels. That snapshot came at the end of a brutal two quarters for stocks, when extra cash might have gone to paying benefits or topping up equity portfolios, pension officials and advisers said. Also, holding cash becomes slightly more attractive as rates rise."
It also says, "Calpers reduced its cash allocation target to 1% from 2% in 2017 and eliminated it in July, as part of a revamp that added leverage and private equity. Deputy Chief Investment Officer Dan Bienvenue said Calpers's access to cash has improved since 2008. Then, he said, 'we not only had to sell at the time we didn't want to sell, we also had to sell things that we didn't want to sell.' We are in a much, much, much better place than we were,' Mr. Bienvenue said."
Fitch Ratings recently published its "Global Money Market Funds Outlook 2023," which tells us, "Fitch Ratings' 2023 sector outlook for global money market funds (MMFs) is deteriorating, driven by deteriorating outlooks in some of the key banking sectors that MMFs invest in and continued market volatility stemming from the global recessionary backdrop, which could lead to flow volatility, especially in a market stress scenario.... The deteriorating outlooks on UK, US, Canadian and German banks indicate significant uncertainty about the credit quality of this segment, which will have a knock-on effect on money funds as portfolios are concentrated in this sector. Vulnerabilities will be assessed on an issuer basis rather than across a whole sector given the varied rating headroom."
They write, "The gradual stabilisation in the monetary policy stance may see funds start to push out maturities of holdings, albeit selectively, which in turn increases market risk sensitivity. Currently MMFs have low weighted average portfolio maturities (WAMs) as fund managers have reduced these in preparation for rising rates, because low WAMs reduce the risk of potential mark-to-market value declines in portfolio securities."
Fitch's summary says, "High inflation and interest rates, alongside global recessionary pressures, are contributing to mixed expectations for 2023 MMF flow direction and may lead to heightened flow volatility in funds. Continued market volatility driven by the downturn could lead to sizeable outflows in a stressed market. However, investor flight-to-safety during the financial downturn may attract inflows for MMF sector overall, with varied effects depending on fund type."
Director Minyue Wang explains, "Regulators globally have suggested draft proposals or shared opinions on MMF reforms, but no final proposals have been published. We expect an extended lead time before any regulatory changes are implemented in the US and the EU given the length of prior regulatory review cycles, therefore giving investors and MMF providers time to adapt. Fitch expects to review its rating methodology in response to final regulatory proposals, once available, to reflect any potential changes in MMFs' expected risk profiles. Regulatory changes under consideration may lead to outflows from US prime funds or a restructuring of certain products."
She continues, "Fitch expects negative rating action on certain money fund holdings, as the deteriorating outlook on banks indicates uncertainty about the credit quality of this key sector for money funds. As of end-August 2022, banks accounted for about 80% of Fitch-rated prime MMFs. Although the banking sectors is placed on deteriorating outlook in certain countries, the rating impact will vary by issuer. Fitch expects recessions will pressure asset quality, although Fitch believes the major banks have rating headroom."
On the rate environment, they state, "Fitch anticipates the Fed will raise interest rates to 4% by end-2022 and maintain them until early 2024, and believes rate cuts are unlikely until next year. Fitch expects EU policy rates to increase to 2% by end-2022, and that the Bank of England will continue increasing interest rates into 1Q23. MMFs began decreasing WAMs ahead of anticipated interest rate increases in 2022 as lower WAMs limit vulnerability to rising rates and allow funds to maintain competitive yields, with managers reversing previous fee waivers and then passing increased rates to investors. A fund's market risk is reduced with lower WAMs and improves liquidity, which would reduce risk in the current uncertain macro environment."
A separate Fitch Ratings publication, "Local Government Investment Pools: 3Q22," explains, "Fitch Ratings' two local government investment pool (LGIP) indices experienced aggregate asset decreases in the third quarter of 2022 (3Q22). This follows seasonal trends where LGIPs have net outflows in the fall. Combined assets for the Fitch Liquidity LGIP Index and the Fitch Short-Term LGIP Index were $486 billion at the end of 3Q22, representing a decrease of $20 billion qoq and increase of $73 billion yoy."
It comments, "Fitch expects pool managers to continue a low weighted average maturity (WAM), defensive position to maintain competitive yields and navigate the Fed's tightening monetary policy. We expect to see this trend reverse as the Fed slows interest rate increases as indicated in Chair Jerome Powell's speech on Nov. 30, 2022."
The piece says, "Both Fitch indices ended 3Q22 with improved average yield profiles, responding quickly to Fed rate hikes with average net yields of 2.79% for the Liquidity Index and 1.87% for the Short-Term Index. The WAM of the Fitch Liquidity LGIP Index decreased to 24 days, down four days qoq but still higher than '2a-7' money market funds at 13 days. The Fitch Short-Term LGIP Index ended the quarter with a slight increase in duration of 1.07 years, a small increase from 1.04 years at the end of 2Q22."
Finally, this update adds, "The Fitch Liquidity LGIP Index continued to decrease exposures to treasuries and increase exposure to agencies and repos by -3%, 4%, and 1%, respectively. Short-term treasury bill yields have remained below the Fed Funds Rate as demand has outpaced supply. Additional Federal Home Loan Bank issuance in 2Q22 and competitive repo rates presented managers with more attractive opportunities, although increases to these exposures were lower this quarter than the previous one."
Barron's "Income Investing" column, entitled, "Don't Give Up on Bonds. Next Year Should Be Better," briefly mentions money funds at the end. The piece says, "Bond investors may take some solace as the year draws to a close; it couldn't have been much worse. Almost every area of fixed income suffered its steepest loss in decades. The Bloomberg U.S. Aggregate Bond Index fell about 11%. Even if it rallies a little from here, it's on track for its worst performance since the index's inception in 1976. Don't feel bad if you never saw the storm coming. Many bond pros didn't, either." (Note: Merry Christmas and Happy Holidays from Crane Data! Thanks for reading in 2022, and best wishes for 2023!)
After reviewing the carnage in bond funds, it explains, "The central bank boosted short-term rates seven times, from around zero percent to a recent range of 4.25% to 4.5%. A few more increases are expected in early 2023 -- likely to push the federal-funds rate to about 5.25% at its peak or 'terminal' level.... Where do we go from here? While we can't predict the path of rates, we can say that holding cash and proxies hasn't looked this good in years."
Barron's tells us, "A two-year Treasury bond was recently yielding 4.2%, compared with 0.8% at the start of 2022. The top-yielding nationally available money market and savings accounts are now at 4.35%, up from 0.55% in January, according to Greg McBride, chief financial analyst at Bankrate. FDIC-insured certificates of deposits also look appealing, though consumers should stick with the shorter terms. The highest-yielding one-year CDs yield 4.86%, versus 0.67% in January. But a five-year CD gets you just 4.6%."
They add, "Money-market mutual funds, available through brokerages, yield 3.9% and could top 4% as the Fed's latest 0.5 of a percentage point rate hike works its way into funds, says Peter Crane, president of Crane Data and Money Fund Intelligence. 'Yields should hit 4% within days,' he predicts. Granted, 4% still doesn't provide a 'real' inflation-adjusted return, considering that prices are rising a bit faster. But bond yields might now be close to an equilibrium with inflation, and could provide a small real return if inflation keeps easing in 2023."
In other news, Wells Fargo Securities' Vanessa Hubbard McMichael writes in a recent "Fixed Income Strategy" on "Front-end Investor Considerations: Recap of Client Conversations in 2022." She comments, "[W]e thought it may be more helpful to summarize thoughts and insights gleaned from investor conversations [from 2022].... Audiences' desired topics focused largely on three themes over this past year, with the rate environment and inflation dominating discussions. We categorize most of this year's dialogue in three categories: 1. General fixed income market update and more specifically, expectations for rates; 2. Strategies and considerations for investing cash in a high inflationary environment; and 3. Education on fixed income investment alternatives."
The Wells piece states, "As the Federal Reserve embarked on its most aggressive tightening cycle since at least the 80s to fight inflation that reached heights also not seen since the 80s, the conversation about when and where to allocate cash into fixed income markets was a highlight this year. There were ample opportunities to invest at higher rates with levels reaching heights not seen since 2007, plus front-end supply was elevated particularly across T-bills, Agency discount notes, certificates of deposit and commercial paper. While some cash investors were conflicted about the right time to allocate to fixed income markets this year, those who remained vigilant about maintaining portfolio structure and investing throughout the year found themselves largely in a position whereby interest income was once again something to take notice of."
It also tells us, "A client at a recent event shared that she 'was able to include interest income as a line item in forecasts once again,' something that was not a reality over the prior 2 years. The current environment is one whereby the potential for income generation on idle funds should not be minimalized or ignored. Every organization, public or private, large or small, can find a good use for additional income earned on balances not being actively deployed otherwise, particularly in an environment with heightened inflation and constrained resources."
Discussing "The cash see-saw," they write, "There was a cash balance see-saw of sorts taking place in our conversations with investors this year. While some organizations were not necessarily in a position of discussing investments in the context of excess cash balances, others were. Some organizations were revisiting prior deferred capital expenditures but still experiencing supply chain issues which further delayed spending, others were recipients of funds from debt financing or other capital raising, others found themselves in a position of net cash after years as a net borrower in capital markets, and there were still a number of organizations generally sitting on historically large cash balances due to some sort of COVID windfall. All of these conversations, no matter how they originated, were seeking the answer to a similar question: within the constraints of safety and liquidity, how do we capitalize on the rate environment in the right way?"
Wells says, "In many instances, these conversations led to the exploration of both new and existing fixed income alternatives. We worked with organizations developing new investment policy documents, revamping existing policy documents, or exploring existing permitted instruments that were historically underutilized. The most frequent asset class additions to investment policies this year were in the Deposit and Certificate of Deposit space (both FDIC-insured and non-FDIC insured), commercial paper (particularly tier-2 nonfinancial CP), and high-quality asset-backed securities. Most of the dialogue on asset class additions to policies was with corporate investors who have more flexibility for policy adjustments. Public entity investors abide by state statutes so unless there is a change in state law, investment parameters remain static."
They add, "Another dominant conversation related to diversification in 2022 was re-allocating some cash out of bank deposits or overnight fund options such as sweeps, money market funds or local government investment pools, and into other parts of the market. These conversations surfaced in efforts to reduce concentration risk for organizations overexposed to one counterparty (e.g., a financial institution) or one part of the market (e.g., MMFs/LGIPs, which are generally overnight instruments). Moreover, rates offered on these overnight alternatives, deposits, MMFs or LGIPs, lag overall fixed income markets, creating opportunity costs of forgone income. These sorts of overnight options are important vehicles for cash managers, so we certainly are not advocating that any organization completely forgo utilizing them but given the rate environment, many organizations have explored or are currently exploring alternatives and gaining comfort with utilizing multiple instruments to park cash."
Finally, Wells concludes, "This year has been quite a dynamic one and while we have not been able to offer a singular catch-all investment strategy to cash investors this year, our conversations were plentiful in dialogue with organizations recognizing the opportunity created for front-end buy-and-hold investors by the Federal Reserve. Yield is not the first objective for cash managers deploying cash but the level of rates on the front-end was difficult to ignore this year. Heading into 2023, the front-end of the curve will continue to offer value given the Fed's intent to pursue additional Federal Funds rate hikes and pause at elevated levels once the terminal rate is reached. Market pricing reflects a slightly different expectation for next year, as implied rates are lower by the end of 2023, despite the Fed's messaging. Eventually the market, the Fed and financial conditions will sync, but until then investors have only current levels and data with which to make investment decisions."
Money fund yields broke the 4.0% level on average Wednesday as our Crane 100 Money Fund Index rose 5 basis points to 4.01%. The top-yielding money funds are now over 4.5%, and yields continue to climb higher as they digest the remainder of the Federal Reserve's December 14 50 basis point hike, its 7th hike of 2022. Money fund yields are now at their highest level since December of 2007. (The highest yield recorded in our Crane 100 since Crane Data started in 2006 is 5.01% as of 8/31/07.) We expect yields to keep inching higher in coming days, and they should move up again following any Fed hikes in 2023. Watch for more yield details in our weekly recap on Tuesday. (Note: Merry Christmas and Happy Holidays from Crane Data! Thanks for reading in 2022, and best wishes for 2023!)
ICI's latest weekly "Money Market Fund Assets" report shows that money fund assets fell this week after hitting their highest level since June 2020 last week. They remain just below their record level of $4.789 trillion (set on May 20, 2020). Money funds have risen in 6 of the past 8 weeks, rising by $128.5 billion since October 26. Over the past 52 weeks, money fund assets are up by $47 billion, or 1.0%, with Retail MMFs rising by $197 billion (13.4%) and Inst MMFs falling by $150 billion (-4.7%). ICI shows assets flat, up by $8 billion or 0.2%, year-to-date, with Institutional MMFs down $182 billion, or -5.6% and Retail MMFs up $190 billion, or 12.9%.
The weekly release says, "Total money market fund assets decreased by $28.18 billion to $4.71 trillion for the week ended Wednesday, December 21, the Investment Company Institute reported.... Among taxable money market funds, government funds decreased by $40.85 billion and prime funds increased by $10.22 billion. Tax-exempt money market funds increased by $2.45 billion." ICI's stats show Institutional MMFs falling $44.2 billion and Retail MMFs increasing $16.0 billion in the latest week. Total Government MMF assets, including Treasury funds, were $3.995 trillion (83.9% of all money funds), while Total Prime MMFs were $652.0 billion (13.8%). Tax Exempt MMFs totaled $105.6 billion (2.2%).
ICI explains, "Assets of retail money market funds increased by $16.03 billion to $1.66 trillion. Among retail funds, government money market fund assets increased by $4.54 billion to $1.16 trillion, prime money market fund assets increased by $9.87 billion to $404.53 billion, and tax-exempt fund assets increased by $1.62 billion to $94.89 billion." Retail assets account for over a third of total assets, or 35.2%, and Government Retail assets make up 70.0% of all Retail MMFs.
They add, "Assets of institutional money market funds decreased by $44.21 billion to $3.05 trillion. Among institutional funds, government money market fund assets decreased by $45.38 billion to $2.80 trillion, prime money market fund assets increased by $352 million to $247.51 billion, and tax-exempt fund assets increased by $826 million to $10.66 billion." Institutional assets accounted for 64.8% of all MMF assets, with Government Institutional assets making up 91.5% of all Institutional MMF totals.
In November, MMF assets increased by $47.7 billion to $5.113 trillion, and they've increased by $22.2 billion month-to-date in December (through 12/21) according to Crane Data, which tracks a broader universe of funds than ICI. Crane Data's Prime asset totals, which broke the $1.0 trillion level early in November, increased $28.7 billion last month to $1.024 trillion (and another $29.8 billion MTD in December). Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data, so they're over $400 billion lower than Crane's asset series.)
In other news, a press release entitled, "Global MMF 2023 Sector Outlook Is Deteriorating," tells us, "Fitch Ratings' 2023 sector outlook for global money market funds (MMFs) is deteriorating, reflecting Fitch's expectations for deterioration in some key banking sector outlooks, continued market volatility and potential considerable flow and asset under management (AUM) dynamics. Evolving global regulation will be key, but should have sufficient lead time for market participants to react accordingly."
It explains, "Fitch anticipates a worsening in the credit environment in 2023 amid a challenging macroeconomic backdrop, and, as a result, expects deteriorating credit outlooks in 2023 for securities and sectors MMFs invest in. The deteriorating outlook on some banking sectors indicates Fitch's significant uncertainty about the credit quality of this segment, which will have a knock-on effect on money funds as portfolios are concentrated in this sector."
The release says, "Central bank policy rate tightening in the US and Europe is likely to slow in 2023 and reach terminal rates. Fund managers reduced weighted average portfolio maturities (WAMs) to position for rising rates. We expect this to reverse as monetary tightening slows and expect fund managers to extend the duration of maturities, which would increase market risk sensitivity."
It states, "High inflation and interest rates, coupled with global recessionary pressures, contribute to mixed expectations for 2023 MMF flow direction and may lead to heightened flow volatility in funds. Continued market volatility driven by the downturn could lead to sizeable outflows in a stressed market, but, alternatively, investor flight-to-safety may attract inflows for the MMF sector overall."
Finally, the release adds, "Fitch expects European AUM in ESG MMFs to continue to grow and for US AUM to remain stable in 2023. We expect increased reputational and regulatory risks in 2023 as higher ESG activity, beyond just MMFs, continue to attract regulatory attention."
The Securities and Exchange Commission's latest monthly "Money Market Fund Statistics" summary shows that total money fund assets increased by $48.5 billion in November to $5.180 trillion. Assets are now just $51.7 billion below their record level ($5.232T) of May 2020. The SEC shows that Prime MMFs increased by $28.0 billion in November to $1.041 trillion, Govt & Treasury funds increased $23.1 billion to $4.023 trillion and Tax Exempt funds decreased $2.6 billion to $116.0 billion. Taxable yields jumped again in November after surging in October. The SEC's Division of Investment Management summarizes monthly Form N-MFP data and includes asset totals and averages for yields, liquidity levels, WAMs, WALs, holdings, and other money market fund trends. We review their latest numbers below.
November's overall asset increase follows an increase of $35.6 billion in October, a decrease of $9.4 billion in September, and increases of $3.5 billion in August, $57.4 billion in July, and $26.6 billion in June. MMFs decreased $19.7 billion in May and $63.3 billion in April, but increased $40.1 billion in March. They decreased $29.3 billion in February and $125.1 billion in January. Over the 12 months through 11/30/22, total MMF assets have increased by $87.8 billion, according to the SEC's series. (Month-to-date in December through 12/20, total MMF assets have increased by $38.5 billion, according to our MFI Daily.)
The SEC's stats show that of the $5.180 trillion in assets, $1.041 trillion was in Prime funds, up $28.0 billion in November. Prime assets were up $36.6 billion in October, $15.8 billion in September, $43.5 billion in August, $56.6 billion in July, $8.5 billion in June and $9.4 billion in May. Prime was down $11.7 billion in April, up $29.5 billion in March, down $2.7 billion in February and up $10.7 billion in January. Prime funds represented 20.1% of total assets at the end of November. They've increased by $203.7 billion, or 24.3%, over the past 12 months. (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.)
Government & Treasury funds totaled $4.023 trillion, or 77.7% of assets. They increased $23.1 billion in November, decreased $12.8 billion in October, $20.8 billion in September and $47.1 billion in August. Govt MMFs increased $8.2 billion in July and $14.4 billion in June. But they decreased by $36.7 billion in May and $57.1 billion in April. They increased $8.7 billion in March, decreased by $25.8 billion in February and $135.2 billion in January. Govt & Treasury MMFs are down $136.7 billion over 12 months, or -3.3%. Tax Exempt Funds decreased $2.6 billion to $116.0 billion, or 2.2% of all assets. The number of money funds was 299 in November, down 1 from the previous month and down 15 funds from a year earlier.
Yields for Taxable MMFs and Tax Exempt MMFs jumped yet again in November. The Weighted Average Gross 7-Day Yield for Prime Institutional Funds on November 30 was 3.97%, up 77 bps from the prior month. The Weighted Average Gross 7-Day Yield for Prime Retail MMFs was 4.11%, up 77 bps from the previous month. Gross yields were 3.77% for Government Funds, up 70 basis points from last month. Gross yields for Treasury Funds were up 63 bps at 3.78%. Gross Yields for Tax Exempt Institutional MMFs were down 48 basis points to 1.57% in November. Gross Yields for Tax Exempt Retail funds were down 33 bps to 1.90%.
The Weighted Average 7-Day Net Yield for Prime Institutional MMFs was 3.91%, up 76 bps from the previous month and up 385 basis points from 11/30/21. The Average Net Yield for Prime Retail Funds was 3.83%, up 76 bps from the previous month, and up 381 bps since 11/30/21. Net yields were 3.53% for Government Funds, up 70 bps from last month. Net yields for Treasury Funds were also up 62 bps from the previous month at 3.56%. Net Yields for Tax Exempt Institutional MMFs were down 47 bps from October to 1.47%. Net Yields for Tax Exempt Retail funds were down 32 bps at 1.66% in November. (Note: These averages are asset-weighted.)
WALs and WAMs were mostly up in November. The average Weighted Average Life, or WAL, was 40.5 days (up 5.5 days) for Prime Institutional funds, and 47.1 days for Prime Retail funds (down 1.7 days). Government fund WALs averaged 61.5 days (up 0.1 days) while Treasury fund WALs averaged 59.8 days (up 0.2 days). Tax Exempt Institutional fund WALs were 9.2 days (up 0.6 days), and Tax Exempt Retail MMF WALs averaged 16.8 days (up 0.9 days).
The Weighted Average Maturity, or WAM, was 17.2 days (up 5.4 days from the previous month) for Prime Institutional funds, 12.7 days (up 3.4 days from the previous month) for Prime Retail funds, 12.0 days (down 0.6 days from previous month) for Government funds, and 22.3 days (down 0.7 days from previous month) for Treasury funds. Tax Exempt Inst WAMs were up 0.3 days to 8.6 days, while Tax Exempt Retail WAMs were up 0.9 days from previous month at 16.0 days.
Total Daily Liquid Assets for Prime Institutional funds were 49.7% in November (down 4.3% from the previous month), and DLA for Prime Retail funds was 40.4% (up 0.6% from previous month) as a percent of total assets. The average DLA was 76.1% for Govt MMFs and 98.8% for Treasury MMFs. Total Weekly Liquid Assets was 64.0% (down 6.3% from the previous month) for Prime Institutional MMFs, and 53.0% (down 0.8% from the previous month) for Prime Retail funds. Average WLA was 86.1% for Govt MMFs and 99.4% for Treasury MMFs.
In the SEC's "Prime Holdings of Bank-Related Securities by Country table for November 2022," the largest entries included: Canada with $107.8 billion, Japan with $100.1 billion, the U.S. with $70.7B, France with $52.2 billion, the Netherlands with $38.2B, Aust/NZ with $35.1B, the U.K. with $34.4B, Germany with $28.4B and Switzerland with $8.6B. The gainers among the "Prime MMF Holdings by Country" included: Canada (up $10.0B), Japan (up $6.9B), the U.K. (up $5.6B), the U.S. (up $3.4B), Germany (up $3.3B), Switzerland (up $1.2B), Aust/NZ (up $1.0B) and the Netherlands (up $0.6B). Decreases were shown by: France (down $6.9B).
The SEC's "Prime Holdings of Bank-Related Securities by Region" table shows The Americas had $178.5 billion (up $13.4B), while Asia Pacific had $154.2B (up $5.2B). Eurozone subset had $135.4B (down $3.3B), while Europe (non-Eurozone) had $98.8B (up $14.6B from last month).
The "Prime MMF Aggregate Product Exposures" chart shows that of the $1.034 trillion in Prime MMF Portfolios as of November 30, $443.0B (42.8%) was in Government & Treasury securities (direct and repo) (up from $434.8B), $251.8B (24.3%) was in CDs and Time Deposits (up from $247.6B), $178.7B (17.3%) was in Financial Company CP (up from $168.6B), $119.7B (11.6%) was held in Non-Financial CP and Other securities (down from $122.4B), and $41.0B (4.0%) was in ABCP (up from $40.8B).
The SEC's "Government and Treasury Funds Bank Repo Counterparties by Country" table shows the U.S. with $128.8 billion, Canada with $94.2 billion, France with $67.2 billion, the U.K. with $59.2 billion, Germany with $8.4 billion, Japan with $88.8 billion and Other with $25.2 billion. All MMF Repo with the Federal Reserve was down $141.5 billion in November to $2.004 trillion.
Finally, a "Percent of Securities with Greater than 179 Days to Maturity" table shows Prime Inst MMFs 4.5%, Prime Retail MMFs with 4.2%, Tax Exempt Inst MMFs with 0.9%, Tax Exempt Retail MMFs with 2.4%, Govt MMFs with 11.4% and Treasury MMFs with 8.3%.
As we approach year end and enter the Holiday season, Crane Data is ramping up preparations for its 2023 conference calendar. We just finished our "basic training" Money Fund University event last week, and we're getting ready for our next show, Bond Fund Symposium, which is March 28-29, 2023, in Boston. But our focus will soon shift to our big show, Crane's Money Fund Symposium, which will take place June 21-23, 2023 at The Hyatt Regency Atlanta, in Atlanta, Ga. The draft agenda for the largest gathering of money market fund managers and cash investors in the world is now available and registrations are now being taken. Money Fund Symposium attracts money fund managers, marketers and servicers, cash investors, money market securities dealers, issuers, and regulators. We review our preliminary agenda, as well as Crane Data's other 2023 conferences, below. (Thanks once more to those who supported in our Money Fund University in Boston last week! Attendees and subscribers may access the recordings and conference materials at the bottom of our "Content" page or via our "Money Fund University 2022 Download Center.")
Our MF Symposium Agenda kicks off on Wednesday, June 21 with a "Keynote: The Elevation of Money Funds II" featuring Marty Flanagan of Invesco (invited). The rest of the Day 1 Agenda includes: "Repo Update: Fed RRP, FICC and Other Repo with Joseph Abate of Barclays, Dina Marchioni of the Federal Reserve Bank of New York and Jeff Sowell of State Street; "Regulations: Money Fund Reforms Round III," with Brenden Carroll of Dechert LLP, Jon-Luc Dupuy of K&L Gates LLP and Jamie Gershkow of Stradley Ronon; and, a "Major Money Fund Issues 2023" panel with moderator Peter Crane of Crane Data, Deborah Cunningham of Federated Hermes, John Tobin of Dreyfus and Peter Yi of Northern Trust AM. The evening's reception is sponsored by Bank of America.
Day 2 of Money Fund Symposium 2023 begins with "Strategists Speak '23: Fed, Rates & Reforms," with Vanessa Hubbard McMichael of Wells Fargo Securities, Priya Misra of TD Securities and Mark Cabana of BofA Securities; followed by a "Senior Portfolio Manager Perspectives" panel with Linda Klingman of Charles Schwab I.M., Chris Tufts of J.P. Morgan Asset Management and Nafis Smith of Vanguard. Next up is "Government & Treasury Money Fund Issues," with Mike Bird of Allspring Funds and Geoff Gibbs of DWS. The morning concludes with a "Muni & Tax Exempt Money Fund Update," featuring Colleen Meehan of Dreyfus, John Vetter of Fidelity and Sean Saroya of J.P. Morgan Securities.
The Afternoon of Day 2 (after a Dreyfus-sponsored lunch) features the segments: "Dealer's Choice: Supply, New Securities & CP" with Robe Crowe of Citi Global Markets, John Kodweis of J.P. Morgan and Stewart Cutler of Barclays; "Local Government Investment Pools & SMAs" with Laura Glenn of Public Trust Advisors and Guyna Johnson of S&P Global Ratings; "Ultra-Short Bond Funds, Alt-Cash & Stablecoins," with Teresa Ho of J.P. Morgan Securities, Rob Sabatino of UBS Asset Mgmt and Jeff Weaver of Allspring Global. The day's wrap-up presentation is a "European & Asian Money Fund Update" involving Greg Fayvilevich of Fitch Ratings and Kim Hochfeld of State Street Global Advisors. (The Day 2 reception is sponsored by Barclays.)
The third day of the Symposium features the sessions: "The State of the Money Fund Industry" with Peter Crane of Crane Data and Kerry Pope of Fidelity Investments; "Treasury Issuance & Fed Repo Update," which features Tom Katzenbach of the U.S. Dept. of the Treasury and Blake Gwinn of RBC Capital Markets; FICC Repo Update & Repo Trading Platforms with Sal Giglio of GLMX and Shiv Rao of Sunthay Holdings; and, "Corporate Investors, Portals, D&I Discussion" with Laurie Brignac of Invesco, Tom Hunt of AFP and Peter Crane of Crane Data.
Visit the Money Fund Symposium website at www.moneyfundsymposium.com for more details. Registration is $1,000, and discounted hotel reservations are available. We hope you'll join us in Atlanta this June! Note that some of our speakers have yet to confirm their participation, and the agenda is still in the process of being finalized, so watch for tweaks in coming weeks. E-mail us at info@cranedata.com to request the full brochure.)
We're also making plans for our sixth annual ultra-short bond fund event, Bond Fund Symposium, which will take place March 23-24, 2023 at the Hyatt Regency Boston. Crane's Bond Fund Symposium offers a concentrated and affordable educational experience, as well as an excellent networking venue, for bond fund and fixed-income professionals. Registrations are now being accepted ($1,000) and sponsorship opportunities are available. See the latest agenda here and details here.
Portfolio managers, analysts, investors, issuers, service providers, and anyone interested in expanding their knowledge of bond funds and fixed-income investing will benefit from our comprehensive program. A block of rooms has been reserved at the Hyatt Regency. We'd like to thank our past sponsors and exhibitors -- Wells Fargo Securities, Fitch Ratings, Fidelity Investments, J.P. Morgan Asset Management, Allspring Global, S&P Global Ratings, DTCC, StoneX, Invesco, BofA Securities, Northern Trust, Bloomberg Intelligence, Goldman Sachs, Federated, Payden & Rygel, PIMCO and Dechert -- for their support. (We'd love to get some new ones!) E-mail us for more details.
Finally, mark your calendars for our next European Money Fund Symposium. It is scheduled for Sept. 25-26, 2023, in Edinburgh, Scotland. Let us know if you'd like more details on any of our events, and we hope to see you in Boston in March, in Atlanta in June or in Edinburgh in September in 2023. Thanks for your patience and support in 2022, Happy Holidays and Happy New Year!
The Investment Company Institute published, "Worldwide Regulated Open-Fund Assets and Flows, Third Quarter 2022," last week, which shows that money fund assets globally fell by $176.8 billion, or -2.1%, in Q3'22 to $8.305 trillion. The decreases were led by sharp drops in money funds in China, France, Luxembourg and Ireland. Meanwhile, money funds in the U.S. and Mexico increased. MMF assets worldwide decreased by $145.3 billion, or -1.7%, in the 12 months through 9/30/22, and money funds in the U.S. now represent 55.0% of worldwide assets. We review the latest Worldwide MMF totals, below. (Thanks again to those who participated in our Money Fund University in Boston last week! Attendees and subscribers may access the recordings and conference materials at the bottom of our "Content" page or via our "Money Fund University 2022 Download Center.")
ICI's release says, "Worldwide regulated open-end fund assets decreased 6.1% to $56.19 trillion at the end of the third quarter of 2022, excluding funds of funds. Worldwide net cash outflow to all funds was $33 billion in the third quarter, compared with $146 billion of net outflows in the second quarter of 2022. The Investment Company Institute compiles worldwide regulated open-end fund statistics on behalf of the International Investment Funds Association (IIFA), the organization of national fund associations. The collection for the second quarter of 2022 contains statistics from 46 jurisdictions."
It explains, "The growth rate of total regulated open-end fund assets reported in US dollars was decreased by US dollar appreciation over the third quarter of 2022. For example, on a US dollar–denominated basis, fund assets in Europe decreased by 8.6% in the third quarter, compared with a decrease of 2.7% on a euro-denominated basis."
ICI's quarterly continues, "On a US dollar–denominated basis, equity fund assets decreased by 7.0 percent to $24.77 trillion at the end of the third quarter of 2022. Bond fund assets decreased by 5.4 percent to $11.25 trillion in the third quarter. Balanced/mixed fund assets decreased by 8.9 percent to $6.60 trillion in the third quarter, while money market fund assets decreased by 2.1% globally to $8.31 trillion."
The release also tells us, "At the end of the third quarter of 2022, 44% 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 15% of the worldwide total. By region, 54% of worldwide assets were in the Americas in the third quarter of 2022, 31% were in Europe, and 16 percent were in Africa and the Asia-Pacific regions."
ICI adds, "Net sales out of regulated open-end funds worldwide were $33 billion in the third quarter of 2022.... Globally, bond funds posted an inflow of $41 billion in the third quarter of 2022, after recording an outflow of $123 billion in the second quarter.... Money market funds worldwide experienced an inflow of $18 billion in the third quarter of 2022 after registering an inflow of $35 billion in the second quarter of 2022."
According to Crane Data's analysis of ICI's "Worldwide" fund data, the U.S. sustained its position as the largest money fund market in Q3'22 with $4.571 trillion, or 55.0% of all global MMF assets. U.S. MMF assets increased by $29.6 billion (0.7%) in Q3'22 and have increased by $27.9 billion (0.6%) in the 12 months through Sept. 30, 2022. China remained in second place among countries overall. China saw assets drop $80.1 billion (-5.1%) in Q3 to $1.502 trillion (18.1% of worldwide assets). Over the 12 months through Sept. 30, 2022, Chinese MMF assets have increased by $40.7 billion, or 2.8%.
Ireland remained third among country rankings, ending Q3 with $628.2 billion (7.6% of worldwide assets). Irish MMFs were down $21.5B for the quarter, or -3.3%, and down $45.1B, or -6.7%, over the last 12 months. Luxembourg remained in fourth place with $404.6 billion (4.9% of worldwide assets). Assets there decreased $22.8 billion, or -5.3%, in Q3, and were down $73.9 billion, or -15.4%, over one year. France was in fifth place with $308.6B, or 3.7% of the total, down $36.2 billion in Q3 (-10.5%) and down a brutal $104.2B (-25.2%) over 12 months.
Australia was listed in sixth place with $238.0 billion, or 2.9% of worldwide assets. Its MMFs decreased by $16.5 billion, or -6.5%, in Q3. Brazil moved up to the 7th ranked country and saw MMF assets decrease $7.1 billion, or -6.6%, in Q3'22 to $99.7 billion (1.2% of the total); they've decreased $367 million (-0.4%) for the year. Korea was at 8th place with $99.7 billion (1.2%); assets there fell $14.5 billion (-12.7%) in Q3 and decreased by $20.8 billion (-17.3%) over 12 months. Japan was 9th place, as assets decreased $7.7 billion, or -7.6%, to 93.8 billion (1.1% of total assets) in Q3. They've decreased $31.8 billion (-25.3%) over the previous 12 months. ICI's statistics show Mexico remained in 10th place with $83.1B, or 1.0% of total assets, up $4.6 billion (5.8%) for the quarter.
India was in 11th place, decreasing $3.5 billion, or -5.9%, to $56.4 billion (0.7% of total assets) in Q3 and decreasing $3.0 billion (-5.1%) over the previous 12 months. Canada ($30.7B, up $1.7B and up $4.4B over the quarter and year, respectively) ranked 12th ahead of Switzerland. ($24.3B, up $2.1B and up $547M). Chinese Taipei ($24.2B, down $2.6B and down $9.0B) and the United Kingdom ($22.5B, down $3.9B and down $6.6B), rank 14th and 15th, respectively. Chile, South Africa, Argentina, Norway and Belgium round out the 20 largest countries with money market mutual funds.
ICI's quarterly series shows money fund assets in the Americas total $4.829 trillion, up $33.0 billion in Q3. Asian MMFs decreased by $126.8 billion to $2.025 trillion, and Europe saw its money funds plunge $81.9 billion in Q3'22 to $1.431 trillion. Africa saw its money funds decrease $1.1B to $21.1 billion.
Note that Ireland and Luxembourg's totals are primarily "offshore" money funds marketed to global multinationals, while most of the other countries in the survey have mainly domestic money fund offerings. Contact us if you'd like our latest "Largest Money Market Funds Markets Worldwide" spreadsheet, based on ICI's data. (Let us know too if you'd like to see our latest Money Fund Intelligence International product, which tracks "offshore" money market funds domiciled in Europe and outside the U.S.)
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. The release says, "The Investment Company Institute (ICI) reports that, as of the final Friday in November, prime money market funds held 39.2 percent of their portfolios in daily liquid assets and 52.3 percent in weekly liquid assets, while government money market funds held 84.2 percent of their portfolios in daily liquid assets and 89.5 percent in weekly liquid assets." Prime DLA was up from 36.4% in October, and Prime WLA was down from 53.6%. Govt MMFs' DLA was down from 86.7% and Govt WLA decreased from 92.6% the previous month. (Thank you to our Money Fund University speakers, sponsors and attendees! We hope you enjoyed last week's show in Boston.... Attendees and subscribers may access the recordings and conference materials at the bottom of our "Content" page or via our "Money Fund University 2022 Download Center.")
ICI explains, "At the end of November, prime funds had a weighted average maturity (WAM) of 12 days and a weighted average life (WAL) of 51 days. Average WAMs and WALs are asset-weighted. Government money market funds had a WAM of 15 days and a WAL of 61 days." Prime WAMs were 3 days longer and WALs were 1 day shorter than the previous month. Govt WAMs were 1 day shorter and WALs were unchanged from October.
Regarding Holdings by Region of Issuer, the release tells us, "Prime money market funds' holdings attributable to the Americas rose from $268.54 billion in October to $284.14 billion in November. Government money market funds' holdings attributable to the Americas declined from $3,743.63 billion in October to $3,694.88 billion in November."
The Prime Money Market Funds by Region of Issuer table shows Americas-related holdings at $284.1 billion, or 47.0%; Asia and Pacific at $123.5 billion, or 20.4%; Europe at $190.8 billion, or 31.5%; and, Other (including Supranational) at $6.3 billion, or 1.1%. The Government Money Market Funds by Region of Issuer table shows Americas at $3.695 trillion, or 93.9%; Asia and Pacific at $81.0 billion, or 2.1%; Europe at $147.2 billion, 3.7%, and Other (Including Supranational) at $9.9 billion, or 0.3%.
A separate release from the Investment Company Institute tells us that, "Retirement Assets Total $32.3 Trillion in Third Quarter 2022." It includes data tables showing that money market funds held in retirement accounts rose to $581 billion (from $569 billion) in total, or 13% of the total $4.571 trillion in money funds. MMFs represent just 6.0% of the total $9.665 trillion of mutual funds in retirement accounts.
This release says, "Total US retirement assets were $32.3 trillion as of September 30, 2022, down 4.5 percent from June 30, 2022. Retirement assets accounted for 30 percent of all household financial assets in the United States at the end of September 2022. `Assets in individual retirement accounts (IRAs) totaled $11.0 trillion at the end of the third quarter of 2022, a decrease of 5.3 percent from the end of the second quarter of 2022. Defined contribution (DC) plan assets were $8.9 trillion at the end of the third quarter, down 5.0 percent from June 30, 2022. Government defined benefit (DB) plans—including federal, state, and local government plans—held $7.2 trillion in assets as of the end of September 2022, a 2.9 percent decrease from the end of June 2022. Private-sector DB plans held $3.0 trillion in assets at the end of the third quarter of 2022, and annuity reserves outside of retirement accounts accounted for another $2.1 trillion."
The ICI tables also show money funds accounting for $410 billion, or 9%, of the $4.801 trillion in IRA mutual fund assets and $171 billion, or 4%, of the $4.864 trillion in defined contribution plan holdings. (Money funds in 401k plans totaled $118 billion, or 3% of the $3.830 trillion of mutual funds in 401k's.)
In other news, The Wall Street Journal's CFO Journal writes, "The Morning Ledger: Fed Raises Rates Again, Signals More Increases to Come." They explain, "The Federal Reserve on Wednesday approved another interest-rate increase–this time of 0.5 percentage point–and signaled it plans to keep raising rates to fight high inflation. The decision marked a step down after four consecutive increases of 0.75 point and raised the benchmark federal-funds rate to a range between 4.25% and 4.5%. Fed Chair Jerome Powell indicated the U.S. central bank would strongly consider dialing down the size of rate rises to a more traditional quarter-percentage-point increment at its next meeting."
The piece comments, "There is an upside to higher interest rates, as finance chiefs are generating higher returns on their companies' cash holdings. Still, the amount of cash that companies are storing in corporate bank accounts is declining as high inflation takes its toll. Corporate cash holdings fell to $3.46 trillion during the third quarter, down $488 billion since the beginning of the year, according to an analysis of Fed data by the Carfang Group, which provides treasury consulting services."
It adds, "About 22.6% of corporate cash was held in money-market funds during the third quarter, a level last seen in 2016, according to Carfang. Those funds -- a form of mutual fund that invests in short-term debt securities including Treasury bills and commercial paper -- provided an average yield of 3.63% as of Dec. 9, compared with 0.02% in December 2021, according to Crane Data, which tracks money-market funds. Total assets, at $5.169 trillion, were largely unchanged from December 2021, Crane Data said."
ICI's latest weekly "Money Market Fund Assets" report shows that money fund assets rose to their highest level since June 2020; they're now just below their record level of $4.789 trillion (set on May 20, 2020). Money funds have risen in 6 of the past 7 weeks, rising by $156.7 billion since October 26. Over the past 52 weeks, money fund assets are up by $105 billion, or 2.3%, with Retail MMFs rising by $198 billion (13.7%) and Inst MMFs falling by $93 billion (-2.9%). ICI shows assets up by $105 billion, or 2.3%, year-to-date, with Institutional MMFs down $138 billion, or -4.3% and Retail MMFs up $174 billion, or 11.9%. (Thanks to those of you who attended our Money Fund University this week in Boston -- we hope you enjoyed the show! Attendees and subscribers may access the conference materials at the bottom of our "Content" page or via our "Money Fund University 2022 Download Center.")
The weekly release says, "Total money market fund assets increased by $22.57 billion to $4.74 trillion for the week ended Wednesday, December 14, the Investment Company Institute reported.... Among taxable money market funds, government funds increased by $13.88 billion and prime funds increased by $10.97 billion. Tax-exempt money market funds decreased by $2.28 billion." ICI's stats show Institutional MMFs rising $9.0 billion and Retail MMFs increasing $13.5 billion in the latest week. Total Government MMF assets, including Treasury funds, were $3.996 trillion (84.3% of all money funds), while Total Prime MMFs were $641.8 billion (13.5%). Tax Exempt MMFs totaled $103.1 billion (2.2%).
ICI explains, "Assets of retail money market funds increased by $13.54 billion to $1.64 trillion. Among retail funds, government money market fund assets increased by $4.11 billion to $1.15 trillion, prime money market fund assets increased by $10.92 billion to $394.67 billion, and tax-exempt fund assets decreased by $1.48 billion to $93.27 billion." Retail assets account for over a third of total assets, or 34.7%, and Government Retail assets make up 70.3% of all Retail MMFs.
They add, "Assets of institutional money market funds increased by $9.03 billion to $3.10 trillion. Among institutional funds, government money market fund assets increased by $9.77 billion to $2.84 trillion, prime money market fund assets increased by $56 million to $247.16 billion, and tax-exempt fund assets decreased by $798 million to $9.83 billion." Institutional assets accounted for 65.3% of all MMF assets, with Government Institutional assets making up 91.7% of all Institutional MMF totals.
For the month of November, MMF assets increased by $47.7 billion to $5.113 trillion, and they've increased by $58.1 billion month-to-date in December (through 12/14) according to Crane Data, which tracks a broader universe of funds than ICI. Crane Data's Prime asset totals, which broke the $1.0 trillion level early in November, increased $28.7 billion last month to $1.024 trillion (and another $21.4 billion MTD in December). Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data, so they're over $400 billion lower than Crane's asset series.)
In other news, Bloomberg published an opinion piece entitled, "Starving for Yield? Check Out Money-Market Funds." It says, "If you think high-yield savings accounts offer juicy rates to park some cash, wait until you see what money-market funds are paying. Yields paid by the typically staid mutual funds, which invest mostly in short-term government bonds, spiked from 0.02% earlier this year to more than 3.6% as of early December, according to Crane Data's 100 money-market fund index. After this week's rate increase by the Federal Reserve, money-market fund yields are poised to soar even higher."
The article explains, "Some funds, such as Allspring Money Market Fund, Goldman Sachs Investor Money Market Fund and JPMorgan Liquid Assets Money Market Fund, are already offering yields close to 4% or more. That compares with a 3% average payout for a high-yield online savings account. Although that's the highest in at least five years, banks haven't exactly kept pace with the Fed's interest-rate increases since May."
It adds, "That's because the rates offered by banks are ultimately at their discretion and influenced by factors other than the Fed's moves. The biggest banks are still flush with pandemic cash so have barely budged from what they're paying depositors on their savings accounts. (The average for all banks was 0.24% as of Nov. 21, according to the Federal Deposit Insurance Corp., but if you bank at say, Wells Fargo or Chase, you're lucky if you get 0.02%.)
Finally, Bloomberg writes, "Online banks are more eager for customer deposits so have been more responsive at passing on the Fed's rate increases to their customers. Still, given that money-market funds are investing mostly in Treasuries, their yields tend to move in lockstep with the Fed's rate. 'Money funds always give the market what the Fed gives them' said Pete Crane, founder of Crane Data."
Crane Data's latest Money Fund Intelligence International shows that assets in European or "offshore" money market mutual funds rose over the past month to $1.055 trillion led by a surge in USD & EUR funds. GBP MMFs declined over the past 30 days. European MMF assets remain just below their record high of $1.101 trillion set in mid-December 2021. These U.S.-style money funds, domiciled in Ireland or Luxembourg but denominated in US Dollars, Pound Sterling and Euros, increased by $30.2 billion over the 30 days through 12/13. The totals are down $8.4 billion (-0.8%) year-to-date. (Note that any increases in the U.S. dollar caused Euro and Sterling totals to decline when they're translated back into dollars.) (For those of you attending at our Money Fund University today and tomorrow, welcome to Boston! We hope you enjoy the show.... You may access the conference materials at the bottom of our "Content" page or via our "Money Fund University 2022 Download Center.")
Offshore US Dollar money funds are up $19.3 billion over the last 30 days and are up $22.2 billion YTD to $556.7 billion. Euro funds increased E16.1 billion over the past month. YTD, they're up E31.7 billion to E190.1 billion. GBP money funds decreased L4.4 billion over 30 days; they are up by L23.1 billion YTD to L270.2B. U.S. Dollar (USD) money funds (196) account for half (52.8%) of the "European" money fund total, while Euro (EUR) money funds (91) make up 17.8% and Pound Sterling (GBP) funds (126) total 29.4%. We summarize our latest "offshore" money fund statistics and our Money Fund Intelligence International Portfolio Holdings (which went out to subscribers Wednesday), below.
Offshore USD MMFs yield 3.79% (7-Day) on average (as of 12/13/22), up from 3.67% a month earlier. Yields averaged 0.03% on 12/31/21, 0.05% on 12/31/20, 1.59% on 12/31/19 and 2.29% on 12/31/18. EUR MMFs finally left negative yield territory 3 months ago; they're yielding 1.26% on average, up from 1.17% a month ago and up from -0.80% on 12/31/21. They averaged -0.71% at year-end 2020, -0.59% at year-end 2019 and -0.49% at year-end 2018. Meanwhile, GBP MMFs yielded 2.89%, up 13 bps from a month ago, and up from 0.01% on 12/31/21. Sterling yields were 0.00% on 12/31/20, 0.64% on 12/31/19 and 0.64% on 12/31/18. (See our latest MFI International for more on the "offshore" money fund marketplace. Note that these funds are only available to qualified, non-U.S. investors.)
Crane's October MFI International Portfolio Holdings, with data as of 11/30/22, show that European-domiciled US Dollar MMFs, on average, consist of 26% in Commercial Paper (CP), 14% in Certificates of Deposit (CDs), 32% in Repo, 10% in Treasury securities, 17% in Other securities (primarily Time Deposits) and 1% in Government Agency securities. USD funds have on average 63.4% of their portfolios maturing Overnight, 6.8% maturing in 2-7 Days, 8.7% maturing in 8-30 Days, 6.1% maturing in 31-60 Days, 5.3% maturing in 61-90 Days, 7.5% maturing in 91-180 Days and 2.3% maturing beyond 181 Days. USD holdings are affiliated with the following countries: the US (28.5%), France (14.3%), Canada (13.9%), Japan (10.8%), Sweden (7.1%), the Netherlands (5.1%), the U.K. (4.1%), Australia (3.7%), Germany (1.9%) and Austria (1.7%).
The 10 Largest Issuers to "offshore" USD money funds include: the US Treasury with $56.5 billion (9.8% of total assets), Federal Reserve Bank of New York with $38.0B (6.6%), RBC with $30.5B (5.3%), Credit Agricole with $23.4B (4.1%), BNP Paribas with $21.8B (3.8%), Sumitomo Mitsui Banking Corp with $17.4B (3.0%), Mizuho Corporate Bank Ltd with $14.7B (2.6%), Fixed Income Clearing Corp with $14.7B (2.6%), Skandinaviska Enskilda Banken AB with $14.1B (2.5%) and Barclays PLC with $13.5B (2.3%).
Euro MMFs tracked by Crane Data contain, on average 45% in CP, 18% in CDs, 23% in Other (primarily Time Deposits), 9% in Repo, 4% in Treasuries and 1% in Agency securities. EUR funds have on average 34.7% of their portfolios maturing Overnight, 11.4% maturing in 2-7 Days, 5.5% maturing in 8-30 Days, 22.0% maturing in 31-60 Days, 17.6% maturing in 61-90 Days, 5.2% maturing in 91-180 Days and 3.6% maturing beyond 181 Days. EUR MMF holdings are affiliated with the following countries: France (33.5%), Japan (13.7%), the U.S. (7.7%), Germany (6.1%), the U.K. (5.7%), the Netherlands (5.6%), Canada (5.0%), Austria (4.9%), Sweden (4.2%) and Belgium (3.2%).
The 10 Largest Issuers to "offshore" EUR money funds include: Republic of France with E10.8B (6.0%), Credit Agricole with E9.8B (5.4%), BNP Paribas with E7.3B (4.1%), Societe Generale with E6.6B (3.7%), Erste Group Bank AG with E6.0B (3.3%), Mizuho Corporate Bank Ltd with E5.9B (3.3%), Sumitomo Mitsui Banking Corp with E5.7B (3.2%), Credit Mutuel with E5.6B (3.1%), Barclays PLC with E5.2B (2.9%) and BPCE SA with E5.1B (2.8%).
The GBP funds tracked by MFI International contain, on average (as of 11/30/22): 33% in CDs, 22% in CP, 28% in Other (Time Deposits), 15% in Repo, 2% in Treasury and 0% in Agency. Sterling funds have on average 40.0% of their portfolios maturing Overnight, 8.0% maturing in 2-7 Days, 5.1% maturing in 8-30 Days, 14.8% maturing in 31-60 Days, 23.3% maturing in 61-90 Days, 5.5% maturing in 91-180 Days and 3.2% maturing beyond 181 Days. GBP MMF holdings are affiliated with the following countries: Japan (20.4%), Canada (15.5%), France (15.3%), the U.K. (9.8%), the Netherlands (7.0%), Australia (5.6%), the U.S. (4.9%), Germany (3.6%), Sweden (3.3%) and Spain (2.7%).
The 10 Largest Issuers to "offshore" GBP money funds include: Mitsubishi UFJ Financial Group Inc with L9.5B (5.8%), Mizuho Corporate Bank Ltd with L9.2B (5.5%), Bank of Nova Scotia with L7.1B (4.3%), RBC with L6.2B (3.7%), Barclays with L6.0B (3.6%), Sumitomo Mitsui Trust Bank with L5.6B (3.4%), BNP Paribas with L5.3B (3.2%), Sumitomo Mitsui Banking Corp with L5.0B (3.1%), Toronto-Dominion Bank with L5.0B (3.0%) and Banco Santander with L4.3B (2.6%).
The December issue of our Bond Fund Intelligence, which was sent to subscribers Wednesday morning, features the stories, "WSJ on Investors Swapping Bond Funds for Bond ETFs," which reviews the shift in assets from bond funds to bond ETFs, and "Weitz Core Plus Income Profiled in Latest Barron's," which reviews a recent profile piece. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund returns rebounded in November while yields were mixed. 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.) (Reminder: For those of you attending at our Money Fund University tomorrow (12/15) in Boston, you may access the conference materials at the bottom of our "Content" page or via our "Money Fund University 2022 Download Center.")
Our "Investors Swapping" article says, "Readers of our bond fund news know that bond ETFs have been gaining asset share over bond mutual funds for years now. But a rare look at the trend and reasons behind it appeared this week in The Wall Street Journal. They write, in, 'Bond Investors Swap Mutual Funds for ETFs at Record Pace,' 'Worn down from record losses, investors have fled bond mutual funds en masse. But many aren't quitting on bonds -- they are just turning to exchange-traded funds. One main reason: taxes. Some investors sell beaten-down positions in bond funds to harvest tax losses. In many cases this year, investors have opted to put cash into similar ETFs to maintain bond exposure.'"
It continues, "The Journal quotes Simon Hamilton, from Raymond James, 'More sophisticated investors are employing tax strategies, as well as trading up in credit quality.' They comment, 'This year is shaping up to be the biggest 'wrapper swap' on record. Roughly $454 billion has been pulled from bond mutual funds on net while $157 billion has entered bond exchange-traded funds through the end of October. That would be the largest net annual swing toward ETFs by a wide margin, according to Strategas. 'The Fed is at its most aggressive in 40 years,' said Todd Sohn, ETF strategist at Strategas. 'Along with inflation, that has absolutely crushed bonds. It's set off the acceleration of wrapper swapping that we have seen in equities for a while. Now we're finally getting it in bonds.'"
Our "Weitz Core" piece states, "Barron's recently wrote, 'Meet Omaha's Unsung Fund Managers. Here's Their Winning Formula <i:https://www.barrons.com/articles/bond-fund-income-corporate-debt-treasuries-51669150874>`_.' They state, 'If volatile derivatives such as futures and credit default swaps are ‘financial weapons of mass destruction' ... what are they doing in your low-risk bond funds? Look at the annual reports of some of the largest bond funds, and chances are you will see several pages devoted to riskier financial contracts that can add both leverage and unique liquidity, as well as counterparty risks to their portfolios. That's one thing you won't find in Weitz Core Plus Income (WCPNX).'"
It continues, "The profile explains, 'It's a U.S.-dollar cash-bond fund, i.e., good, old fashioned fixed-income investing,' says the fund's co-manager, Nolan Anderson. 'There are no derivatives, no options, no foreign currencies, no non-U.S. dollar-denominated debt.' Anderson, 42, and co-manager Tom Carney, 58, seek to minimize downside risk. They also avoid hewing too closely to the Bloomberg U.S. Aggregate Bond Index.... 'We allocate capital based on the best risk-adjusted returns we can find in the market broadly, whether or not that is something that’s in the index.'"
Our first News brief, "Returns Rebound, Yields Mixed in Nov," states, "Bond fund returns rebounded strongly in November while yields were mixed after rising for 12 months in a row. Our BFI Total Index rose 2.80% over 1-month but is down 8.19% over 12 months. The BFI 100 rose 2.88% in Nov. but lost 9.45% over 1-year. Our BFI Conservative Ultra-Short Index was up 0.55% over 1-month but is down 0.32% for 1-year; Ultra-Shorts rose 0.55% and -1.32%. Short-Term rose 1.20% and -4.91%, and Intm-Term rose 3.35% and -11.54% over 1-year. BFI's Long-Term Index rose 4.53% and -15.12%. High Yield rose 2.03% in Nov. but fell 6.84% over 1-year."
A second News brief, "The New York Times Says, 'The Picture Improves for the Treasury Bond <i:https://www.nytimes.com/2022/12/09/business/bond-market-economy-investing.html>`_.' They write, 'This has been an awful year for U.S. bonds -- so bad that 2022 may end up as the worst calendar year in history. But what do terrible bond returns in 2022 mean for the future? ... At the very least, a repetition of the shocking level of the losses of 2022 isn't likely.'"
Another brief quotes Barron's "Take a Look at Junk Bonds. They Now Yield Over 8%.' They write, 'Their 'Income Investing' column tell us, 'High-yield bonds have struggled alongside most of fixed income amid a spike in interest rates from the Federal Reserve. The question now: Is it time to dip in? ... 'It's a nice, clean asset class for investors looking to generate yield,' says Ashish Shah, chief investment officer of public investments at Goldman Sachs Asset Management. Falling prices have pushed junk yields up to an average 8.4%, based on the ICE BofA US High Yield Index. That’s nearly double the average yield of 4.35% at the end of 2021.'"
A BFI sidebar, "MStar: Best BFs for Rebalance," explains, "Morningstar published, 'The Best Funds for Rebalancing in 2023,' which says, 'Those looking for solid core bond ETFs or mutual funds should begin their search with highly rated funds in the intermediate core bond or the intermediate core-plus bond Morningstar Categories. Funds in both categories invest largely in investment-grade U.S. fixed-income issues, including government, corporate, and securitized debt; they usually maintain durations that range from 75% of 125% of the three-year average effective duration of the Morningstar Core Bond Index. The difference: Core-plus funds have more flexibility to own noncore bonds, such as corporate high-yield, bank-loan, and emerging-markets debt. Funds in both categories therefore provide a lot of diversification in a single holding, and as a result they don't court excessive interest-rate or credit risk.'"
Finally, another sidebar, "BF Assets Jump Back in Nov.," explains, "Bond fund assets Jumped in November after falling for 10 out of past 11 months. Total assets rose by $62.1 billion to $2.628 trillion last month, according to BFI. YTD, assets are down $601.9 billion (through 11/30/22), and over 1-year they're down $711.6 billion, or -21.3%."
The Federal Reserve released its latest quarterly "Z.1 Financial Accounts of the United States" statistical survey (a.k.a. "Flow of Funds") late last week. Among the 4 tables it includes on money market mutual funds, the Third Quarter 2022 edition shows that Total MMF Assets increased by $52 billion to $5.084 trillion in Q3'22. The Household Sector, by far the largest investor segment with $2.781 trillion, saw an asset increase in Q3. The second largest segment, Nonfinancial Corporate Businesses, also experienced a jump in assets. The Fed's latest Z.1 numbers, which contain one of the few looks at money fund investor segments available, also shows asset decreases in MMF holdings for the Other Financial Business and Mutual Funds categories in Q3 2022. (Note: We look forward to seeing some of you at our Money Fund University this Thursday (12/15) in Boston! Attendees and subscribers may access the conference materials at the bottom of our "Content" page or via our "Money Fund University 2022 Download Center.")
Mutual Funds, Exchange-traded Funds and Other Financial Business categories all saw minor asset decreases last quarter. The Property-Casualty Insurance, Life Insurance Companies, Private Pension Funds, Nonfinancial Noncorporate Business and the Rest of the World categories saw small asset increases in Q3, while the State & Local Govt Retirement and State & Local Governments sectors remained unchanged. Over the past 12 months, the Household Sector, Other Financial Business, Private Pension Funds, Nonfinancial Corporate Business and Life Insurance Companies categories showed the biggest asset increases, while Mutual Funds, Exchange-traded Funds and Property-Casualty Insurance saw the biggest asset decreases.
The Fed's "Table L.206," "Money Market Mutual Fund Shares," shows that total assets increased by $52 billion, or 1.0%, in the third quarter to $5.084 trillion. The largest segment, the Household sector, totals $2.781 trillion, or 54.7% of assets. The Household Sector increased by $51 billion, or 1.9%, in the quarter. Over the past 12 months through September 30, 2022, Household assets were up $72 billion, or 2.6%.
Nonfinancial Corporate Businesses, the second-largest segment according to the Fed's data series, held $781 billion, or 15.4% of the total. Assets here increased by $5 billion in the quarter, or 0.7%, and they've increased by $12 billion, or 1.6%, over the past year. Other Financial Business was the third-largest investor segment with $554 billion, or 10.9% of money fund shares. This category dropped $7 billion, or -1.3%, in the latest quarter. Other Financial Business, which we believe includes Securities Lending, has increased by $32 billion, or 6.2%, over the previous 12 months.
The fourth-largest segment, Private Pension Funds held $249 billion (4.9%). (A new addition to the tables), Mutual Funds, was the 5th largest category with 4.6% of money fund assets ($233 billion); it was down by $16 billion (-6.4%) for the quarter and down $69 billion, or -22.8% over the last 12 months. The Rest of World remained sixth place in market share among investor segments with 3.0%, or $154 billion, while Nonfinancial Noncorporate Business held $124 billion (2.4%), Life Insurance Companies held $80 billion (1.6%), State & Local Governments held $53 billion (1.0%), Exchange-traded Funds held $28 billion (0.5%), State & Local Govt Retirement held $24 billion (0.5%), and Property-Casualty Insurance held $24 billion (0.5%), according to the Fed's Z.1 breakout.
The Fed's "Flow of Funds" Table L.121 shows "Money Market Mutual Funds" largely invested in “Security Repurchase Agreements” with $2.743 trillion, or 53.9% and "Debt Securities," or Credit Market Instruments, with $2.113 trillion, or 41.6% of the total. Debt securities includes: Open market paper ($245 billion, or 4.8%; we assume this is CP), Treasury securities ($1.256 trillion, or 24.7%), Agency and GSE-backed securities ($492 billion, or 9.7%), Municipal securities ($113 billion, or 2.2%) and Corporate and foreign bonds ($6 billion, or 0.1%).
Another large MMF position in the Fed's series includes `Time and savings deposits ($210 billion, or 4.1%). Money funds also hold minor positions in Miscellaneous assets ($17 billion, or 0.3%) and Foreign deposits ($1 billion, 0.0%). Note: The Fed also lists "Variable Annuity Money Funds," which currently total $43 billion.
During Q3, Debt Securities were down $111 billion. This subtotal included: Open Market Paper (up $24 billion), Treasury Securities (down $203 billion), Agency- and GSE-backed Securities (up $69 billion), Corporate and Foreign Bonds (up $3 billion) and Municipal Securities (down $4 billion). In the third quarter of 2022, Security Repurchase Agreements were up $147 billion, Foreign Deposits were unchanged, Time and Savings Deposits were up by $23 billion, and Miscellaneous Assets were down $7 billion.
Over the 12 months through 9/30/22, Debt Securities were down $421 billion, which included Open Market Paper (down $4B), Treasury Securities (down $439B), Agencies (up $18B), Municipal Securities (up $7B), and Corporate and Foreign Bonds (down $4B). Foreign Deposits were unchanged, Time and Savings Deposits were up $31B, Securities repurchase agreements were up $479 billion and Miscellaneous Assets were down $24B.
The L.121 table shows `Stable NAV money market funds with $4,411 billion, or 86.8% of the total (up $25.7 or 0.6% in Q3 and up $56B or 1.3% over 1-year), and Floating NAV money market funds with $673 billion, or 13.2% (up $26.1B or 4.0% in Q3 and up $9B or 1.3% over 1-year). Government money market funds total $4.012 trillion, or 78.9% (down $59.6B or -1.5% in Q3 and down $52B or -1.3% over 1-year), Prime money market funds total $966 billion, or 19.0% (up $116.1B or 13.7% in Q3 and up $107B or 12.5% over 1-year) and Tax-exempt money market funds $107B, or 2.1% (down $4.7B or -4.2% in Q3 and up $9B or 9.4% last year).
The Federal Reserve made changes to the Z.1 tables three quarters ago. Describing a "Money market funds sector data source change," the report says, "The money market mutual funds (MMF) sector (tables F.121 and L.121) has been revised beginning 2010:Q4 to reflect a change in data source to Securities and Exchange Commission Form NMFP. The level of assets and shares outstanding of the sector have increased due to the inclusion of private placement MMFs in the source data. Changes in the level due to changes in the data source in 2010:Q4 are recorded as other volume changes in the Financial Accounts."
On "Mutual funds sector holdings of money market funds," Z.1 tells us, "The mutual funds sector (tables F.122 and L.122) has been revised beginning 2010:Q4 to reflect holdings of money market funds not previously reported on the tables. In addition, holdings of repurchase agreements, commercial paper, corporate bonds, and miscellaneous assets have been revised. Additional and revised holdings are estimated using data from Morningstar and Investment Company Institute.... The exchange-traded funds sector (tables F.124 and L.124) has been revised beginning 2010:Q4 to reflect holdings of money market funds not previously reported on the tables."
Crane Data's December Money Fund Portfolio Holdings, with data as of Nov. 30, 2022, show that Agency holdings jumped while Treasuries continued their deep 9-month slide (and Repo fell). Money market securities held by Taxable U.S. money funds (tracked by Crane Data) decreased by $24.6 billion to $4.967 trillion in November, after increasing $57.7 in October, $15.2 billion in September, decreasing $20.8 billion in August and increasing $116.1 billion in July. Holdings decreased $2.6 billion in June, $58.4 billion in May and $55.2 billion in April. Repo remained the largest portfolio segment, while Treasuries remained in the No. 2 spot. The Federal Reserve Bank of New York, which surpassed the U.S. Treasury as the largest "Issuer" six months ago, saw RRP issuance to MMFs drop $127.1 billion to $1.999 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.
Among taxable money funds, Repurchase Agreements (repo) decreased $23.7 billion (-0.9%) to $2.687 trillion, or 54.3% of holdings, in November, after decreasing $6.0 billion in October, increasing $74.4 billion in September, $23.1 billion in August, $88.7 billion in July and $128.6 billion in June. Treasury securities fell $65.7 billion (-5.4%) to $1.146 trillion, or 24.3% of holdings, after decreasing $41.8 billion in October, $84.8 billion in September, $82.6 billion in August, $33.2 billion in July and $72.5 billion in June. Government Agency Debt was up $53.6 billion, or 10.1%, to $586.7 billion, or 10.7% of holdings, after increasing $55.0 billion in October, $35.9 billion in September, $11.3 billion in August and $24.5 billion in July. Agencies decreased $14.6 billion in June. Repo, Treasuries and Agency holdings now total $4.419 trillion, representing a massive 89.3% of all taxable holdings.
Money fund holdings of CP and CDs jumped in November. Commercial Paper (CP) increased $7.7 billion (3.0%) to $262.7 billion, or 5.1% of holdings, after increasing $19.3 billion in October, decreasing $7.8 billion in September, but increasing $15.4 billion in August and $15.3 billion in July. Certificates of Deposit (CDs) increased $4.4 billion (3.0%) to $153.8 billion, or 3.0% of taxable assets, after increasing $15.5 billion in October, decreasing $1.6 billion in September, but increasing $13.4 billion in August and $3.6 billion in July. Other holdings, primarily Time Deposits, decreased $1.0 billion (-0.8%) to $120.8 billion, or 2.4% of holdings, after increasing $16.0 billion in November, decreasing $1.1 billion in September, $1.8 billion in August and increasing $17.3 billion in July. VRDNs fell to $10.1 billion, or 0.2% of assets. (Note: This total is VRDNs for taxable funds only. We will post our Tax Exempt MMF holdings separately Thursday around noon.)
Prime money fund assets tracked by Crane Data jumped to $1.019 trillion, or 20.5% of taxable money funds' $4.967 trillion total. Among Prime money funds, CDs represent 15.1% (up from 14.9% a month ago), while Commercial Paper accounted for 25.8% (up from 25.6% in October). The CP totals are comprised of: Financial Company CP, which makes up 17.5% of total holdings, Asset-Backed CP, which accounts for 3.9%, and Non-Financial Company CP, which makes up 4.4%. Prime funds also hold 7.5% in US Govt Agency Debt, 3.6% in US Treasury Debt, 27.4% in US Treasury Repo, 0.4% in Other Instruments, 9.6% in Non-Negotiable Time Deposits, 4.4% in Other Repo, 3.9% in US Government Agency Repo and 0.6% in VRDNs.
Government money fund portfolios totaled $2.713 trillion (54.6% of all MMF assets), down from $2.726 trillion in October, while Treasury money fund assets totaled another $1.234 trillion (24.8%), down from $1.266 trillion the prior month. Government money fund portfolios were made up of 18.8% US Govt Agency Debt, 11.1% US Government Agency Repo, 15.6% US Treasury Debt, 54.3% in US Treasury Repo, 0.0% in Other Instruments. Treasury money funds were comprised of 55.6% US Treasury Debt and 44.3% in US Treasury Repo. Government and Treasury funds combined now total $3.947 trillion, or 79.5% of all taxable money fund assets.
European-affiliated holdings (including repo) increased by $22.2 billion in November to $429.8 billion; their share of holdings jumped to 8.7% from last month's 8.2%. Eurozone-affiliated holdings decreased to $266.7 billion from last month's $273.6 billion; they account for 5.4% of overall taxable money fund holdings. Asia & Pacific related holdings jumped to $215.4 billion (4.3% of the total) from last month's $200.2 billion. Americas related holdings fell to $4.317 trillion from last month's $4.379 trillion, and now represent 86.9% of holdings.
The overall taxable fund Repo totals were made up of: US Treasury Repurchase Agreements (down $82.3 billion, or -3.5%, to $2.298 trillion, or 46.3% of assets); US Government Agency Repurchase Agreements (up $58.4 billion, or 20.5%, to $343.5 billion, or 6.9% of total holdings), and Other Repurchase Agreements (down $0.5 billion, or -1.2%, from last month to $45.3 billion, or 0.9% of holdings). The Commercial Paper totals were comprised of Financial Company Commercial Paper (up $10.4 billion to $178.0 billion, or 3.6% of assets), Asset Backed Commercial Paper (up $0.3 billion to $40.1 billion, or 0.8%), and Non-Financial Company Commercial Paper (down $3.0 billion to $44.6 billion, or 0.9%).
The 20 largest Issuers to taxable money market funds as of Nov. 30, 2022, include: the Federal Reserve Bank of New York ($1.999T, 40.2%), US Treasury ($1,146.3, 23.1%), Federal Home Loan Bank ($479.1, 9.6%), Fixed Income Clearing Corp ($125.0B, 2.5%), Federal Farm Credit Bank ($98.2B, 2.0%), RBC ($87.5B, 1.8%), JP Morgan ($69.1B, 1.4%), Barclays PLC ($62.1B, 1.2%), BNP Paribas ($55.3B, 1.1%), Citi ($48.9B, 1.0%), Sumitomo Mitsui Banking Corp ($46.1B, 0.9%), Mitsubishi UFJ Financial Group Inc ($42.3B, 0.9%), `Mizuho Corporate Bank Ltd ($36.6B, 0.7%), Bank of America ($33.1B, 0.7%), Toronto-Dominion Bank ($30.9B, 0.6%), Nomura ($29.3B, 0.6%), Canadian Imperial Bank of Commerce ($28.3B, 0.6%), Credit Agricole ($27.8B, 0.6%), ING Bank ($25.5B, 0.5%) and Bank of Montreal ($24.4B, 0.5%).
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 ($1.999T, 74.4%), Fixed Income Clearing Corp ($125.0B, 4.7%), JP Morgan ($62.6B, 2.3%), RBC ($59.9B, 2.2%), BNP Paribas ($47.1B, 1.8%), Barclays PLC ($42.2B, 1.6%), Citi ($32.2B, 1.2%), Sumitomo Mitsui Banking Corp ($30.7B, 1.1%), Nomura ($29.3B, 1.1%) and Bank of America ($27.6B, 1.0%). The largest users of the $1.999 trillion in Fed RRP include: Goldman Sachs FS Govt ($146.5B), Vanguard Federal Money Mkt Fund ($120.9B), JPMorgan US Govt MM ($111.9B), Fidelity Govt Money Market ($111.5B), Fidelity Govt Cash Reserves ($101.3B), Morgan Stanley Inst Liq Govt ($78.1B), Fidelity Inv MM: Govt Port ($65.5B), Federated Hermes Govt ObI ($60.0B), American Funds Central Cash ($54.8B) and BlackRock Lq FedFund ($53.4B).
The 10 largest issuers of "credit" -- CDs, CP and Other securities (including Time Deposits and Notes) combined -- include: Mizuho Corporate Bank Ltd ($29.1B, 6.2%), RBC ($27.6B, 5.9%), Skandinaviska Enskilda Banken AB ($21.7B, 4.6%), Barclays PLC ($19.8B, 4.2%), Toronto-Dominion Bank ($19.6B, 4.2%), Mitsubishi UFJ Financial Group Inc ($18.8B, 4.0%), Citi ($16.7B, 3.6%), Credit Agricole ($15.6B, 3.3%), Australia & New Zealand Banking Group Ltd ($15.6B, 3.3%) and Sumitomo Mitsui Banking Corp ($15.4B, 3.3%).
The 10 largest CD issuers include: Sumitomo Mitsui Banking Corp ($13.8B, 9.0%), Mitsubishi UFJ Financial Group Inc ($13.4B, 8.7%), Mizuho Corporate Bank Ltd ($11.2B, 7.3%), Citi ($10.9B, 7.1%), Toronto-Dominion Bank ($9.7B, 6.3%), Canadian Imperial Bank of Commerce ($8.3B, 5.4%), Sumitomo Mitsui Trust Bank ($8.2B, 5.3%), Credit Agricole ($7.6B, 4.9%), Bank of Nova Scotia ($6.9B, 4.5%) and RBC ($6.3B, 4.1%).
The 10 largest CP issuers (we include affiliated ABCP programs) include: RBC ($16.5B, 7.4%), Barclays PLC ($9.9B, 4.4%), Toronto-Dominion Bank ($9.6B, 4.3%), Australia & New Zealand Banking Group Ltd ($8.9B, 4.0%), Bank of Nova Scotia ($8.1B, 3.6%), Bank of Montreal ($7.8B, 3.5%), National Australia Bank Ltd ($7.2B, 3.2%), UBS AG ($7.1B, 3.2%), JP Morgan ($6.5B, 2.9%) and BNP Paribas ($6.4B, 2.9%).
The largest increases among Issuers include: Federal Home Loan Bank (up $53.2B to $479.1B), Fixed Income Clearing Corp (up $50.5B to $125.0B), RBC (up $20.2B to $87.5B), Barclays PLC (up $19.2B to $62.1B), JP Morgan (up $17.0B to $69.1B), Nomura (up $6.1B to $29.3B), Citi (up $5.4B to $48.9), Mitsubishi UFJ Financial Group Inc (up $4.5B to $42.3B), Canadian Imperial Bank of Commerce (up $3.4B to $28.3B) and DNB ASA (up $3.1B to $6.1B).
The largest decreases among Issuers of money market securities (including Repo) in November were shown by: the Federal Reserve Bank of New York (down $127.1B to $1.999T), US Treasury (down $77.2B to $1.146T), Credit Agricole (down $5.6B to $27.8B), BNP Paribas (down $2.8B to $55.3B), Natixis (down $2.0B to $13.6B), ABN Amro Bank (down $1.5B to $11.4B), Banco Santander (down $1.0B to $10.8B), Bank of Nova Scotia (down $0.9B to $22.2B), Rabobank (down $0.9B to $6.4B) and Sumitomo Mitsui Banking Corp (down $0.8B to $46.1B).
The United States remained the largest segment of country-affiliations; it represents 82.7% of holdings, or $4.108 trillion. Canada (4.2%, $208.3B) was in second place, while Japan (3.9%, $192.2B) was No. 3. France (2.6%, $126.6B) occupied fourth place. The United Kingdom (1.9%, $94.4B) remained in fifth place. Netherlands (1.1%, $54.2B) was in sixth place, followed by Sweden (1.0%, $49.7B) Australia (0.8%, $38.4B), Germany (0.7%, $35.6B), and Switzerland (0.3%, $12.2B). (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 Nov. 30, 2022, Taxable money funds held 70.7% (down from 72.1%) of their assets in securities maturing Overnight, and another 6.4% maturing in 2-7 days (up from 5.1%). Thus, 77.1% in total matures in 1-7 days. Another 7.5% matures in 8-30 days, while 6.3% matures in 31-60 days. Note that over three-quarters, or 90.8% 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 4.5% of taxable securities, while 3.8% matures in 91-180 days, and just 0.9% 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 Friday, and we'll be writing our regular monthly update on the new Nov. 30 data for Monday's News. But we also uploaded a separate and broader Portfolio Holdings data set based on the SEC's Form N-MFP filings on Thursday. (We continue to merge the two series, and the N-MFP version is now available via our Holding file listings to Money Fund Wisdom subscribers.) Our new N-MFP summary, with data as of Nov. 30, includes holdings information from 992 money funds (down 1 from last month), representing assets of $5.147 trillion (down from $5.162 trillion). Prime MMFs now total $1.034 trillion, or 20.1% of the total. We review the new N-MFP data, and we also look at our revised MMF expense data, which shows charged expenses and money fund revenues inched higher in November. (Note: There's still time to register for next week's Money Fund University, which will take place Dec. 15-16 in Boston!)
Our latest Form N-MFP Summary for All Funds taxable and tax-exempt) shows Repurchase Agreement (Repo) holdings in money market funds decreased to $2.707 trillion (down slightly from $2.735 trillion), or 52.6% of all assets. Treasury holdings totaled $1.171 trillion (down from $1.221 trillion), or 22.7% of all holdings, and Government Agency securities totaled $600.1 billion (up from $548.6 billion), or 11.7%. Holdings of Treasuries, Government agencies and Repo (almost all of which is backed by Treasuries and agencies) combined total $4.478 trillion, or a massive 87.0% of all holdings.
Commercial paper (CP) totals $270.9 billion (up from $263.6 billion), or 5.3% of all holdings, and the Other category (primarily Time Deposits) totals $160.7 billion (up from $159.8 billion), or 3.1%. Certificates of Deposit (CDs) total $154.0 billion (up from $149.6 billion), 3.0%, and VRDNs account for $83.1 billion (down from $83.5 billion last month), or 1.6% of money fund securities.
Broken out into the SEC's more detailed categories, the CP totals were comprised of: $178.7 billion, or 3.5%, in Financial Company Commercial Paper; $40.8 billion or 0.8%, in Asset Backed Commercial Paper; and, $51.4 billion, or 1.0%, in Non-Financial Company Commercial Paper. The Repo totals were made up of: U.S. Treasury Repo ($2.316 trillion, or 45.0%), U.S. Govt Agency Repo ($344.5B, or 6.7%) and Other Repo ($46.4B, or 0.9%).
The N-MFP Holdings summary for the Prime Money Market Funds shows: CP holdings of $265.6 billion (up from $258.7 billion), or 25.7%; Repo holdings of $367.3 billion (down from $382.3 billion), or 35.5%; Treasury holdings of $42.0 billion (up from $35.6 billion), or 4.1%; CD holdings of $154.0 billion (up from $149.6 billion), or 14.9%; Other (primarily Time Deposits) holdings of $119.8 billion (up from $118.8 billion), or 11.6%; Government Agency holdings of $79.0 billion (up from $62.9 billion), or 7.6% and VRDN holdings of $6.3 billion (down from $6.4 billion), or 0.6%.
The SEC's more detailed categories show CP in Prime MMFs made up of: $178.7 billion (up from $168.6 billion), or 17.3%, in Financial Company Commercial Paper; $40.8 billion (up from $40.5 billion), or 3.9%, in Asset Backed Commercial Paper; and $46.1 billion (down from $49.6 billion), or 4.5%, in Non-Financial Company Commercial Paper. The Repo totals include: U.S. Treasury Repo ($281.7 billion, or 27.2%), U.S. Govt Agency Repo ($40.2 billion, or 3.9%), and Other Repo ($45.4 billion, or 4.4%).
In related news, money fund charged expense ratios (Exp%) were unchanged in November remaining at 0.39% from the prior month (after jumping earlier this year from 0.08% at the start of 2022). Our Crane 100 Money Fund Index and Crane Money Fund Average were 0.27% and 0.39%, respectively, as of Nov. 30, 2022. 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 Thursday 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.
Our Crane 100 Money Fund Index, a simple average of the 100 largest taxable money funds, shows an average charged expense ratio of 0.27%, up 1 bp from last month's level (19 bps higher than 12/31/21's 0.08%). The average is now back at the level (0.27%) as it was on Dec. 31, 2019, so we estimate that funds are now charging normal expenses (but starting to waive some fees for competitive purposes). The Crane Money Fund Average, a simple average of all taxable MMFs, showed a charged expense ratio of 0.39% as of Nov. 30, 2022, unchanged from the month prior and now slightly below the 0.40% at year-end 2019.
Prime Inst MFs expense ratios (annualized) average 0.32% (unchanged from last month), Government Inst MFs expenses average 0.28% (unchanged from previous month), Treasury Inst MFs expenses average 0.31% (up 1 bp from last month). Treasury Retail MFs expenses currently sit at 0.52%, (unchanged from last month), Government Retail MFs expenses yield 0.53% (up 1 bp from last month). Prime Retail MF expenses averaged 0.50% (up 1 bp from the previous month). Tax-exempt expenses were unchanged at 0.41% on average.
Gross 7-day yields rose again during the month ended Nov. 30, 2022. (Yields should jump again later in December following an expected Dec. 14 50 bps Fed hike.) The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 746), shows a 7-day gross yield of 3.81%, up 67 bps from the prior month. The Crane Money Fund Average has passed the 1.72% at the end of 2019 and up from 0.15% the end of 2020 and 0.09% at the end of 2021. Our Crane 100's 7-day gross yield was up 66 bps, ending the month at 3.75%.
According to our revised MFI XLS and Crane Index numbers, we now estimate that annualized revenue for all money funds is $13.550 billion (as of 11/30/22). Our estimated annualized revenue totals increased from $13.226B last month and from $13.171B two months ago. Revenue levels are still more than four times larger than May's record low $2.927B level. Charged expenses and gross yields are driven by a number of variables, but revenues should continue their upwards trend over the next month as MMFs see inflows from bank deposits.
Crane Data's latest monthly Money Fund Market Share rankings show assets were mostly higher among the largest U.S. money fund complexes in November. Money market fund assets increased $55.4 billion, or 1.1%, last month to $5.120 trillion. Assets increased by $79.2 billion, or 1.6%, over the past 3 months, and they've increased by $76.4 billion, or 1.5%, over the past 12 months. The largest increases among the 25 largest managers last month were seen by Schwab, Goldman Sachs, UBS, Invesco and Western, which grew assets by $17.7 billion, $16.1B, $8.2B, $6.9B and $5.5B, respectively. Large declines in November were seen by SSGA and BlackRock, which decreased by $13.4 billion and $6.9B, 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, and look at money fund yields, which jumped again in November, below.
Over the past year through Nov. 30, 2022, Schwab (up $107.2B, or 74.6%), American Funds (up $74.6B, or 54.5%), Goldman Sachs (up $49.7B, or 13.0%), Fidelity (up $49.6B, or 5.5%) and Invesco (up $42.3B, or 48.4%) were the largest gainers. Schwab, Goldman Sachs, Fidelity, Invesco and UBS had the largest asset increases over the past 3 months, rising by $57.5B, $52.1B, $30.8B, $15.9B and $12.9B, respectively. The largest decliners over 12 months were seen by: BlackRock (down $62.7B), JP Morgan (down $57.2B), Northern (down $53.7B), Morgan Stanley (down $48.6B) and Allspring (down $41.4B). The largest decliners over 3 months included: SSGA (down $32.9B), Morgan Stanley (down $18.0B), BlackRock (down $12.1B), JPMorgan (down $11.7B) and Northern (down $9.8B).
Our latest domestic U.S. Money Fund Family Rankings show that Fidelity Investments remains the largest money fund manager with $951.3 billion, or 18.6% of all assets. Fidelity was up $5.3B in November, up $30.8 billion over 3 mos., and up $49.6B over 12 months. BlackRock ranked second with $465.5 billion, or 9.1% market share (down $6.9B, down $12.1B and down $62.7B for the past 1-month, 3-mos. and 12-mos., respectively). Vanguard ranked in third place with $452.7 billion, or 8.8% of assets (up $1.2B, down $4.2B and down $3.3B). Goldman Sachs ranked fourth with $431.5 billion, or 8.4% market share (up $16.1B, up $52.1B and up $49.7B), while JPMorgan was the fifth largest MMF manager with $409.2 billion, or 8.0% of assets (up $359M, down $11.7B and down $57.2B for the past 1-month, 3-mos. and 12-mos.).
Federated Hermes was in sixth place with $337.6 billion, or 6.6% (up $3.3B, down $967M and up $4.9B), while Schwab was in seventh place with $251.0 billion, or 4.9% of assets (up $17.7B, up $57.5B and up $107.2B). Morgan Stanley ($244.3B, or 4.8%) was in eighth place (up $4.9B, down $18.0B and down $48.6B), followed by Dreyfus ($242.4B, or 4.7%; down $553M, down $3.8B and down $6.8B). American Funds was in 10th place ($211.4B, or 4.1%; unchanged, up $129M and up $74.6B).
The 11th through 20th-largest U.S. money fund managers (in order) include: SSGA ($158.3B, or 3.1%), Allspring (formerly Wells Fargo) ($151.6B, or 3.0%), Northern ($140.6B, or 2.7%), Invesco ($129.7B, or 2.5%), First American ($115.6B, or 2.3%), HSBC ($64.7B, or 1.3%), UBS ($62.9B, or 1.2%), T. Rowe Price ($50.6B, or 1.0%), DWS ($37.3B, or 0.7%) and Western ($31.8B, or 0.6%). Crane Data currently tracks 61 U.S. MMF managers, unchanged from 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: JPMorgan moves up to the No. 3 spot, Vanguard moves down to the No. 5 spot, Morgan Stanley moves up to the No. 7 spot, Dreyfus moves up to the No. 8 spot, and Schwab falls to the 9th 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 ($961.2 billion), BlackRock ($686.7B), JP Morgan ($588.4B), Goldman Sachs ($569.6B) and Vanguard ($452.7B). Federated Hermes ($345.2B) was in sixth, Morgan Stanley ($306.6B) was seventh, followed by Dreyfus/BNY Mellon ($261.4B), Schwab ($251.0B) and American Funds ($211.4B), 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 December issue of our Money Fund Intelligence and MFI XLS, with data as of 11/30/22, shows that yields jumped again in November across the Crane Money Fund Indexes. The Crane Money Fund Average, which includes all taxable funds covered by Crane Data (currently 746), rose to 3.37% (up 59 bps) for the 7-Day Yield (annualized, net) Average, the 30-Day Yield increased to 3.25% (up 57 bps). The MFA's Gross 7-Day Yield rose to 3.71% (up 61 bps), and the Gross 30-Day Yield also moved up to 3.59% (up 61 bps). (Gross yields will be revised Thursday at noon, though, once we download the SEC's Form N-MFP data for 11/30/22.)
Our Crane 100 Money Fund Index shows an average 7-Day (Net) Yield of 3.57% (up 72 bps) and an average 30-Day Yield at 3.46% (up 67 bps). The Crane 100 shows a Gross 7-Day Yield of 3.73% (up 67 bps), and a Gross 30-Day Yield of 3.63% (up 63 bps). Our Prime Institutional MF Index (7-day) yielded 3.66% (up 72 bps) as of November 30. The Crane Govt Inst Index was at 3.37% (up 63 bps) and the Treasury Inst Index was at 3.46% (up 61 bps). Thus, the spread between Prime funds and Treasury funds is 20 basis points, and the spread between Prime funds and Govt funds is 29 basis points. The Crane Prime Retail Index yielded 3.50% (up 71 bps), while the Govt Retail Index was 3.05% (up 56 bps), the Treasury Retail Index was 3.28% (up 66 bps from the month prior). The Crane Tax Exempt MF Index yielded 1.49% (down 33 bps) as of November 30.
Gross 7-Day Yields for these indexes to end November were: Prime Inst 3.93% (up 70 bps), Govt Inst 3.63% (up 62 bps), Treasury Inst 3.73% (up 60 bps), Prime Retail 3.90% (up 66 bps), Govt Retail 3.53% (up 54 bps) and Treasury Retail 3.67% (up 61 bps). The Crane Tax Exempt Index dropped to 1.47% (down 20 bps). The Crane 100 MF Index returned on average 0.28% over 1-month, 0.70% over 3-months, 1.12% YTD, 1.12% over the past 1-year, 0.56% over 3-years (annualized), 1.06% over 5-years, and 0.62% over 10-years.
The total number of funds, including taxable and tax-exempt, rose by 5 in November to 889. There are currently 746 taxable funds, up 5 from the previous month, and 143 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 December issue of our flagship Money Fund Intelligence newsletter, which will be sent out to subscribers Wednesday morning, features the articles: "Top 10 Stories of 2022: Rising Yields, Reform Reactions, D&I," which highlights Crane Data's biggest News pieces of the past year; "J.P. Morgan's 2023 Outlook: Supply-Demand Gap Narrows," which reviews the outlook for money markets in the coming year; and, "BlackRock's Circle Reserve Fund USDC Stablecoin," which covers the new money market fund used by the USDC stablecoin. We will also send out our MFI XLS spreadsheet Wednesday a.m., and we've updated our Money Fund Wisdom database with 11/30/22 data. Our December Money Fund Portfolio Holdings are scheduled to ship on Friday, Dec. 9, and our December Bond Fund Intelligence is scheduled to go out on Wednesday, Dec. 14. (Note: Our MFI, MFI XLS and Crane Index products are all available to subscribers via our Content center. Note too: Register ASAP for our Money Fund University, Dec. 15-16 in Boston, Mass, at the Hyatt Regency. Clients are welcome to stop by Crane Data's Holiday Cocktail Party at MFU on 12/15 from 5-7pm!)
MFI's "Top 10 Stories" article says, "After almost two years of zero interest rates, money fund yields skyrocketed in 2022, rising from 0.02% to 3.60% (Crane 100 MF Index). While this was the biggest story of the year, money funds also spent time discussing the SEC's Money Fund Reform Proposal from December 2021. (We're still waiting for the final rules to come out any day now.) Other major themes of the past year included: the pivot of ESG money funds towards Social MMFs, carnage in the stock and bond fund markets and asset outflows from ultra-shorts, the increase in yields in European and worldwide markets, and the end of fee waivers. Below, we excerpt from a number of our biggest stories to highlight the major trends of 2022."
It continues, "Crane Data's Top 10 Stories of 2022 include (in chronological order): 'Rolling w/Reform Changes IV: Recap of '21 Exits & Entries, ESG & News' (1/4/22); 'ESMA Proposes Reforms to European Money Market Fund Regulations' (2/22/22); 'Dreyfus Announces New BOLD D&I Share Class with Howard University' (3/1/22); 'BlackRock: Redemption Fee Simpler Than Swing Pricing; Sliding Scale' (4/21/22); 'Money Fund Yields Break 0.50%; Fidelity Hikes Sweep Rate; ICI Holdings' (5/17/22); 'AFP's 2022 Liquidity Shows Deposits, MMFs, T-Bills Still Kings of Cash' (6/17/22); 'Schwab CFO Crawford Discusses Cash 'Sorting,' End of Fee Waivers in Q2' (8/3/22); 'Third 75's a Charm for Fed, Rates Head to 3%; Money Funds in the News' (9/22/22); 'European MMFs Jump on Sterling Surge, Euro Yields Positive; MFII Holds' (10/18/22); 'Money Funds Hot and Getting Hotter: Barron’s, and, WSJ, FT Feature Articles' (10/24/22). (As a bonus #11, see too: 'Fed Hikes 6th Time; Rates Head to 4%; Prime Over $1 Tril.; More Swing (11/3/22).'"
Our "2023 Outlook" piece states, "J.P. Morgan published its 'Short-Term Fixed Income 2023 Outlook' last week, and titled it, 'More supply and higher yields, what's not to like?' Authors Teresa Ho, Pankaj Vohra and Holly Cunningham tell us, 'The sharp rise in rates this year was a welcome relief for the US money markets -- markets that were plagued by the Fed's zero interest rate policy for at least two years. Even so, it was not all good news, as high inflation and tight labor markets pushed the Fed to embark on one of the most aggressive tightening cycles in modern history. In response, liquidity investors significantly shortened duration at a time when the supply-and-demand mismatch in the money markets was substantial.'"
It Continues, "They say, '[T]his pushed short-dated T-bills and SOFR to trade meaningfully through RRP.... All told, balances at the Fed's ON RRP continued to grow, increasing from $1.5tn ... to $2.1tn, as investors used the facility as a source of backstop supply, to shorten duration, and/or to [support] their yields.'"
Our "Circle Reserves" piece states, "BlackRock recently launched a new Treasury (and repo) money market fund, Circle Reserve Fund, exclusively for Circle Internet Financial, which offers one of the largest stablecoins, USDC. The fund, with ticker USDXX (for its Institutional Shares), was launched on November 3, and has already grown to a hefty $15.9 billion. It has an expense ratio of 0.21% (0.17% after waivers), a minimum initial investment of $2 billion, a WAM (weighted average maturity) of 41 days and a 7-day yield of 3.86% (as of 11/30). BlackRock is the Manager and Distributor, while BNY Mellon is the Custodian and Accounting Services Provider, according to the fund's N-1A registration filing. USDC is approximately $43.9 billion in size, while the largest stablecoin, Tether, is $65.9 billion (though the latter has been decreasing of late)."
MFI writes, "An article from Coindesk, entitled, 'Circle Begins Putting Reserves Into New BlackRock Fund,' explains, 'Circle Internet Financial has begun moving the reserves for its USDC stablecoin into a dedicated fund set up by BlackRock and registered with the U.S. Securities and Exchange Commission, the company disclosed.... The Circle Reserve Fund -- a government money market fund managed by BlackRock Advisors -- has been in the works for months after BlackRock initially sought to register it in May. Circle will be its only eligible investor, and the stablecoin issuer has already started putting its reserves there, expecting to be 'fully transitioned' by the end of March.'"
MFI also includes the News brief, "Crane 100 Money Fund Index Hits 3.60%, Top MFs Break 4.0%." It says, "Money fund yields jumped again last month; our Crane 100 (7-Day Yield) rose 72 bps to 3.57% in Nov. (and has risen to 3.61% since). Eight money funds are yielding 4.0% or higher. Sweep rates also continue inching up, as Fidelity hiked its FDIC insured rates to 1.94%. Brokerage Sweeps average 0.43%."
Another News brief, "Retail MMFs Hit Record, Total Poised to Break," explains, "Crane Data's totals show assets rising $55.4 billion in November to $5.121 trillion, just below May 2020's record $5.163 trillion. ICI's latest weekly 'Money Market Fund Assets' report shows money fund assets jumping over the past week, the 4th increase in the past 5 weeks. Retail money fund assets hit a record $1.6 trillion recently."
Also, a sidebar, "NY Fed Blog: Deposit Betas," states, "The Federal Reserve Bank of New York's 'Liberty Street Economics' asks, 'How Do Deposit Rates Respond to Monetary Policy?' It tells us, 'When the Federal Open Market Committee (FOMC) wants to raise the target range for the fed funds rate, it raises the interest on reserve balances (IORB) paid to banks, the primary credit rate offered to banks, and the award rate paid to participants that in- vest in the overnight reverse repo (ON RRP) market to keep the fed funds rate within the target range.'"
Another sidebar, "MFs Bigger Than Bond Funds," says, "The Investment Company Institute's latest monthly 'Trends in Mutual Fund Investing' shows that money fund assets increased $36.8 billion in October to $4.607 trillion. Meanwhile, bond fund assets continued their steep decline, falling by $88.1 billion to $4.445 trillion. Money fund assets surpassed bond fund assets last month for the first time since 2010; bond funds have declined by over $1.1 trillion year-to-date in 2022. (The bond fund totals don't include bond ETFs, which total $1.204 trillion as of 10/31, according to ICI.)"
Our December MFI XLS, with November 30 data, shows total assets increased $55.4 billion to $5.121 trillion, after increasing $42.2 billion in October, $1.7 billion in September, $2.3 billion in August, $26.0 billion in July and $31.9 billion in June. They decreased $10.7 billion in May and $74.3 billion in April. MMFs increased $24.1 billion in March, decreased $34.6 billion in February and decreased $128.1 billion in January. Assets increased $104.6 billion in December and $49.7 billion in November. Our broad Crane Money Fund Average 7-Day Yield was up 63 bps to 3.37%, and our Crane 100 Money Fund Index (the 100 largest taxable funds) was up 72 bps to 3.57% in November.
On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA and the Crane 100 both were both higher at 3.69% and 3.73%, respectively. Charged Expenses averaged 0.38% and 0.26% for the Crane MFA and the Crane 100. (We'll revise expenses on Thursday once we upload the SEC's Form N-MFP data for 11/30/22.) The average WAM (weighted average maturity) for the Crane MFA was 16 days (up one day from previous month and the first increase in 11 months) while the Crane 100 WAM was also higher by one day at 15 days. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
Money fund yields inched higher yet again last week -- the Crane 100 Money Fund Index (7-Day Yield) rose 3 more basis points to 3.60% in the week ended Friday, 12/2. Yields rose by 3 basis points the previous week and are up from 2.88% on Oct. 31 and 2.66% on Sept. 30. Yields should jump again and approach 4.0% by year end, if, as expected, the Fed hikes rates again (probably by 50 bps) on Dec. 14. The top-yielding money market funds have broken above 4.0% and should move towards 4.5% in coming weeks (see our "Highest-Yielding Money Funds" table above). Brokerage Sweep rates also moved higher as Fidelity increased its FDIC insured sweep rate to 1.94% from 1.57%, which lifted our Brokerage Sweep Intelligence average up from 0.40% to 0.43%.
Our broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 678), shows a 7-day yield of 3.48%, up 4 bps in the week through Friday. Prime Inst MFs were up 2 bps to 3.74% in the latest week. Government Inst MFs rose by 4 bps to 3.47%. Treasury Inst MFs up 5 bps for the week at 3.50%. Treasury Retail MFs currently yield 3.30%, Government Retail MFs yield 3.25%, and Prime Retail MFs yield 3.58%, Tax-exempt MF 7-day yields were down at 1.47%.
According to Monday's Money Fund Intelligence Daily, with data as of Friday (12/2), just 140 funds (out of 817 total) still yield between below 2.0%, with assets of $118.8 billion, or 2.3% of total assets; 57 funds yielded between 2.00% and 2.99% with $54.6 billion, or 1.1%; 620 funds yield 3.00% or more ($4.968 trillion, or 96.6%), and 14 funds have now officially broken over the 4.0% yield barrier.
Brokerage sweep rates saw just one change over the past week, but it was a biggie. Our Crane Brokerage Sweep Index, the average rate for brokerage sweep clients (almost all of which are swept into FDIC insured accounts; only Fidelity sweeps to a money market fund), was up 3 bps this past week at 0.43% and is up from 0.34% at the start of November. The latest Brokerage Sweep Intelligence, with data as of Dec. 2, shows that Fidelity increased rates to 1.94% for all balances between $1 and over $5 million. Just 3 of 11 major brokerages still offer rates of 0.01% for balances of $100K (and lower tiers). These include: E*Trade, Merrill Lynch and Morgan Stanley.
In other news, the Office of Financial Research (OFR) published a brief entitled, "OFR's Pilot Provides Unique Window Into the Non-centrally Cleared Bilateral Repo Market." It explains, "The repurchase agreement (repo) market is a foundational component of the U.S. financial system, providing trillions of dollars of daily funding and facilitating liquidity for U.S. Treasuries and other securities. The repo market allows participants to borrow cash against securities pledged as collateral, with an obligation to repurchase those securities in the future."
The OFR writes, "The U.S. repo market can be divided into four major segments, depending on two factors: One, whether the trades are settled bilaterally or through a triparty custodian, and two, whether the trades are centrally cleared or non-centrally cleared. The largest of the four segments, with an estimated market size exceeding $2 trillion outstanding, is the non-centrally cleared bilateral repo (NCCBR). This is the only segment of the market that contains neither a central counterparty nor a triparty custodian."
They continue, "Despite the increase in market transparency provided by the OFR's Centrally Cleared Repo Data Collection and the Federal Reserve's collection of non-centrally cleared triparty repo, the NCCBR segment remains opaque to regulators. Even the traders who conduct business in this market have little direct visibility into the competitive landscape. Given the size and importance of this market, regulators have expressed concern over this lack of transparency."
OFR tells us, "As a starting point to provide regulators with more information on the market, the OFR secured the voluntary participation of nine dealers for a pilot data collection. These dealers include primary dealers and nonprimary dealers, bank affiliated and nonbank affiliated dealers, and both purely domestic dealers and dealers that are affiliates of foreign institutions."
They add, "[O]ur pilot captured $373 billion in repo and $536 billion in reverse repo by pilot participants, which is higher than participants' total volumes outstanding in cleared repo segments, both for their repo and reverse repo exposures. While the total size of the non-centrally cleared repo market is unknown, assuming it is roughly $2 trillion would mean that these pilot participants make up roughly 50% of total non-centrally cleared bilateral repo."
Finally, Federated Hermes' Deborah Cunningham wrote recently in her monthly update, "Just the facts: FOMC voters must stick to the data to make their next decision on rates." She explains, "For a word so central to many fields, it's fascinating that we can't decide if 'data' should be a singular or plural noun. The vernacular has veered to the former, kicking 'datum' to the curb. Many analysts, economists and scientists prefer using the grammatically correct latter configuration."
She comments, "Of course, the Federal Reserve is always dependent on what the data show/shows. But gut feelings and abstract theories play a role. That shouldn't be the case for the Federal Open Market Committee's (FOMC) mid-December meeting. The markets are likely to interpret a downshift to a half-percentage-point hike as a change in monetary policy as investors are looking for any indication this tightening cycle will end. If the FOMC makes that move only to return to a three-quarter point hike in January, it risks losing credibility. That it cannot afford."
Cunningham also says, "A brief word about the impact on the money markets from the downfall of the FTX crypto exchange: none. The short-term securities in which we invest traded steadily after the news broke, with no spread widening. Traditionally, an exchange is where the collateral resides that backs something. FTX's collateral, whatever it was, has allegedly declined by many billions. But it doesn't appear to have flowed into the secondary market in any material amount."
She adds, "Across the money markets in November, prime funds ruled the roost again, led by a high influx of assets into retail prime products. Government fund flows were flat, and tax-free funds pulled back. The latter reflected the downward pressure on SIFMA caused by low issuance as municipalities still are flush with stimulus cash. We continued to position our portfolios short overall to capture rate hikes, maintaining Weighted Average Maturities (WAMs) in a 25-35 day range for our government money market funds and between 15-25 days for our prime and tax-free money funds."
After almost two years of zero interest rates caused by the coronavirus pandemic, money fund yields skyrocketed in 2022, rising from 0.02% to 3.60% (and still rising), based on our Crane 100 Money Fund Index. While this was no doubt the biggest story of 2022, money funds also spent a lot of time discussing the SEC's Money Fund Reform Proposal (from December 2021). (We're still waiting for the final rules to come out any day now.) Other major themes of the past year included: the pivot of ESG money funds towards Social MMFs, carnage in the stock and bond fund markets and asset outflows from ultra-shorts, the increase in yields in European and worldwide markets, and the end of fee waivers. Below, we excerpt from a number of our biggest and most representative news stories of 2022 to remind readers and to highlight the major trends of the past year. (Note: As a reminder, register ASAP for our Money Fund University, Dec. 15-16 in Boston, Mass, at the Hyatt Regency. Clients and friends are also welcome to stop by Crane Data's Holiday Cocktail Party at MFU on 12/15 from 5-7pm!)
Crane Data's Top 10 Stories of 2022 include (in chronological order): "Rolling w/Reform Changes IV: Recap of '21 Exits & Entries, ESG & News" (1/4/22); "ESMA Proposes Reforms to European Money Market Fund Regulations" (2/22/22); "Dreyfus Announces New BOLD D&I Share Class with Howard University" (3/1/22); "BlackRock: Redemption Fee Simpler Than Swing Pricing; Sliding Scale" (4/21/22); "Money Fund Yields Break 0.50%; Fidelity Hikes Sweep Rate; ICI Holdings" (5/17/22); "AFP's 2022 Liquidity Shows Deposits, MMFs, T-Bills Still Kings of Cash" (6/17/22); "Schwab CFO Crawford Discusses Cash 'Sorting,' End of Fee Waivers in Q2" (8/3/22); "Third 75's a Charm for Fed, Rates Head to 3%; Money Funds in the News" (9/22/22); "European MMFs Jump on Sterling Surge, Euro Yields Positive; MFII Holds" (10/18/22); "Money Funds Hot and Getting Hotter: Barron's, and, WSJ, FT Feature Articles" (10/24/22). (As a bonus #11, see too: "Fed Hikes 6th Time; Rates Head to 4%; Prime Over $1 Tril.; More Swing" (11/3/22).)
Early in 2022, we reported on reform changes, news and moves of the previous year (many of these trends continued into this year). Our Jan. 4 story, "Rolling w/Reform Changes IV: Recap of '21 Exits & Entries, ESG & News," told readers, "In January 2016, money market mutual funds were in the midst of a series of dramatic changes ahead of October 2016's Money Fund Reforms, the biggest changes to money fund regulations since their introduction in October 1970. Five years ago, we ran the story, 'Rolling w/Reform Changes II: Recap of '15 Announcements, '16 Plans,' which reviewed a number of major changes among the largest managers that took place during 2015. As in the past year, exits from Prime MMFs and fund repositioning were notable trends. Today, we examine the Covid-19 driven changes and general fund actions over the past year, as we prepare for potential regulatory changes and more fund lineup shifts in the New Year."
For more stories related to reforms, check out these news pieces, "SEC Proposes MMF Reforms: More Liquidity, No Gates/Fees, Swing Pricing" (12/16/21); "More Reforms: SEC Commissioners Comment on Controversial Proposal" (12/27/21); and "Kitchen Sink II: SEC Doubles Down on Disclosures in MF Reform Proposal" (12/29/21). See also last year's "Top 10 List" and Dec. 10, 2021 News, "Top 10 Stories of 2021: More Regulations; Zero Yields; ESG; Changes?" (Note: Readers may also review "Crane Data's News," "Link of the Day" and "Money Fund Intelligence Archives" for more stories from the past year, 5 years and decade-plus.)
Our February 22 story, "ESMA Proposes Reforms to European Money Market Fund Regulations" highlights the possibility of further money market fund reforms in Europe. It reviews the press release, "ESMA Proposes Reforms to Improve Resilience of Money Market Funds," which tells us, "The European Securities and Markets Authority (ESMA), the EU's securities markets regulator, is issuing an Opinion containing proposed reforms to the regulatory framework for EU Money Market Funds (MMFs) under the Money Market Funds Regulation (MMFR). The proposals will improve the resilience of MMFs by addressing in particular liquidity issues and the threshold effects for constant net asset value (CNAV) MMFs." See ESMA's "Final Report - ESMA Opinion on the Review of the Money Market Fund Regulation" and their "Final Report - Guidelines on Stress Test Scenarios Under the MMF Regulation 2021."
Our March 1 News, "Dreyfus Announces New BOLD D&I Share Class with Howard University" discusses the launch of a newer type of 'directed charity' share class. We wrote, "After 2-month pause following the release of the SEC's Money Fund Reform Proposals, the D&I and ESG money market fund space appears to be heating up again. A new press release entitled, 'Dreyfus launches BOLD shares supporting Howard University,' tells us, 'Dreyfus Cash Investment Strategies (Dreyfus), BNY Mellon Investment Management's affiliated liquidity manager, ... announced a partnership with Howard University to help support its students in their educational journey with the launch of a new BOLD share class for the Dreyfus Government Cash Management fund. Offered through Dreyfus' largest money market fund, 10% of the BOLD shares net revenue, with a minimum of $300,000, will be donated to Howard's Graduation Retention Access to Continued Excellence (GRACE) Grant annually.'"
In April, we published, "BlackRock: Redemption Fee Simpler Than Swing Pricing; Sliding Scale," one of the major comments to the SEC on its proposed reforms. It starts, "Earlier this week, we excerpted from recent 'Comments on Money Market Fund Reform' posted by the SEC, including one from the largest money fund manager, Fidelity Investments and one from mutual fund trade group ICI. Today, we quote from the second largest MMF manager, BlackRock. Elizabeth Kent and Jonathan Steel write, 'BlackRock supports the Securities and Exchange Commission's efforts to continue to improve the resiliency and transparency of United States money market funds. The proposal, which incorporates certain feedback from market participants in response to the December 2020 President's Working Group Paper on potential MMF reform options, represents a positive step toward the Commission's goal of making MMFs more resilient during periods of stress.'"
See also these "comment letter" stories: "Comment Period Ends on SEC Reform Proposal; Allspring PM Commentary" (4/13/22); "Fidelity Comment Blasts SEC on Swing Pricing, Negative Yield Proposals" (4/19/22); "ICI's Pan Comments on Latest SEC MMF Reforms; ICI Holdings Summary" (4/20/22); "JP Morgan Comments on Reforms: Tiered Liquidity Fee Not Swing Pricing" (4/25/22); "Federated Hermes' MMF Reform Comments; Discretionary Liquidity Fee" (4/26/22); "Morgan Stanley, Dreyfus Comment on SEC's Money Fund Reform Proposal" (4/27/22); and "Keeping the Comments Coming: Allspring, SSGA, Capital Group Talk Regs" (4/28/22).
At the end of May, we started discussing Fed rate hikes in, "Money Fund Yield Break 0.50%; Fidelity Hikes Sweep Rate; ICI Holdings." This piece says, "It's been almost 2 weeks since the Federal Reserve raised its Federal funds rate by another 50 basis points, and money market fund yields continue to climb higher after a big jump last week. While they've yet to reflect the full 50 basis point increase (and may not entirely due to the last of the fee waivers being reduced), yields have risen noticeably since the March 16 25 bps hike and the May 4 50 bps hike. Our flagship Crane 100 Money Fund Index started March 2022 at 0.02% (where is had been pinned for 2 years), rose to 0.13% the week following the March hike, and has jumped to 0.52% as of Friday, 5/13. Brokerage sweep rates have also started to move. Our latest Brokerage Sweep Intelligence shows most brokerages still paying 0.01% yields (on FDIC insured deposits), but several brokerages raised rates this week."
A June story, "AFP's 2022 Liquidity Shows Deposits, MMFs, T-Bills Still Kings of Cash," highlighted parts of AFP's latest liquidity survey, which shows that bank deposits and money funds still dominate the cash world. It starts, "The Association For Financial Professionals, a group representing corporate treasurers, published its '2022 AFP Liquidity Survey'" (See AFP's press release and our June 15 Link of the Day, 'AFP Releases Liquidity Survey.')
Our August 3 update, "Schwab CFO Crawford Discusses Cash 'Sorting,' End of Fee Waivers in Q2," explains, "Charles Schwab & Co. recently hosted a '2022 Summer Business Update,' which discussed the brokerage company's latest quarter and mentioned cash and money markets in a number of places. (See Crane Data's July 25 Link of the Day, 'Schwab Earnings Driven by Rates.') CFO Peter Crawford comments, 'Our performance was obviously helped by higher interest rates across the curve, which boosted our net interest margin and BDA [bank deposit account] yield and eliminated money fund fee waivers by the end of the quarter.'"
In September, we wrote about rate hikes yet again in, "Third 75's a Charm for Fed, Rates Head to 3%; Money Funds in the News." This piece says, "The Federal Reserve raised short-term interest rates for the 5th time this year and hiked by 75 basis points for the third time in a row. The Federal funds target rate is now in a range from 3.0% to 3.25%, its highest level since 2008. Money fund yields should surge in coming days and should break 2.5% on average and approach 3.0% in coming weeks.'"
In October, we published, "European MMFs Jump on Sterling Surge, Euro Yields Positive; MFII Holds," which states, "Crane Data's latest Money Fund Intelligence International shows that assets in European or 'offshore' money market mutual funds jumped over the past month to $1.018 trillion led by a surge in GBP funds. European MMF assets broke back above $1 trillion level on Oct. 4 for the first time since early August, but they remain below their record high of $1.101 trillion in mid-December 2021. These U.S.-style money funds, domiciled in Ireland or Luxembourg but denominated in US Dollars, Pound Sterling and Euros, increased by $44.4 billion over the 30 days through 10/14. (Note that the increase in the U.S. dollar has caused Euro and Sterling totals to decline when they're translated back into dollars.) The totals are down $45.0 billion (-4.2%) year-to-date."
Another October News piece, "Money Funds Hot and Getting Hotter: Barron's, WSJ, FT Feature Articles," starts off, "Money market mutual funds are hot and getting hotter, with articles on them appearing in Barron's, The Wall Street Journal and the Financial Times.... Barron's piece, 'Yields on Money-Market Mutual Funds Near 3%. How to Buy In,' explains, 'Cash hasn't looked this good in money-market mutual funds for a long time. Yields are averaging 2.77% [now 3.60%], up from 0.02% in early January, according to Crane Data. Retail money funds could soon cross the 3% threshold, assuming that the Federal Reserve keeps raising its benchmark federal-funds rate. 'Money funds follow the Fed, so there's no mystery of where yields are going,' says Peter Crane, president and publisher of Crane Data and Money Fund Intelligence. 'You haven't seen 3% to 4% yields since prior to the [2008-09] financial crisis,' he adds.'" (See also November's, "Fed Hikes 6th Time; Rates Head to 4%; Prime Over $1 Tril.; More Swing.")
For more 2022 (and soon 2023) News (and prior years going back to 2006), see Crane Data's News Archives. We'll continue to provide daily updates on the money fund marketplace in the coming year, so keep reading our News and Link of the Day commentaries in 2023. Let us know if you need web access (unlimited access is for subscribers only), or if you'd like to see our latest Money Fund Intelligence, Bond Fund Intelligence or MFI Daily publications. Thanks to all of our readers and subscribers for your support in 2022, and we wish you all the best in the coming year. Merry Christmas, Happy Holidays and Happy New Year!
ICI's latest weekly "Money Market Fund Assets" report shows money fund assets jumping over the past week, their 4th increase in the past 5 weeks. Over the past 52 weeks, money fund assets are up by $49 billion, or 1.1%, with Retail MMFs rising by $182 billion (12.7%) and Inst MMFs falling by $133 billion (-4.2%). ICI shows assets down by $34 billion, or -0.7%, year-to-date, with Institutional MMFs down $180 billion, or -5.6% and Retail MMFs up $146 billion, or 9.9%. (Note: Register soon for our upcoming Money Fund University, which will be Dec. 15-16 in Boston!)
The weekly release says, "Total money market fund assets increased by $29.93 billion to $4.67 trillion for the eight-day period ended Wednesday, November 30, the Investment Company Institute reported.... Among taxable money market funds, government funds increased by $26.99 billion and prime funds increased by $6.15 billion. Tax-exempt money market funds decreased by $3.21 billion." ICI's stats show Institutional MMFs rising $25.9 billion and Retail MMFs increasing $4.1 billion in the latest week. Total Government MMF assets, including Treasury funds, were $3.953 trillion (84.6% of all money funds), while Total Prime MMFs were $609.3 billion (13.0%). Tax Exempt MMFs totaled $108.4 billion (2.3%).
ICI explains, "Assets of retail money market funds increased by $4.07 billion to $1.61 trillion. Among retail funds, government money market fund assets decreased by $1.00 billion to $1.14 trillion, prime money market fund assets increased by $7.11 billion to $372.92 billion, and tax-exempt fund assets decreased by $2.04 billion to $97.11 billion." Retail assets account for over a third of total assets, or 34.6%, and Government Retail assets make up 70.9% of all Retail MMFs.
They add, "Assets of institutional money market funds increased by $25.85 billion to $3.06 trillion. Among institutional funds, government money market fund assets increased by $27.99 billion to $2.81 trillion, prime money market fund assets decreased by $966 million to $236.40 billion, and tax-exempt fund assets decreased by $1.17 billion to $11.29 billion." Institutional assets accounted for 65.4% of all MMF assets, with Government Institutional assets making up 91.9% of all Institutional MMF totals.
For the month of November (through 11/30), MMF assets increased by $45.5 billion to $5.100 trillion according to Crane Data's Money Fund Intelligence XLS, which tracks a broader universe of funds than ICI. Crane Data's Prime asset totals, which broke the $1.0 trillion level three weeks ago, increased $34.4 billion last month to $1.030 trillion. Given that November and December are the two strongest months of the year seasonally, we expect even bigger inflows in December. (Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data, so they're over $400 billion lower than Crane's asset series.) According to MFI Daily, our Crane 100 Money Fund Index rose by 70 bps in November to 3.59%, while our broader Crane Money Fund Average rose by 68 bps to 3.46%.
In other news, we reviewed the new Circle Reserve Fund from BlackRock in yesterday's News, and mentioned The Wall Street Journal's story, "Rising Tether Loans Add Risk to Stablecoin, Crypto World." Today, we examine this article in more detail. The Journal writes, "The company behind the tether stablecoin has increasingly been lending its own coins to customers rather than selling them for hard currency upfront. The shift adds to risks that the company may not have enough liquid assets to pay redemptions in a crisis."
They explain, "Tether Holdings Ltd. says it lends only to eligible customers and requires that borrowers post lots of 'extremely liquid' collateral, which could be sold for dollars if borrowers default. These loans have appeared for several quarters in the financial reports that Tether shows on its website. In the most recent report, they reached $6.1 billion as of Sept. 30, or 9% of the company's total assets. They were $4.1 billion, or 5% of total assets, at the end of 2021."
The piece tells us, "Tether calls them 'secured loans' and discloses little about the borrowers or the collateral accepted. Alex Welch, a Tether spokeswoman, confirmed that all of the secured loans listed in the reports were issued and denominated in tether. The company said the loans were short-term and that Tether holds the collateral.'"
It adds, "The rise in Tether's lending represents a broad risk to the crypto world. Stablecoins such as tether are anchors in the system. They are vital for trading many cryptocurrencies and are widely held by traders. The premise of tether -- and other stablecoins -- is that the issuer always will redeem one coin for $1. Issuers take pains to demonstrate they have ample funds available to do so. The company's reports show only U.S. dollar amounts for the loans and don't say the loans were made in tether tokens. The reports also say the loans were 'fully collateralized by liquid assets.'"
They quote our Peter Crane, "I've been very skeptical and in disbelief that they can get away with the lack of disclosure and with the limited transparency.... If you do have reserves, why wouldn't you show them?"
BlackRock recently launched a new Treasury (and repo) money market fund, Circle Reserve Fund, exclusively for Circle Internet Financial, which offers one of the largest stablecoins, USDC. The fund, with ticker USDXX (for its Institutional Shares), was launched on November 3, and has already grown to a hefty $12.8 billion. It has an expense ratio of 0.21% (0.17% after waivers), a minimum initial investment of $2 billion, a WAM (weighted average maturity) of 41 days and a 7-day yield of 3.84% (as of 11/29). BlackRock is the Manager and Distributor, while BNY Mellon is the Custodian and Accounting Services Provider, according to the fund's N-1A registration filing. USDC is approximately $43.9 billion in size, while the largest stablecoin, Tether, is $65.9 billion (though the latter has been decreasing of late). (See too today's Wall Street Journal story, "Rising Tether Loans Add Risk to Stablecoin, Crypto World.")
An article from Coindesk, entitled, "Circle Begins Putting Reserves Into New BlackRock Fund," explains, "Circle Internet Financial has begun moving the reserves for its USDC stablecoin into a dedicated fund set up by BlackRock and registered with the U.S. Securities and Exchange Commission, the company disclosed.... The Circle Reserve Fund -- a government money market fund managed by BlackRock Advisors -- has been in the works for months after BlackRock initially sought to register it in May. Circle will be its only eligible investor, and the stablecoin issuer has already started putting its reserves there, expecting to be 'fully transitioned' by the end of March."
It says, "All of the company's short-term Treasury assets will be phased into the fund, though the cash reserve -- about 20% of the total -- will still be held in partner banks, [CFO Jeremy] Fox-Geen said, because it allows for customers to more easily redeem USDC around the clock. `But that's a temporary measure, he explained, because the ultimate goal is for BlackRock to apply -- in time -- to get the fund into the Federal Reserve's reverse-repo program.... These efforts will 'improve the risk profile and oversight and the disclosures around USDC reserve,' he said."
CoinDesk adds, "The current circulation of $43.9 billion in USDC is backed by $44.1 billion in cash and short-term U.S. government bonds, according to weekly company disclosures. The portfolio of the new fund will also consist of U.S. Treasury bonds. The assets will be held at the Bank of New York Mellon, according to Circle, where the fund will be subject to regulation under the Investment Company Act of 1940, which requires an independent board and daily reports on the portfolio. Circle had previously begun a financial relationship with BlackRock, the world's biggest asset manager, when the firm invested in Circle's funding round announced in April."
A blog posting on Circle's website, "Deepening Our Partnership with BlackRock," tells us, "From the start, we've managed the USDC reserve to minimize risk -- liquidity, counterparty, operational, reputational and more -- so that USDC holders can be confident their money is sound and redeemable 1:1 for U.S. dollars at any time. This has guided our approach to regulation, liquidity and transparency and shaped our strategy of partnering with leading financial institutions."
It continues, "Through our partnership with BlackRock, we have begun investing in the Circle Reserve Fund to manage a portion of the USDC reserves. We expect the reserve composition will continue to be approximately 20% cash and 80% short duration U.S. Treasuries. The Circle Reserve Fund is a registered Rule 2a-7 government money market fund managed by BlackRock Advisors, LLC and its portfolio will consist of cash and short-dated U.S. Treasuries."
The blog comments, "The Circle Reserve Fund is only available to Circle. As our existing Treasury holdings mature, the proceeds will be used to purchase new Treasuries by the Circle Reserve Fund. We began this process on November 3, 2022 and expect to be fully transitioned by the end of Q1 2023. The Fund is custodied at Bank of New York Mellon, which already serves as the custodian for the Treasuries that comprise the USDC reserve today."
In other news, Investment News recently wrote that, "Higher yields on cash give advisers another asset allocation tool." The article states, "It's possible cash could turn out to be the best-performing asset class in 2022, which means some challenging conversations and asset allocation strategies for financial advisers and their clients. While yields on cash accounts hovering near 4% provides a silver lining to the general economic malaise of the past few years by giving savers something for their idle cash, it hasn't yet convinced everyone that a better-yielding form of safety is the best short- or long-term play."
It warns, "But stiff-arming the higher yields on cash in exchange for a higher risk/reward scenario could become less appealing as the Federal Reserve continues to push rates higher in an effort to tamp down inflation. 'I think high rates are here to stay for a while,' said Gary Zimmerman, chief executive of the cash management platform MaxMyInterest. Zimmerman said the past decade of below-normal interest rates and cash yields stands in stark contrast to the current market. He believes that the future will bring a reversion to 'more normalized' higher interest rates and that the Fed is not done raising rates yet."
Finally, the piece quotes, "Frank Bonanno, managing director at StoneCastle Cash Management, agrees that the 'inflation tail will continue to wag the Fed' for a while.... Bonanno described the mountains of cash sitting outside of portfolios managed by advisers as 'lazy cash' that can 'languish for years earning little to nothing and is many times uninsured.' 'It behooves advisers to address this indolent cash and create value by helping clients safely earn, insure, and save more and lessen the effects of diminishing purchasing power and higher inflation,' he added. 'Cash earning 0.5%, can easily be turned into 4%.'"
