News Archives: September, 2022

State Street Global Advisors published a new "Monthly Cash Review" update entitled, "Ask April," which explains, "Portfolio Strategist William Goldthwait sits down with April Borawski, Portfolio Manager, to discuss the latest trends in money markets." (Note: For those attending our European Money Fund Symposium,, welcome to Paris! We look forward to 2 days of presentations and discussions on "offshore", European and global money market funds.)

Goldthwait says, "April, it's been a while since we have checked in with you on money markets. What has been going on over the past month or so?" Borawski responds, "Several of the themes we discussed in the past still hold true today, such as uncertainty on how aggressive the Fed will be on its monetary policy path. That, coupled with rich market levels on both the fixed and floating side has made it a challenging environment as an investor!"

He asks, "What is the cash management team most focused on in the current market environment?" She responds, "We have already had 225bps of rate hikes this year and it's possible we get another 75 in about a week [we got it]. In the US, the labor market remains very tight and the unemployment rate is hovering in the mid 3% range, levels not seen since the 1960s. Inflation remains elevated: Core PCE, the Fed's preferred measure of inflation, has averaged +4.9% YoY since the beginning of the year, levels that haven't been seen since the 1980's. Taken together, these conditions explain why the Fed has been so aggressive on raising rates."

Goldthwait also queries, "What has that meant for our cash strategies? Borawski answers, "We began to adjust our thinking, and therefore strategic positioning, as early as last fall. We chose to sit short, heavily invested in overnight repo and the Fed's RRP, instead of locking money up further out the curve at rates that could, and frequently did, underperform versus short-dated repo/the RRP. We felt the Fed was behind on raising rates and as time passed, the Fed clearly acknowledged that. Ultimately the Fed needed to tighten faster and sooner than many of our peers expected, resulting in an outperformance in our strategies versus our peers."

The Q&A also tells us, "There has been a lot of talk about the Fed's 'pivot', or when they might stop hiking and potentially ease policy rates, similar to what happened in 2018-2019. Does the team have any thoughts on a potential change in Fed rhetoric?" It explains, "As we continue along the Fed's hiking cycle, the timing of when funds choose to extend duration will be critical -- especially as we move towards an environment in which the Fed might need to pause or even cut rates. But, are we there yet? All signs point to no, we aren't there yet. The economy has proven to be robust enough to withstand aggressive policy moves for the foreseeable future, and we believe the Fed will make good on their promise to keep rates higher for longer in order to quell price pressures."

Goldthwait also asks, "What about forward guidance? Now that it is gone, what does that mean?" Borawski answers, "It was unclear what Powell meant when he said the end of 'clear guidance'. There is always room for debate around how the various Fed officials' words translate into rate hikes or cuts. At the time of this writing the market is back to pricing a 75bps September hike. Although before the recent WSJ article confirmed the FOMC wants a 75bps hike the market had been back and forth depending on what data and Fed rhetoric has hit the tape each day. Regardless, both Fed officials and the market are pointing to higher rates. Fed Funds Futures are pricing a policy rate that is close to 4% by the first quarter of next year. Chairman Powell also expressed the Fed's comfort in continuing to tighten at the Jackson Hole Symposium stating, '[I]n current circumstances, with inflation running far above 2 percent and the labor market extremely tight, estimates of longer-run neutral are not a place to stop or pause <b:>`_.'"

The update adds, "So the Fed keeps hiking? Yes. What remains unclear is the size and timing of additional rate hikes, making the decision of when to extend money market funds difficult. As I noted above, we will want to extend at some point, but currently most term investments offer little-to-no upside versus sitting in the Fed's RRP. Our shorter positioning has made our strategies a comfortable place to be. The time to extend is likely not upon us yet given current Fed and market expectations/pricing. Although, the window in which money market funds may have to extend could prove short, as the market might interpret any slowing in the Fed's hiking cycle as a harbinger of imminent rate cuts, i.e. the curve would invert, making extension less attractive. Therefore, funds must be willing and ready to add duration should market levels move closer to break-evens."

SSGA adds, "There has been a lot of discussion about T-Bill yields and how rich they are. What should we expect over the next few months? Over recent weeks Treasury Bill supply has increased by ~$210bn, a welcome shift for short-end investors. The increase in supply has helped nudge bill yields higher and closer to break-evens; although, the demand for bills continues to outpace supply. One clear indicator of the supply/demand imbalance is the roughly $2.1 trillion of demand for the Fed's RRP. Similar to T-bills, government agency discount note issuance has increased, pushing yields slightly higher. Although most of these agency discount notes offer a yield advantage versus their T-bill counterparts, their levels are still rich to break-even of rolling overnight repo. Thus we have limited interest. This trend is likely to persist in coming months."

Goldthwait also questions, "What about floating rate notes? How do they add value to the strategies <b:>`_?" Borawski says, "Through a typical market cycle, floating rate notes will add value in a cash strategy. The frequent reset and longer maturity allow you to capture term premium without the interest rate duration. At present we do not see a lot of value in adding meaningfully to our floating rate note positions, although we do add selectively to TFRNs (Treasury Floating Rate Notes). These positions have fared well given the continued steepness of the bill curve. Secured Overnight Financing Rate (SOFR) floaters remain just fine. What I mean by fine, is that given their one day interest rate duration and positive spread they should not underperform RRP, but they also do not help you meaningfully, as you would have to add a large position in order to add incremental yield to the strategy."

Finally, he asks, "So can you sum it up for us?" She responds, "We are still being paid to be cautious and respect an aggressive Fed. We continue to lean heavily on the Fed's RRP. We have added select positions in term maturities to hedge a little. Nonetheless, even with these term positions, we remain well positioned to move into additional and potentially aggressive rate hikes."

The Investment Company Institute published, "Worldwide Regulated Open-Fund Assets and Flows, Second Quarter 2022," which shows that money fund assets globally fell by $153.5 billion, or -1.8%, in Q2'22 to $8.482 trillion. The decreases were led by drops in money funds in the U.S., Ireland and Luxembourg. Meanwhile, money funds in China and Australia increased. MMF assets worldwide decreased by $83.0 billion, or -1.0%, in the 12 months through 6/30/22, and money funds in the U.S. represent 53.5% of worldwide assets. We review the latest Worldwide MMF totals, below. (Note: We hope to see you this week at our European Money Fund Symposium, which will take place Sept. 27-28 in Paris, France!)

ICI's release says, "Worldwide regulated open-end fund assets decreased 11.5 percent to $59.91 trillion at the end of the second quarter of 2022, excluding funds of funds. Worldwide net cash outflow to all funds was $130 billion in the second quarter, compared with $79 billion of net inflows in the first 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 second quarter of 2022. For example, on a US dollar–denominated basis, fund assets in Europe decreased by 12.8 percent in the second quarter, compared with a decrease of 6.8 percent on a euro-denominated basis."

ICI's quarterly continues, "On a US dollar–denominated basis, equity fund assets decreased by 15.9 percent to $26.63 trillion at the end of the second quarter of 2022. Bond fund assets decreased by 8.9 percent to $11.89 trillion in the second quarter. Balanced/mixed fund assets decreased by 11.5 percent to $7.30 trillion in the second quarter, while money market fund assets decreased by 1.9 percent globally to $8.48 trillion."

The release also tells us, "At the end of the second quarter of 2022, 44 percent of worldwide regulated open-end fund assets were held in equity funds. The asset share of bond funds was 20 percent and the asset share of balanced/mixed funds was 12 percent. Money market fund assets represented 14 percent of the worldwide total. By region, 53 percent of worldwide assets were in the Americas in the second quarter of 2022, 32 percent were in Europe, and 16 percent were in Africa and the Asia-Pacific regions."

ICI adds, "Net sales of regulated open-end funds worldwide were $130 billion in the second quarter of 2022.... Globally, bond funds posted an outflow of $123 billion in the second quarter of 2022, after recording an outflow of $56 billion in the first quarter.... Money market funds worldwide experienced an inflow of $36 billion in the second quarter of 2022 after registering an outflow of $212 billion in the first 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 Q2'22 with $4.541 trillion, or 53.5% of all global MMF assets. U.S. MMF assets decreased by $51.3 billion (-1.1%) in Q2'22 but have increased by $6.8 billion (0.2%) in the 12 months through June 30, 2022. China remained in second place among countries overall. China saw assets jump $2.6 billion (0.2%) in Q2 to $1.582 trillion (18.7% of worldwide assets). Over the 12 months through June 30, 2022, Chinese MMF assets have surged by $146.3 billion, or 10.2%.

Ireland remained third among country rankings, ending Q2 with $649.8 billion (7.7% of worldwide assets). Dublin-based MMFs were down $29.1B for the quarter, or -4.3%, and down $49.4B, or -7.1%, over the last 12 months. Luxembourg remained in fourth place with $427.3 billion (5.0% of worldwide assets). Assets there decreased $21.2 billion, or -4.7%, in Q2, and were down $57.7 billion, or -11.9%, over one year. France was in fifth place with $344.8B, or 4.1% of the total, down $21.0 billion in Q2 (-5.7%) and down $80.2B (-18.9%) over 12 months.

Australia was listed in sixth place with $254.5 billion, or 3.0% of worldwide assets. Its MMFs increased by $4.5 billion, or 1.8%, in Q2. Korea was the 7th ranked country and saw MMF assets decrease $12.7 billion, or -10.0%, in Q2'22 to $114.2 billion (1.3% of the total); they've decreased $12.3 billion (-9.7%) for the year. Brazil remained at 8th place with $106.8 billion (1.3%); assets there fell $5.9 billion (-5.2%) in Q2 and decreased by $7.8 billion (-6.8%) over 12 months. Japan was 9th place, as assets decreased $10.4 billion, or -9.3%, to 101.5 billion (1.2% of total assets) in Q2. They've decreased $23.4 billion (-18.7%) over the previous 12 months. ICI's statistics show Mexico remained in 10th place with $78.5B, or 0.9% of total assets, up $3.9 billion (5.2%) for the quarter.

India was in 11th place, decreasing $802 million, or -1.3%, to $59.9 billion (0.7% of total assets) in Q2 and increasing $793 million (1.3%) over the previous 12 months. Canada ($29.0B, up $1.6B and up $2.0B over the quarter and year, respectively) ranked 12th ahead of Chinese Taipei. ($26.9B, down $1.6B and down $7.7B). The United Kingdom ($26.4B, down $2.9B and down $2.7B) and South Africa ($22.2B down $1.9B and down $4.1B), rank 14th and 15th, respectively. Switzerland, Chile, 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 $4.796 trillion, down $57.7 billion in Q2. Asian MMFs decreased by $18.4 billion to $2.152 trillion, and Europe saw its money funds plunge $75.5 billion in Q2'22 to $1.512 trillion. Africa saw its money funds decrease $1.9B to $22.2 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.)

Money fund assets jumped in the latest week after declining in 6 of the past 8 weeks; it was their biggest gain since late April. The Investment Company Institute's latest weekly "Money Market Fund Assets" report shows assets down by $121 billion, or -2.6%, year-to-date, with Institutional MMFs down $172 billion, or -5.3% and Retail MMFs up $50 billion, or 3.4%. Over the past 52 weeks, money fund assets are up by $69 billion, or 1.5%, with Retail MMFs rising by $88 billion (6.2%) and Inst MMFs falling by $19 billion (-0.6%). (For the month of Sept. through 9/22, MMF assets increased by $25.4 billion to $5.053 trillion according to Crane's MFI XLS, which tracks a broader universe of funds than ICI. Crane Data's Prime asset total is currently $963.6 billion.)

ICI's weekly release says, "Total money market fund assets increased by $31.76 billion to $4.58 trillion for the week ended Wednesday, September 21, the Investment Company Institute reported.... Among taxable money market funds, government funds increased by $21.56 billion and prime funds increased by $10.58 billion. Tax-exempt money market funds decreased by $369 million." ICI's stats show Institutional MMFs increasing $22.7 billion and Retail MMFs increasing $9.1 billion in the latest week. Total Government MMF assets, including Treasury funds, were $3.955 trillion (86.3% of all money funds), while Total Prime MMFs were $527.8 billion (11.5%). Tax Exempt MMFs totaled $101.1 billion (2.2%).

ICI explains, "Assets of retail money market funds increased by $9.08 billion to $1.52 trillion. Among retail funds, government money market fund assets increased by $1.94 billion to $1.13 trillion, prime money market fund assets increased by $7.82 billion to $297.99 billion, and tax-exempt fund assets decreased by $680 million to $90.15 billion." Retail assets account for just under a third of total assets, or 33.1%, and Government Retail assets make up 74.4% of all Retail MMFs.

They add, "Assets of institutional money market funds increased by $22.68 billion to $3.06 trillion. Among institutional funds, government money market fund assets increased by $19.62 billion to $2.82 trillion, prime money market fund assets increased by $2.76 billion to $229.83 billion, and tax-exempt fund assets increased by $311 million to $10.59 billion." Institutional assets accounted for 66.7% of all MMF assets, with Government Institutional assets making up 92.2% of all Institutional MMF totals. (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, J.P. Morgan's "`Mid-Week US Short Duration Update," gives, "An update on CP buyers in light of prospective final MMF reforms." They write, "It's been a while since we've last checked in on the composition of CP buyers, but given the forthcoming SEC ruling on MMF reform (reported to be released in October), we thought it would be worthwhile to look at how the CP buyer base has evolved YTD. Based on the Fed's most recent Z.1 report on the Financial Accounts of the United States, MMFs continued to comprise a smaller segment of the CP market, representing 20% as of 2Q22, down from 21% at YE21 and 25% at YE20."

The brief continues, "This should not be a surprise, as prime MMFs have concentrated more holdings into the Fed's RRP since 1Q21, and currently hold about $265bn of RRP exposures as of August 2022. Meanwhile, corporates' share of the CP market held steady at 23% YTD, though this is a decline from 27% at YE20. Even so, from a notional perspective, they continue to have a significant amount of CP exposure, totaling about $250bn, a notable increase from where they were pre-pandemic. This makes sense, as the liquidity portfolios of large corporations substantially increased since early 2020."

JPM tells us, "Indeed, at their peak, S&P non-financial firms held $2.22tn across cash, cash equivalents, and marketable securities as of 3Q20, an uptick from $1.70tn as of 4Q19." Their balances stayed above $2tn for most of 2020 and 2021, but have since come down some, declining by about $250bn to $1.85tn as of 2Q22."

The article says, "Beyond MMFs and corporates, mutual funds, such as ultra-short and short-term bond funds, are holding a slightly smaller share of the CP market, at 3% as of 2Q22 versus 5% as of 4Q20, perhaps driven by fund outflows over the past year. State and local governments continue to see a gradual increase in their participation. 'Other financial businesses,' which we believe include securities lenders and hedge funds, have seen a slight decline in participation YTD -- though like corporates, they continue to have a substantial amount of CP exposure, totaling about $200bn."

It states, "In the event the SEC finalizes MMF reform as proposed (e.g., swing pricing for institutional prime and tax-exempt funds), the concern is what happens to short-term funding. Overall, we believe short-term funding will remain available for banks and corporates. Even if prime funds shrink, this should leave the door open for other credit liquidity investors to step in and absorb some of that lost capacity, particularly if some of the money that exits prime gets redirected into ultra-short/short-term bond funds/SMA instead of government MMFs. However, while credit will continue to be extended in the money markets, the composition will change."

Finally, JPM adds, "Ultimately, prime funds are not government funds, nor are they ultra-short/short-term bond funds or SMAs. Money is moving to an investor base that either cannot buy CP/CD or can buy a host of other products that compete with CP/CD. Funding costs will have to adjust to incentivize some of the longer-duration liquidity investors to take part. As a result, the CP/CD curve will likely have to steepen, and spreads widen."

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. The Fed's FOMC statement says, "Recent indicators point to modest growth in spending and production. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures."

They write, "The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 3 to 3-1/4 percent and anticipates that ongoing increases in the target range will be appropriate. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in the Plans for Reducing the Size of the Federal Reserve's Balance Sheet that were issued in May. The Committee is strongly committed to returning inflation to its 2 percent objective."

The FOMC adds, "In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments." (For more, see our July 28 LOTD, "Fed Hikes 75 Bps Again to 2.25-2.50%," and our June 16 News, "Fed Triples Down, Hikes by 75 bps to 1.5-1.75%."

In related news, columnist Alan Sloan writes in The Washington Post on the "'Revenge of the Savers': Fed rate rises offer a boon to the cautious." He tells us, "The Federal Reserve's four rate increases earlier this year and expectations around Wednesday's fifth increase have been major factors in sending both stocks and bonds into bear markets. However, tens of millions of people are getting a little-recognized benefit from these rate increases. I'm talking about people who own money market mutual funds, whose assets consist of high-quality, short-term IOUs from the federal government, banks and other financial institutions."

Sloan comments, "The interest that holders of these funds are getting these days is more than 100 times -- or 10,000 percent -- above what they were earning at the end of last year.... According to the Investment Company Institute, the mutual fund industry's trade organization, there are about 58 million money market mutual fund accounts, which means lots of people benefit when money fund interest yields rise, and have their income diminished when rates fall."

The Post piece continues, "Numbers from Peter Crane, whose Crane Data is the go-to source on money market funds, indicate the funds were yielding 0.02 percent at the end of last year, and had about $5 trillion of assets. Get out your calculator, multiply $5 trillion by 0.0002, and you see that the funds collectively were yielding about $1 billion a year. These days, the average yield on these funds is about 2.11 percent. Do the multiplication again, and you see that holders' annualized income is running a bit over $105 billion a year. That's more than 105 times -- call it 10,500 percent -- the year-end number."

It states, "To be sure, money fund holders aren't getting rich on their current income. But it's way above what they'd been getting. And it's going to rise more after this week's Fed increase works its way into money fund yields, a process that will take about three weeks.... Crane is projecting a 3 percent yield for money funds by mid-October and about 4 percent by year-end."

Sloan adds, "I've written numerous columns about how prudent, conservative savers were getting screwed by the Fed lowering rates to almost nothing to help bail out the imprudent and bolster the economy. Now, savers are getting a bit of their own back. Sure, I don't want to see the return of the days of double-digit money fund and Treasury bill yields, like we had in the 1980s when inflation was running wild. But it sure is nice to see tens of millions of people getting yields on safe, short-term investments that include a number to the left of the decimal point rather than looking like a rounding error."

Finally, Reuters' published the article, "Wall Street Week Ahead: Investors hide in cash despite surging inflation." It states, "A tough year in markets is leading some investors to seek refuge in cash, as they capitalize on higher interest rates and await chances to buy stocks and bonds at cheaper prices. The Federal Reserve has roiled markets in 2022 as it implements huge rate hikes in an effort to moderate the steepest inflation in 40 years. But higher rates are also translating into better rates for money market funds, which had returned virtually nothing since the pandemic began in 2020. That's made cash a more attractive hideout for investors seeking shelter from market gyrations -- even though the highest inflation in forty years has dented its appeal."

Reuters tells us, "Fund managers increased their average cash balances to 6.1% in September, the highest level in more than two decades, a widely followed survey from BofA Global Research showed. Assets in money market funds have stayed elevated since jumping after the pandemic began, coming in at $4.44 trillion as of last month, not far from their peak of $4.67 trillion in May 2020, according to Refinitiv Lipper. 'Cash is now becoming a viable asset class because of what has happened to interest rates,' said Paul Nolte of Kingsview Investment Management, who said the portfolios he manages have 10 to 15% in cash versus less than 5% typically."

The piece adds, "Meanwhile, taxable money market funds had returned 0.4% so far this year as of the end of August, according to the Crane 100 Money Fund index, an average of the 100 largest such funds. The average yield in the Crane index is 2.08%, up from 0.02% at the start of the year and the highest level since July 2019. 'They are looking better and their competition is looking worse,' said Peter Crane, president of Crane Data, which publishes the money fund index."

Late last week, SIFMA, the Securities Industry and Financial Markets Association (formerly the more easily recognizable Bond Market Association), posted a letter to the SEC on money fund reforms authored by its Asset Management Group and the Investment Company Institute. Entitled, "Securities Industry and Financial Markets Association Comments on Money Market Fund Reforms," the letter states, "The Asset Management Group of the Securities Industry and Financial Markets Association ('SIFMA AMG') and the Investment Company Institute ('ICI') welcome the opportunity to provide additional information to the U.S. Securities and Exchange Commission with respect to the Commission's proposed amendments to Rule 2a-7 that govern money market funds under the Investment Company Act of 1940, and related proposed amendments to Form N-MFP, Form N-CR and Form N-1A." (See the "Comments on Money Market Fund Reforms" posted to the SEC's website here, and see our Sept. 6 News, "Funds Doing Last-Minute Lobbying to SEC Says Ignites; Germain on RDM.")

It explains, "As a follow-up to our conversation on August 10 and previous submissions to the Commission, we are writing to provide an example of language that a money market fund could use to describe how a reverse distribution mechanism ('RDM') works and would impact an individual investor in a negative interest rate environment. The language takes the form of a supplement that a fund would use to inform shareholders that the fund board has elected to implement an RDM mechanism. In practice, each fund would develop its own specific disclosure language, so the template is an illustration rather than proposed mandatory language. We re-iterate that the proposed provision to prohibit RDMs should not be included in final amendments."

The example Prospectus Supplement filing language says, "Upon the recommendation of [ABC Fund Advisers] and to address circumstances where interest rates fall below zero and cause the income accrued on the Fund's portfolio securities before deduction of expenses to be negative, the Board of [Trustees/Directors] of the Trust authorized the implementation of a 'reverse distribution mechanism' ('RDM'). As discussed in more detail below, the RDM will be implemented to seek to maintain the Fund's stable $1.00 share price by reducing the number of shares held by shareholders, thereby reducing the value of each shareholder's investment in the Fund in an amount corresponding to the Fund's daily negative income.... Shareholders are encouraged to consider whether their investment in the Fund remains appropriate and consistent with their investment objectives."

It continues, "The fund will reduce the number of shares that you hold in order to maintain a stable $1.00 share price once it implements RDM. The value of your investment will decline if the fund reduces the number of shares that you hold. In the event of a negative interest rate environment that impacts a money market fund's ability to maintain a stable $1.00 share price, subject to approval by the board of trustees, a money market fund may: 1) Implement an RDM: A money market fund that implements an RDM would continue to maintain a stable $1.00 share price by use of the amortized cost method of valuation and/or penny rounding method; Such fund would reduce the number of shares held by an investor to offset the daily negative income accrued by a fund on the fund's investments; and, The value of an investor's investment in a money market fund that implements RDM would decline if the fund reduces the number of shares held by the investor."

The fund may also, "2) 'Float' its NAV: A money market fund that floats its NAV would no longer maintain a stable $1.00 share price and instead have a share price that fluctuates; Such fund would establish its NAV per share by using available market quotations (or an appropriate substitute that reflects current market conditions). The NAV per share would be reduced to reflect the daily negative income accrued by a fund on the fund's investments; and, An investor in a money market fund that floats its NAV would lose money if the investor sells their shares when they are worth less than what the investor originally paid for them."

The SIFMA letter adds, "Regardless of which option a fund selects, the decline in the value of a shareholder's investment due to the negative interest income earned by the fund would be the same. The board of trustees has determined that it is in the best interests of the fund and its shareholders to maintain a stable NAV per share and has authorized the fund to implement an RDM. To maintain a stable $1.00 share price in the current interest rate environment, on each business day on which income accrued on the Fund's portfolio securities before deduction of expenses is negative, the RDM will reduce the number of full and fractional Fund shares outstanding in an amount necessary to offset the daily negative income accrued by the Fund on its investments."

In other news, Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics Tuesday, which track a shifting subset of our monthly Portfolio Holdings collection. The most recent cut (with data as of Sept. 16) includes Holdings information from 62 money funds (up 8 from two weeks ago), which represent $2.114 trillion (up from $1.732 trillion) of the $5.007 trillion (42.2%) in total money fund assets tracked by Crane Data. (Our Weekly MFPH are e-mail only and aren't available on the website.)

Our latest Weekly MFPH Composition summary again shows Government assets dominating the holdings list with Repurchase Agreements (Repo) totaling $1.105 trillion (up from $922.1 billion two weeks ago), or 52.3%; Treasuries totaling $722.8 billion (up from $543.9 billion two weeks ago), or 34.2%, and Government Agency securities totaling $114.8 billion (up from $107.8 billion), or 5.4%. Commercial Paper (CP) totaled $49.6 billion (up from two weeks ago at $45.9 billion), or 2.3%. Certificates of Deposit (CDs) totaled $38.7 billion (up from $37.4 billion two weeks ago), or 1.8%. The Other category accounted for $50.2 billion or 2.4%, while VRDNs accounted for $32.3 billion, or 1.5%.

The Ten Largest Issuers in our Weekly Holdings product include: the Federal Reserve Bank of New York with $872.6 billion (41.3%), the US Treasury with $722.8 billion (34.2% of total holdings), Federal Home Loan Bank with $72.0B (3.4%), Federal Farm Credit Bank with $37.9B (1.8%), RBC with $30.8B (1.5%), BNP Paribas with $26.3B (1.2%), JP Morgan with $17.7B (0.8%), Mitsubishi UFJ Financial Group Inc with $14.3B (0.7%), Barclays PLC with $13.7B (0.6%), and Credit Agricole with $13.0B (0.6%).

The Ten Largest Funds tracked in our latest Weekly include: JPMorgan US Govt MM ($221.5B), Goldman Sachs FS Govt ($209.0B), Morgan Stanley Inst Liq Govt ($144.3B), Fidelity Inv MM: Govt Port ($123.4B), State Street Inst US Govt ($111.2B), Dreyfus Govt Cash Mgmt ($109.6B), Goldman Sachs FS Treas Instruments ($108.2B), Allspring Govt MM ($107.2B), JPMorgan 100% US Treas MMkt ($90.0B) and First American Govt Oblg ($78.4B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary, or our Bond Fund Portfolio Holdings data series.)

The Securities and Exchange Commission's latest monthly "Money Market Fund Statistics" summary shows that total money fund assets increased by $3.5 billion in August to $5.105 trillion. The SEC shows that Prime MMFs increased by $43.5 billion in August to $960.1 billion, Govt & Treasury funds decreased $47.1 billion to $4.034 trillion and Tax Exempt funds increased $7.1 billion to $111.2 billion. Taxable yields jumped again in August after surging in July. The SEC's Division of Investment Management summarizes monthly Form N-MFP data and includes asset totals and averages for yields, liquidity levels, WAMs, WALs, holdings, and other money market fund trends. We review their latest numbers below. (Note: We look forward to seeing some of you next week at our European Money Fund Symposium, which will take place Sept. 27-28 in Paris, France!)

August's asset increase follows an increase of $57.4 billion in July, $26.6 billion in June, decreases of $19.7 billion in May and $63.3 billion in April, an increase of $40.1 billion in March, and decreases of $29.3 billion in February and $125.1 billion in January. Assets gained $122.9 billion in December, $53.7 billion in November, $7.9 billion in October and $19.9 billion in September. Over the 12 months through 8/31/22, total MMF assets have increased by $94.6 billion, according to the SEC's series. (Note that the SEC's series includes a number of internal money funds not tracked by ICI, though Crane Data includes most of these assets in its collections.)

The SEC's stats show that of the $5.105 trillion in assets, $960.1 billion was in Prime funds, up $43.5 billion in August. Prime assets were up $56.6 billion in July, $8.5 billion in June, $9.4 billion in May, down $11.7 billion in April, up $29.5 billion in March, down $2.7 billion in February, up $10.7 billion in January, and down $20.5 billion in December, $21 billion in November and $12.1 billion in October. This follows an increase of $2.6 billion in September. Prime funds represented 18.8% of total assets at the end of August. They've increased by $92.9 billion, or 10.7%, over the past 12 months. (Month-to-date in September through 9/16, total MMF assets have decreased by $24.3 billion, according to our MFI Daily.)

Government & Treasury funds totaled $4.034 trillion, or 79.0% of assets. They decreased $47.1 billion in August, increased $8.2 billion in July, $14.4 billion in June, decreased by $36.7 billion in May, decreased $57.1 billion in April, increased $8.7 billion in March, decreased by $25.8 billion in February and $135.2 billion in January, after increasing by $144.4 billion in December, $76.0 billion in November, $21.0 billion in October and $20.4 billion in Sept. Govt & Treasury MMFs are down $8.8 billion over 12 months, or -0.0%. Tax Exempt Funds increased $7.1 billion to $111.2 billion, or 2.2% of all assets. The number of money funds was 304 in August, down 2 from the previous month and down 12 funds from a year earlier.

Yields for Taxable MMFs and Tax Exempt MMFs surged higher again in August. The Weighted Average Gross 7-Day Yield for Prime Institutional Funds on August 31 was 2.34%, up 48 bps from the prior month. The Weighted Average Gross 7-Day Yield for Prime Retail MMFs was 2.52%, up 44 bps from the previous month. Gross yields were 2.23% for Government Funds, up 35 basis points from last month. Gross yields for Treasury Funds were up 38 bps at 2.20%. Gross Yields for Tax Exempt Institutional MMFs were up 21 basis points to 1.46% in August. Gross Yields for Tax Exempt Retail funds were up 49 bps to 1.64%.

The Weighted Average 7-Day Net Yield for Prime Institutional MMFs was 2.29%, up 51 bps from the previous month and up 223 basis points from 8/31/21. The Average Net Yield for Prime Retail Funds was 2.23%, up 51 bps from the previous month, and up 221 bps since 8/31/21. Net yields were 2.00% for Government Funds, up 39 bps from last month. Net yields for Treasury Funds were also up 40 bps from the previous month at 1.99%. Net Yields for Tax Exempt Institutional MMFs were up 28 bps from July to 1.36%. Net Yields for Tax Exempt Retail funds were up 54 bps at 1.38% in August. (Note: These averages are asset-weighted.)

WALs and WAMs were mostly down in August. The average Weighted Average Life, or WAL, was 39.0 days (down 4.5 days) for Prime Institutional funds, and 48.8 days for Prime Retail funds (up 0.2 days). Government fund WALs averaged 63.8 days (down 4.5 days) while Treasury fund WALs averaged 66.6 days (down 4.3 days). Tax Exempt Institutional fund WALs were 8.8 days (down 0.8 days), and Tax Exempt Retail MMF WALs averaged 17.1 days (up 0.2 days).

The Weighted Average Maturity, or WAM, was 16.8 days (down 4.6 days from the previous month) for Prime Institutional funds, 14.1 days (down 3.7 days from the previous month) for Prime Retail funds, 18.3 days (down 4.5 days from previous month) for Government funds, and 26.7 days (down 4.6 days from previous month) for Treasury funds. Tax Exempt Inst WAMs were down 1.1 days to 8.5 days, while Tax Exempt Retail WAMs were down 0.3 days from previous month at 16.1 days.

Total Daily Liquid Assets for Prime Institutional funds were 52.7% in August (up 1.6% from the previous month), and DLA for Prime Retail funds was 42.1% (up 3.5% from previous month) as a percent of total assets. The average DLA was 81.1% for Govt MMFs and 98.6% for Treasury MMFs. Total Weekly Liquid Assets was 66.0% (down 0.1% from the previous month) for Prime Institutional MMFs, and 53.3% (down 0.5% from the previous month) for Prime Retail funds. Average WLA was 89.6% for Govt MMFs and 99.6% for Treasury MMFs.

In the SEC's "Prime Holdings of Bank-Related Securities by Country table for August 2022," the largest entries included: Canada with $89.2 billion, Japan with $79.2 billion, France with $59.2 billion, the U.S. with $54.8B, the Netherlands with $30.4B, the U.K. with $30.0B, Aust/NZ with $28.5B, Germany with $26.0B and Switzerland with $7.3B. The gainers among the "Prime MMF Holdings by Country" included: Japan (up $7.8B), the U.K. (up $5.4B), Germany (up $3.8B), Canada (up $3.6B) and Aust/NZ (up $0.1B). Decreases were shown by: the Netherlands (down $2.1B), France (down $1.8B), the U.S. (down $0.8B) and Switzerland (down $0.7B).

The SEC's "Prime Holdings of Bank-Related Securities by Region" table shows The Americas had $144.0 billion (up $2.8B), while Eurozone subset had $133.0B (up $2.5B). Asia Pacific had $129.0B (up $9.6B), while Europe (non-Eurozone) had $85.5B (up $7.0B from last month).

The "Prime MMF Aggregate Product Exposures" chart shows that of the $956.3B billion in Prime MMF Portfolios as of August 31, $414.9B (43.4%) was in Government & Treasury securities (direct and repo) (up from $402.0B), $221.9B (23.2%) was in CDs and Time Deposits (up from $210.7B), $161.4B (16.9%) was in Financial Company CP (up from $154.1B), $121.7B (12.7%) was held in Non-Financial CP and Other securities (up from $119.9B), and $36.4B (3.8%) was in ABCP (up from $29.7B).

The SEC's "Government and Treasury Funds Bank Repo Counterparties by Country" table shows the U.S. with $106.5 billion, Canada with $90.9 billion, France with $98.6 billion, the U.K. with $43.0 billion, Germany with $11.3 billion, Japan with $83.5 billion and Other with $25.5 billion. All MMF Repo with the Federal Reserve was down $28.7 billion in August to $2.069 trillion.

Finally, a "Percent of Securities with Greater than 179 Days to Maturity" table shows Prime Inst MMFs 5.5%, Prime Retail MMFs with 8.2%, Tax Exempt Inst MMFs with 0.8%, Tax Exempt Retail MMFs with 2.1%, Govt MMFs with 11.8% and Treasury MMFs with 9.9%.

A Prospectus Supplement filing for State Street ESG Liquid Reserves Fund states, "The Trust's Board of Trustees has approved a Plan of Liquidation and Termination of Series with respect to the Fund, pursuant to which the Fund is expected to be liquidated and terminated on or about October 28, 2022. The Plan authorizes the Fund and its investment adviser, SSGA Funds Management, Inc., to engage in such transactions as may be appropriate for the Fund's liquidation and dissolution, including, without limitation, the sale of Fund assets and payment of, and provision for, Fund liabilities in anticipation of the liquidation. Accordingly, during the period between the effective date of the Plan (September 15, 2022) and the Liquidation Date, the Fund will engage in business and activities solely for the purposes of winding down its business and affairs and making a distribution of its assets to shareholders, and it is possible the Fund will not pursue or achieve its investment objective. Furthermore, it is anticipated that during all, or a portion of, the Liquidation Period the Fund’s assets will be held exclusively in cash and/or cash equivalents." (For more on ESG & Social Money Market Funds, see our May 12 Crane Data News (and hotlinks at the end of that story), "UBS AM Explains Sustainability in Liquidity; Federated Adds SGD Shares.")

It explains, "In anticipation of the Fund's liquidation, the Fund will cease the sale of its shares to new shareholders upon the close of business on September 19, 2022; however, shares of the Fund may continue to be offered through intermediaries that currently have relationships with the Fund and to existing shareholders having accounts directly with the Fund. Effective upon the close of business on October 24, 2022, the Fund will no longer accept from Intermediary Relationships and/or existing shareholders orders to purchase additional shares. Existing shareholders of the Fund may, consistent with the requirements set forth in the applicable Prospectus, redeem their shares or exchange their shares into shares of the same class of any other series of the Trust at any time prior to the Liquidation Date as long as their applicable share class is available for incoming exchanges."

State Street writes, "On or prior to the Liquidation Date, the Fund will make one or more pro rata liquidating distributions consisting of substantially all the assets of the Fund, less the amount reserved to pay creditors of the Fund. Liquidating Distributions will be made to shareholders of record in accordance with instructions from such shareholders, provided that if a shareholder of record has not given instructions to the Fund by the time that the liquidation proceeds are distributed, the shareholder's liquidation proceeds may be distributed by the mailing of a check to such shareholder."

In other news, 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 MMF Holdings release says, "The Investment Company Institute (ICI) reports that, as of the final Friday in August, prime money market funds held 36.3 percent of their portfolios in daily liquid assets and 51.2 percent in weekly liquid assets, while government money market funds held 87.4 percent of their portfolios in daily liquid assets and 93.6 percent in weekly liquid assets." Prime DLA was down from 36.5% in July, and Prime WLA was also down from 52.9%. Govt MMFs' DLA decreased from 88.2% in July and Govt WLA decreased from 93.8% the previous month.

ICI explains, "At the end of August, prime funds had a weighted average maturity (WAM) of 14 days and a weighted average life (WAL) of 53 days. Average WAMs and WALs are asset-weighted. Government money market funds had a WAM of 21 days and a WAL of 65 days." Prime WAMs were 3 days shorter and WALs were 2 days shorter from the previous month. Govt WAMs were 5 days shorter and WALs were 4 days shorter from July.

Regarding Holdings by Region of Issuer, the release tells us, "Prime money market funds' holdings attributable to the Americas rose from $212.71 billion in July to $232.50 billion in August. Government money market funds' holdings attributable to the Americas declined from $3,782.80 billion in July to $3,695.23 billion in August."

The Prime Money Market Funds by Region of Issuer table shows Americas-related holdings at $232.5 billion, or 45.8%; Asia and Pacific at $99.8 billion, or 19.7%; Europe at $168.8 billion, or 33.3%; and, Other (including Supranational) at $6.6 billion, or 1.4%. The Government Money Market Funds by Region of Issuer table shows Americas at $3.695 trillion, or 93.6%; Asia and Pacific at $77.7 billion, or 2.0%; Europe at $154.8 billion, 3.9%, and Other (Including Supranational) at $20.0 billion, or 0.5%.

Finally, the Investment Company Institute also published the release, "Retirement Assets Total $33.7 Trillion in Second Quarter 2022." It includes data tables showing that money market funds held in retirement accounts rose to $569 billion (from $545 billion) in total, or 13% of the total $4.541 trillion in money funds. MMFs represent just 5.6% of the total $10.231 trillion of mutual funds in retirement accounts.

This release says, "Total US retirement assets were $33.7 trillion as of June 30, 2022, down 10.2 percent from March 31, 2022. Retirement assets accounted for 31 percent of all household financial assets in the United States at the end of June 2022. Assets in individual retirement accounts (IRAs) totaled $11.7 trillion at the end of the second quarter of 2022, a decrease of 11.4 percent from the end of the first quarter of 2022. Defined contribution (DC) plan assets were $9.3 trillion at the end of the second quarter, down 11.4 percent from March 31, 2022. Government defined benefit (DB) plans—including federal, state, and local government plans—held $7.3 trillion in assets as of the end of June 2022, a 6.9 percent decrease from the end of March 2022. Private-sector DB plans held $3.2 trillion in assets at the end of the second quarter of 2022, and annuity reserves outside of retirement accounts accounted for another $2.2 trillion."

The ICI tables also show money funds accounting for $400 billion, or 8%, of the $5.073 trillion in IRA mutual fund assets and $170 billion, or 3%, of the $5.158 trillion in defined contribution plan holdings. (Money funds in 401k plans totaled $116 billion, or 3% of the $4.050 trillion of mutual funds in 401k's.)

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 $973.6 billion led by US dollar funds. But European MMF assets 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 $9.5 billion over the 30 days through 9/14. (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 $89.4 billion (-8.4%) year-to-date. (Note: For more on "offshore" money funds, join us for our upcoming European Money Fund Symposium, Sept. 27-28, in Paris, France.)

Offshore US Dollar money funds are up $23.6 billion over the last 30 days and are up $20.2 billion YTD to $554.7 billion. Euro funds dropped E3.8 billion over the past month. YTD, they're down E9.1 billion to E149.3 billion. GBP money funds decreased L8.4 billion over 30 days; they are down by L30.2 billion YTD to L216.9B. U.S. Dollar (USD) money funds (202) account for nearly half (47.4%) of the "European" money fund total, while Euro (EUR) money funds (94) make up 22.1% and Pound Sterling (GBP) funds (130) total 30.5%. We summarize our latest "offshore" money fund statistics and our Money Fund Intelligence International Portfolio Holdings (which went out to subscribers Thursday), below.

Offshore USD MMFs yield 2.20% (7-Day) on average (as of 9/14/22), up from 2.05% 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 are poised to leave negative yield territory within a matter of days; they're yielding -0.03% on average, 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 1.64%, up 18 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 September MFII Portfolio Holdings, with data as of 8/31/22, show that European-domiciled US Dollar MMFs, on average, consist of 22% in Commercial Paper (CP), 16% in Certificates of Deposit (CDs), 28% in Repo, 14% in Treasury securities, 19% in Other securities (primarily Time Deposits) and 1% in Government Agency securities. USD funds have on average 60.7% of their portfolios maturing Overnight, 4.6% maturing in 2-7 Days, 12.2% maturing in 8-30 Days, 6.1% maturing in 31-60 Days, 7.3% maturing in 61-90 Days, 6.9% maturing in 91-180 Days and 2.1% maturing beyond 181 Days. USD holdings are affiliated with the following countries: the US (28.2%), France (15.4%), Canada (12.9%), Japan (11.3%), Sweden (7.1%), the Netherlands (4.5%), the U.K. (4.1%), Australia (3.7%), Germany (2.5%) and Singapore (1.6%).

The 10 Largest Issuers to "offshore" USD money funds include: the US Treasury with $76.9 billion (13.6% of total assets), RBC with $30.7B (5.4%), Credit Agricole with $25.2B (4.5%), Sumitomo Mitsui Banking Corp with $22.4B (4.0%), BNP Paribas with $21.8B (3.9%), Federal Reserve Bank of New York with $20.0B (3.5%), Fixed Income Clearing Corp with $16.0B (2.8%), Barclays with $14.7B (2.6%), Mizuho Corporate Bank Ltd with $14.5B (2.6%) and Skandinaviska Enskilda Banken AB with $14.3B (2.5%).

Euro MMFs tracked by Crane Data contain, on average 40% in CP, 19% in CDs, 28% in Other (primarily Time Deposits), 11% in Repo, 1% in Treasuries and 1% in Agency securities. EUR funds have on average 40.6% of their portfolios maturing Overnight, 11.8% maturing in 2-7 Days, 21.5% maturing in 8-30 Days, 7.9% maturing in 31-60 Days, 7.0% maturing in 61-90 Days, 9.1% maturing in 91-180 Days and 2.3% maturing beyond 181 Days. EUR MMF holdings are affiliated with the following countries: France (33.1%), Japan (13.4%), the U.S. (7.7%), Sweden (6.1%), Germany (5.9%), the U.K. (5.6%), Canada (5.4%), Austria (4.6%), Switzerland (3.5%) and Belgium (3.4%).

The 10 Largest Issuers to "offshore" EUR money funds include: Credit Agricole with E7.8B (5.5%), BNP Paribas with E7.3B (5.2%), Societe Generale with E6.2B (4.4%), Credit Mutuel with E5.2B (3.7%), Mitsubishi UFJ Financial Group Inc with E4.5B (3.2%), Natixis with E4.4B (3.1%), Sumitomo Mitsui Banking Corp with E4.3B (3.0%), DZ Bank AG with E4.1B (2.9%), Mizuho Corporate Bank Ltd with E4.1B (2.9%) and Barclays PLC with E4.0B (2.9%).

The GBP funds tracked by MFI International contain, on average (as of 8/31/22): 36% in CDs, 18% in CP, 25% in Other (Time Deposits), 19% in Repo, 2% in Treasury and 0% in Agency. Sterling funds have on average 38.9% of their portfolios maturing Overnight, 8.7% maturing in 2-7 Days, 12.2% maturing in 8-30 Days, 12.6% maturing in 31-60 Days, 9.5% maturing in 61-90 Days, 13.8% maturing in 91-180 Days and 4.3% maturing beyond 181 Days. GBP MMF holdings are affiliated with the following countries: Japan (16.5%), Canada (16.2%), France (15.0%), the U.K. (13.7%), Australia (7.0%), the Netherlands (5.3%), Sweden (4.8%), the U.S. (3.5%), Germany (3.4%) and Spain (2.8%).

The 10 Largest Issuers to "offshore" GBP money funds include: UK Treasury with L10.8B (5.9%), Mitsubishi UFJ Financial Group Inc with L7.9B (4.4%), Toronto-Dominion Bank with L7.3B (4.0%), Mizuho Corporate Bank Ltd with L7.3B (4.0%), BNP Paribas with L6.4B (3.6%), Bank of Nova Scotia with L6.4B (3.6%), Sumitomo Mitsui Trust Bank with L6.4B (3.5%), Nordea Bank with L6.3B (3.5%), RBC with L6.2B (3.4%) and Barclays with L5.8B (3.2%).

The September issue of our Bond Fund Intelligence, which was sent to subscribers Thursday morning, features the lead story, "Bond Funds After Dead-Cat Bounce: Carnage Continues," which reviews the resumption of bond fund losses and, "EFAMA Fact Book Reviews European Bond Funds in '21," which reviews statistics on bond funds in Europe. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund returns plunged again in August while yields rose for the 11th straight month. 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.)

Our "Dead-Cat Bounce" article says, "The year 2022 has been brutal to bond funds. While they got some respite in July, bond funds were hammered again in August. Both returns and assets fell sharply last month, with our Crane 100 BFI Index falling 1.99% (down 8.75% over 1-year) and assets falling by $70.5 billion."

The piece cites, "No Escape From Biggest Bond Loss in Decades as Fed Keeps Hiking," a recent piece by Bloomberg. They tell us, "Investors who might be looking for the world's biggest bond market to rally back soon from its worst losses in decades appear doomed to disappointment."

It also quotes from Morningstar's "Are Bond Investors Making a Mistake by Bailing Out?" They write, "There's no question that 2022 has been a horrible year for bonds. As the Federal Reserve has hiked interest rates to try to get inflation under control, bonds have suffered some of their worst losses in decades. In the first six months of 2022, for example, the Bloomberg U.S. Aggregate Bond Index dropped 10.35% -- its worst showing in over four decades."

Our "EFAMA" update states, "A press release entitled, 'EFAMA publishes 2022 Industry Fact Book,' tells us, 'The European Fund and Asset Management Association (EFAMA) has released its 2022 Industry Fact Book. The 2022 Fact Book provides an in-depth analysis of trends in the European fund industry, with an emphasis on what happened in 2021. It also includes an extensive overview of the regulatory developments across 28 European countries and a wealth of data.'"

It quotes EFAMA Director General Tanguy van de Werve, "Beyond providing in-depth analysis of recent trends in the European investment fund industry, this year's ... Fact Book analyses several issues highly relevant for our industry, including the current limitations of the Sustainable Financial Disclosure Regulation (SFDR)."

Our first News brief, "Returns Crushed; Yields Jump Again," says, "Bond fund returns crashed again in August after a July rebound. Yields jumped for the 11th month in a row. Our BFI Total Index fell 1.58% over 1-month and fell 8.00% over 12 months. The BFI 100 lost 1.99% in August and lost 8.75% over 1-year. Our BFI Conservative Ultra-Short Index was up 0.15% over 1-month but down 0.55% for 1-year; Ultra-Shorts rose 0.14% but fell 1.57%. Short-Term returned –0.76% and -4.76%, and Intm-Term fell 2.35% in August and is down 10.39% over 1-year. BFI's Long-Term Index fell 2.85% and -13.74%. High Yield fell 1.31% in August and 7.79% over 1-year."

A second News brief, "Bloomberg's 'Bond Funds Ready to 'Load Up the Boat' at Higher Treasury Yields,' says, 'After months of heightened market volatility that savaged the performance of bond funds, investors are focused on salvation. With Federal Reserve officials beating the drum on their commitment to bringing down the highest inflation in decades, bond managers are relishing the prospect of another jump in Treasury yields that might allow them to get back in and put some of their billions of dollars in funds to work at higher rates. And they are particularly honed in on longer-dated Treasuries.'"

Another brief, "Reuters Writes, 'U.S. Bond Funds Record Biggest Weekly Outflow in Eight Weeks..' They say, 'Investors dumped U.S. bond funds in the week to Aug 24 as they waited to hear a speech by Federal Reserve Chair Jerome Powell later on Friday which will be scrutinised for clues on the pace of forthcoming interest rate hikes.'"

A BFI sidebar on Morningstar's "`3 Short-Term Bond Funds to Calm Interest-Rate Jitters," explains, "If you are worried about bonds and stocks, where do you hide? Short-term bond funds are not a bad place. Interest-rate risk is measured by duration, and the funds with the shortest duration are ultrashort bond funds followed by short-term bond funds. These funds generally have very small losses when interest rates rise. That safety doesn't come free, though. If inflation is 6%, and your short-term bond fund yields 2%, you are losing money in real terms."

Finally, another sidebar, "BF Assets Fall in August," says, "Bond fund assets plunged in August after recovering a bit in July; assets have fallen hard in 7 of the 8 months of 2022. Total assets fell by $70.5 billion to $2.756 trillion last month, according to BFI. YTD, assets are down $559.6 billion (through 8/31/22), and over 1-year they're down $581.6 billion, or -17.4%."

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 Second Quarter 2022 edition shows that Total MMF Assets decreased by $58 billion to $5.032 trillion in Q2'22. The Household Sector, by far the largest investor segment with $2.723 trillion, saw an asset decrease in Q2. The second largest segment, Nonfinancial Corporate Businesses, also experienced a drop 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 Q2 2022.

State & Local Governments, Property-Casualty Insurance, Mutual Funds, Exchange-traded Funds, Other Financial Business and the Rest of the World categories all saw minor asset decreases last quarter. The Life Insurance Companies, Private Pension Funds and Nonfinancial Noncorporate Business categories saw small asset increases in Q2, while the State & Local Govt Retirement sector remained unchanged. Over the past 12 months, the Other Financial Business, Nonfinancial Noncorporate Business, Rest of World and Private Pension Funds categories showed the biggest asset increases, while Mutual Funds, Household sector and Property-Casualty Insurance saw the biggest asset decreases.

The Fed's "Table L.206," "Money Market Mutual Fund Shares," shows that total assets decreased by $58 billion, or -1.1%, in the second quarter to $5.032 trillion. The largest segment, the Household sector, totals $2.723 trillion, or 54.1% of assets. The Household Sector decreased by $4 billion, or -0.1%, in the quarter. Over the past 12 months through June 30, 2022, Household assets were down $33 billion, or -1.2%.

Nonfinancial Corporate Businesses, the second-largest segment according to the Fed's data series, held $776 billion, or 15.4% of the total. Assets here decreased by $8 billion in the quarter, or -1.1%, and they've increased by $15 billion, or 2.0%, over the past year. Other Financial Business was the third-largest investor segment with $560 billion, or 11.1% of money fund shares. This category dropped $19 billion, or -3.3%, in the latest quarter. Other Financial Business, which we believe includes Securities Lending, has increased by $33 billion, or 6.2%, over the previous 12 months.

The fourth-largest segment (a new addition to the tables), Mutual Funds, held $252 billion (5.0%). Private Pension Funds, was the 5th largest category with 4.8% of money fund assets ($241 billion); it was up by $7 billion (2.9%) for the quarter and up $14 billion, or 5.9% over the last 12 months. The Rest of World remained sixth place in market share among investor segments with 3.0%, or $153 billion, while ` Nonfinancial Noncorporate Business <b:>`_ held $123 billion (2.4%), Life Insurance Companies held $73 billion (1.5%), State & Local Governments held $53 billion (1.0%), Exchange-traded Funds held $33 billion (0.7%), State & Local Govt Retirement held $25 billion (0.5%), and Property-Casualty Insurance held $22 billion (0.4%), 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 $2.596 trillion, or 51.6% and "Debt Securities," or Credit Market Instruments, with $2.225 trillion, or 44.2% of the total. Debt securities includes: Open market paper ($221 billion, or 4.4%; we assume this is CP), Treasury securities ($1.459 trillion, or 29.0%), Agency and GSE-backed securities ($424 billion, or 8.4%), Municipal securities ($117 billion, or 2.3%) and Corporate and foreign bonds ($4 billion, or 0.1%).

Another large MMF position in the Fed's series includes `Time and savings deposits ($187 billion, or 3.7%). Money funds also hold minor positions in Miscellaneous assets ($23 billion, or 0.5%) and Foreign deposits ($2 billion, 0.0%). Note: The Fed also lists "Variable Annuity Money Funds," which currently total $18 billion.

During Q2, Debt Securities were down $290 billion. This subtotal included: Open Market Paper (down $12 billion), Treasury Securities (down $300 billion), Agency- and GSE-backed Securities (up $20 billion), Corporate and Foreign Bonds (down $2 billion) and Municipal Securities (up $4 billion). In the second quarter of 2022, Security Repurchase Agreements were up $219 billion, Foreign Deposits were unchanged, Time and Savings Deposits were up by $12 billion, and Miscellaneous Assets were up $1 billion.

Over the 12 months through 6/30/22, Debt Securities were down $961 billion, which included Open Market Paper (down $15B), Treasury Securities (down $829B), Agencies (down $112B), Municipal Securities (up $5B), and Corporate and Foreign Bonds (down $9B). Foreign Deposits were up $1B, Time and Savings Deposits were up $11B, Securities repurchase agreements were up $881 billion and Miscellaneous Assets were up $84B.

The L.121 table shows `Stable NAV money market funds with $4,385 billion, or 87.1% of the total (down $40.6 or -0.9% in Q2 and up $48B or 1.1% over 1-year), and Floating NAV money market funds with $647 billion, or 12.9% (down $17.6B or -2.6% in Q2 and down $31B or -4.6% over 1-year). Government money market funds total $4.071 trillion, or 80.9% (down $80.3B or -1.9% in Q2 and up $42B or 1.1% over 1-year), Prime money market funds total $850 billion, or 16.9% (up $5.2B or 0.6% in Q2 and down $35B or -3.9% over 1-year) and Tax-exempt money market funds $112B, or 2.2% (up $16.8B or 17.7% in Q2 and up $9B or 9.0% last year).

The Federal Reserve made changes to the Z.1 tables two 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 September Money Fund Portfolio Holdings, with data as of Aug. 31, 2022, show Repo (led by Fed repo) increasing yet again while Treasuries continued a deep 7-month slide. Money market securities held by Taxable U.S. money funds (tracked by Crane Data) decreased by $20.8 billion to $4.918 trillion in August, after increasing $116.1 billion in July, but decreasing $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" three months ago, saw RRP issuance to MMFs dip slightly to $2.060 trillion, its first decline in 6 months. Agencies were the third largest segment, CP remained fourth, ahead of CDs, Other/Time Deposits and VRDNs. Below, we review our latest Money Fund Portfolio Holdings statistics. (Note: There's just 2 weeks to go until our European Money Fund Symposium, which is in Paris Sept. 27-28. We look forward to seeing you in France!)

Among taxable money funds, Repurchase Agreements (repo) increased $23.1 billion (0.9%) to $2.642 trillion, or 53.7% of holdings, in August, after increasing $88.7 billion in July, $128.6 billion in June and $52.5 billion in May. Repo decreased $9.9 billion in April but increased $100.9 billion in March. Treasury securities fell $82.6 billion (-5.8%) to $1.338 trillion, or 27.2% of holdings, after decreasing $33.2 billion in July, $72.5 billion in June, $145.4 billion in May, $78.6 billion in April and $79.2 billion in March. Government Agency Debt was up $11.3 billion, or 2.6%, to $442.1 billion, or 9.0% of holdings, after increasing $24.5 billion in July, decreasing $14.6 billion in June, increasing $35.1 billion in May, and decreasing $1.0 billion in April. Repo, Treasuries and Agency holdings now total $4.423 trillion, representing a massive 89.9% of all taxable holdings.

Money fund holdings of CP and CDs rose in August. Commercial Paper (CP) increased $15.4 billion (6.8%) to $243.4 billion, or 4.9% of holdings, after increasing $15.3 billion in July, decreasing $17.3 billion in June, increasing $5.8 billion in May and decreasing $0.1 billion in April. Certificates of Deposit (CDs) increased $13.4 billion (11.0%) to $135.4 billion, or 2.8% of taxable assets, after increasing $3.6 billion in July, decreasing $1.0 billion in June, but increasing $3.4 billion in May and $7.3 billion in April. Other holdings, primarily Time Deposits, decreased $1.8 billion (-1.7%) to $106.9 billion, or 2.2% of holdings, after increasing $17.3 billion in July, decreasing $21.1 billion in June and $4.7 billion in May, but increasing $28.2 billion in April. VRDNs rose to $10.2 billion, or 0.2% of assets. (Note: This total is VRDNs for taxable funds only. We will post our Tax Exempt MMF holdings separately Tuesday around noon.)

Prime money fund assets tracked by Crane Data jumped to $939 billion, or 19.1% of taxable money funds' $4.918 trillion total. Among Prime money funds, CDs represent 14.4% (up from 13.5% a month ago), while Commercial Paper accounted for 26.0% (up from 25.4% in June). The CP totals are comprised of: Financial Company CP, which makes up 17.1% of total holdings, Asset-Backed CP, which accounts for 3.8%, and Non-Financial Company CP, which makes up 5.1%. Prime funds also hold 6.3% in US Govt Agency Debt, 5.2% in US Treasury Debt, 29.2% in US Treasury Repo, 0.3% in Other Instruments, 9.1% in Non-Negotiable Time Deposits, 4.8% in Other Repo, 2.2% in US Government Agency Repo and 0.6% in VRDNs.

Government money fund portfolios totaled $2.769 trillion (56.3% of all MMF assets), down from $2.781 trillion in July, while Treasury money fund assets totaled another $1.210 trillion (24.6%), down from $1.257 trillion the prior month. Government money fund portfolios were made up of 13.8% US Govt Agency Debt, 9.0% US Government Agency Repo, 20.0% US Treasury Debt, 56.8% in US Treasury Repo, 0.0% in Other Instruments. Treasury money funds were comprised of 60.8% US Treasury Debt and 38.9% in US Treasury Repo. Government and Treasury funds combined now total $3.979 trillion, or 80.9% of all taxable money fund assets.

European-affiliated holdings (including repo) increased by $30.2 billion in August to $428.0 billion; their share of holdings rose to 8.7% from last month's 8.1%. Eurozone-affiliated holdings increased to $293.3 billion from last month's $278.9 billion; they account for 6.0% of overall taxable money fund holdings. Asia & Pacific related holdings jumped higher to $191.3 billion (3.9% of the total) from last month's $176.6 billion. Americas related holdings fell to $4.294 trillion from last month's $4.360 trillion, and now represent 87.3% of holdings.

The overall taxable fund Repo totals were made up of: US Treasury Repurchase Agreements (up $5.1 billion, or 0.2%, to $2.317 trillion, or 47.1% of assets); US Government Agency Repurchase Agreements (up $18.6 billion, or 7.4%, to $271.5 billion, or 5.5% of total holdings), and Other Repurchase Agreements (down $0.5 billion, or -1.0%, from last month to $53.7 billion, or 1.1% of holdings). The Commercial Paper totals were comprised of Financial Company Commercial Paper (up $7.7 billion to $160.5 billion, or 3.3% of assets), Asset Backed Commercial Paper (up $6.8 billion to $35.3 billion, or 0.7%), and Non-Financial Company Commercial Paper (up $1.0 billion to $47.5 billion, or 1.0%).

The 20 largest Issuers to taxable money market funds as of Aug. 31, 2022, include: the Federal Reserve Bank of New York ($2.060T, 41.9%), the US Treasury ($1.339 trillion, or 27.2%), Federal Home Loan Bank ($335.3B, 6.8%), Federal Farm Credit Bank ($95.3B, 1.9%), BNP Paribas ($81.3B, 1.7%), RBC ($76.1B, 1.5%), Fixed Income Clearing Corp ($52.7B, 1.1%), JP Morgan ($49.2B, 1.0%), Sumitomo Mitsui Banking Co ($45.6B, 0.9%), Barclays ($40.6B, 0.8%), Mitsubishi UFJ Financial Group Inc ($39.2B, 0.8%), Citi ($37.2B, 0.8%), Credit Agricole ($33.3B, 0.7%), Bank of America ($32.9B, 0.7%), Toronto-Dominion Bank ($29.0B, 0.6%), Mizuho Corporate Bank Ltd ($25.7B, 0.5%), Bank of Montreal ($23.6B, 0.5%), Societe Generale ($22.7B, 0.5%), Goldman Sachs ($22.3B, 0.5%) and Canadian Imperial Bank of Commerce ($22.2B, 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 ($2.060T, 78.0%), BNP Paribas ($74.3B, 2.8%), RBC ($56.5B, 2.1%), Fixed Income Clearing Corp ($52.7B, 2.0%), JP Morgan ($42.3B, 1.6%), Sumitomo Mitsui Banking Corp ($31.9B, 1.2%), Bank of America ($29.4B, 1.1%), Citi ($27.0B, 1.0%), Barclays PLC ($25.6B, 1.0%) and Nomura ($20.7B, 0.8%). The largest users of the $2.060 trillion in Fed RRP include: Vanguard Federal Money Mkt Fund ($132.3B), Fidelity Govt Money Market ($124.8B), Fidelity Govt Cash Reserves ($110.8B), Goldman Sachs FS Govt ($109.5B), JPMorgan US Govt MM ($109.2B), Federated Hermes Govt Obl ($84.5B), Morgan Stanley Inst Liq Govt ($82.3B), State Street Inst US Govt ($71.0B), Fidelity Inv MM: Govt Port ($68.7B) and BlackRock Lq FedFund ($66.2B).

The 10 largest issuers of "credit" -- CDs, CP and Other securities (including Time Deposits and Notes) combined -- include: Credit Agricole ($20.3B, 5.0%), RBC ($19.6B, 4.8%), Mitsubishi UFJ Financial Group Inc ($19.0B, 4.6%), Mizuho Corporate Bank Ltd ($18.4B, 4.5%), Toronto-Dominion Bank ($17.8B, 4.3%), Skandinaviska Enskilda Banken AB ($16.6B, 4.1%), Barclays PLC ($15.0B, 3.7%), Bank of Nova Scotia ($13.7B, 3.4%), Sumitomo Mitsui Banking Corp ($13.7B, 3.4%) and Svenska Handelsbanken ($12.0B, 2.9%).

The 10 largest CD issuers include: Mitsubishi UFJ Financial Group Inc ($14.8B, 10.9%), Sumitomo Mitsui Banking Corp ($11.5B, 8.5%), Credit Agricole ($9.7B, 7.2%), Canadian Imperial Bank of Commerce ($8.4B, 6.2%), Toronto-Dominion Bank ($7.9B, 5.8%), Bank of Nova Scotia ($7.7B, 5.7%), Sumitomo Mitsui Trust Bank ($6.9B, 5.1%), Citi ($6.0B, 4.5%), Mizuho Corporate Bank Ltd ($4.9B, 3.6%) and Barclays PLC ($4.8B, 3.5%).

The 10 largest CP issuers (we include affiliated ABCP programs) include: RBC ($12.9B, 6.5%), Toronto-Dominion Bank ($9.2B, 4.7%), Bank of Montreal ($7.1B, 3.6%), JP Morgan ($6.9B, 3.5%), National Australia Bank Ltd ($6.8B, 3.5%), BNP Paribas ($6.3B, 3.2%), Barclays PLC ($6.1B, 3.1%), Bank of Nova Scotia ($6.0B, 3.0%), Societe Generale ($5.6B, 2.8%) and BayernLB ($5.3B, 2.7%).

The largest increases among Issuers include: Federal Home Loan Bank (up $24.7B to $335.3B), JP Morgan (up $9.8B to $49.2B), Barclays PLC (up $9.3B to $40.6B), Fixed Income Clearing Corp (up $6.8B to $52.7B), Mitsubishi UFJ Financial Group Inc (up $6.5B to $39.2B), Societe Generale (up $5.9B to $22.7B), RBC (up $5.7B to $76.1B), Nomura (up $4.4B to $20.7B), Goldman Sachs (up $3.2B to $22.3B) and Lloyds Banking Group (up $2.5B to $7.5B).

The largest decreases among Issuers of money market securities (including Repo) in August were shown by: the US Treasury (down $81.7B to $1.339T), Federal Reserve Bank of New York (down $27.7B to $2.060T), Federal Farm Credit Bank (down $9.6B to $95.3B), Federal Home Loan Mortgage Corp (down $4.1B to $6.4B), Bank of America (down $1.1B to $32.9B), Credit Agricole (down $1.0B to $33.3B), Australia & New Zealand Banking Group Ltd (down $0.9B to $11.7B), Bank of Montreal (down $0.5B to $23.6B), Mizuho Corporate Bank Ltd (down $0.4B to $25.7B) and Nordea Bank (down $0.3B to $6.0B).

The United States remained the largest segment of country-affiliations; it represents 83.5% of holdings, or $4.109 trillion. Canada (3.8%, $185.3B) was in second place, while France (3.4%, $167.6B) was No. 3. Japan (3.4%, $165.2B) occupied fourth place. The United Kingdom (1.5%, $72.1B) remained in fifth place. Netherlands (0.9%, $44.2B) was in sixth place, followed by Sweden (0.9%, $42.2B) Germany (0.7%, $35.9B), Australia (0.6%, $30.8B) and Spain (0.3%, $13.4B). (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 Aug. 31, 2022, Taxable money funds held 66.6% (up from 64.9%) of their assets in securities maturing Overnight, and another 6.2% maturing in 2-7 days (down from 7.0%). Thus, 72.8% in total matures in 1-7 days. Another 8.4% matures in 8-30 days, while 6.4% matures in 31-60 days. Note that over three-quarters, or 87.5% 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 5.2% of taxable securities, while 5.6% matures in 91-180 days, and just 1.8% 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 Monday, and we'll be writing our regular monthly update on the new Aug. 31 data for Tuesday's News. But we also uploaded a separate and broader Portfolio Holdings data set based on the SEC's Form N-MFP filings on Friday. (We continue to merge the two series, and the N-MFP version is now available via our Holding file listings to Money Fund Wisdom subscribers.) Our new N-MFP summary, with data as of August 31, includes holdings information from 997 money funds (up 1 from last month), representing assets of $5.087 trillion (down from $5.097 trillion). Prime MMFs now total $956.4 billion, or 18.8% of the total. We review the new N-MFP data, and we also look at our revised MMF expense data, which shows charged expenses inching lower and money fund revenues dipping to a $13.3 trillion annualized rate in August.

Our latest Form N-MFP Summary for All Funds (taxable and tax-exempt) shows Repurchase Agreement (Repo) holdings in money market funds increased to $2.669 trillion (up from $2.644 trillion), or 52.5% of all assets. Treasury holdings totaled $1.350 trillion (down from $1.433 trillion), or 26.5% of all holdings, and Government Agency securities totaled $458.0 billion (up from $445.8 billion), or 9.0%. Holdings of Treasuries, Government agencies and Repo (almost all of which is backed by Treasuries and agencies) combined total $4.477 trillion, or a massive 88.0% of all holdings.

Commercial paper (CP) totals $252.7 billion (up from $236.6 billion), or 5.0% of all holdings, and the Other category (primarily Time Deposits) totals $146.6 billion (down from $148.0 billion), or 2.9%. Certificates of Deposit (CDs) total $135.7 billion (up from $122.1 billion), 2.7%, and VRDNs account for $75.6 billion (up from $68.2 billion last month), or 1.5% of money fund securities.

Broken out into the SEC's more detailed categories, the CP totals were comprised of: $161.4 billion, or 3.2%, in Financial Company Commercial Paper; $36.1 billion or 0.7%, in Asset Backed Commercial Paper; and, $55.2 billion, or 1.0%, in Non-Financial Company Commercial Paper. The Repo totals were made up of: U.S. Treasury Repo ($2.345 trillion, or 46.1%), U.S. Govt Agency Repo ($277.9B, or 5.5%) and Other Repo ($45.8B, or 0.9%).

The N-MFP Holdings summary for the Prime Money Market Funds shows: CP holdings of $247.9 billion (up from $232.1 billion), or 25.9%; Repo holdings of $343.7 billion (up from $327.5 billion), or 35.9%; Treasury holdings of $53.9 billion (down from $58.4 billion), or 5.6%; CD holdings of $135.7 billion (up from $122.1 billion), or 14.2%; Other (primarily Time Deposits) holdings of $106.2 billion (down from $108.2 billion), or 11.1%; Government Agency holdings of $62.7 billion (up from $62.2 billion), or 6.6% and VRDN holdings of $6.2 billion (up from $5.9 billion), or 0.6%.

The SEC's more detailed categories show CP in Prime MMFs made up of: $161.4 billion (up from $154.1 billion), or 16.9%, in Financial Company Commercial Paper; $36.1 billion (up from $29.2 billion), or 3.8%, in Asset Backed Commercial Paper; and $50.3 billion (up from $48.8 billion), or 5.3%, in Non-Financial Company Commercial Paper. The Repo totals include: U.S. Treasury Repo ($277.2 billion, or 29.0%), U.S. Govt Agency Repo ($21.1 billion, or 2.2%), and Other Repo ($45.5 billion, or 4.8%).

In related news, money fund charged expense ratios (Exp%) inched lower in August to 0.38% from 0.41% 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 0.26% and 0.38%, respectively, as of Aug. 31, 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 Friday morning, so we revised our monthly MFI XLS spreadsheet and historical craneindexes.xlsx averages file to reflect the latest expenses, gross yields, portfolio composition and maturity breakout yesterday.) Visit our "Content" page for the latest files.

Our Crane 100 Money Fund Index, a simple average of the 100 largest taxable money funds, shows an average charged expense ratio of 0.26%, 3 basis points lower than last month's level (but 18 bps higher than 12/31/21's 0.08%). The average is slightly below 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 0.38% as of August 31, 2022, 3 bps lower than the month prior and now below the 0.40% at year-end 2019.

Prime Inst MFs expense ratios (annualized) average 0.32% (down 2 bps from last month), Government Inst MFs expenses average 0.28% (down 2 bps from previous month), Treasury Inst MFs expenses average 0.31% (down 2 bps from last month). Treasury Retail MFs expenses currently sit at 0.52%, (down 3 bps from last month), Government Retail MFs expenses yield 0.52% (down 3 bps from last month). Prime Retail MF expenses averaged 0.50% (down 4 bps from the previous month). Tax-exempt expenses were down 5 bps at 0.41% on average.

Gross 7-day yields rose again during the month ended August 31, 2022 (month after a 75 bps hike). (Yields should jump again in September if, as expected, the Fed hikes again.) The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 740), shows a 7-day gross yield of 2.30%, up 41 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 39 bps, ending the month at 2.28%.

According to our revised MFI XLS and Crane Index numbers, we now estimate that annualized revenue for all money funds is $13.297 billion (as of 8/31/22). Our estimated annualized revenue totals decreased from $14.860B last month and from $13.301B 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 resume their upwards trend in coming months as the MMFs start seeing substantial inflows from bank deposits.

Crane Data's latest monthly Money Fund Market Share rankings show assets were mixed among the largest U.S. money fund complexes in August. Money market fund assets increased $2.3 billion, or 0.0%, last month to $5.043 trillion. Assets increased by $79.9 billion, or 1.6%, over the past 3 months, and they've increased by $79.9 billion, or 1.6%, over the past 12 months. The largest increases among the 25 largest managers last month were seen by Schwab, SSGA, Federated Hermes, Dreyfus and Vanguard, which grew assets by $20.2 billion, $11.1B, $9.3B, $6.4B and $6.2B, respectively. The largest declines in August were seen by BlackRock, Goldman Sachs, Northern, JP Morgan and Morgan Stanley, which decreased by $22.0 billion, $12.5B, $10.3B, $9.2B and $6.4B, 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 August, below.

Over the past year through August 31, 2022, American Funds (up $84.0B, or 62.5%), SSGA (up $47.6B, or 33.1%), Schwab (up $47.5B, or 32.6%), HSBC (up $26.8B, or 72.1%) and Fidelity (up $26.6B, or 3.0%) were the largest gainers. Schwab, American Funds, Federated Hermes, Invesco and SSGA had the largest asset increases over the past 3 months, rising by $46.1B, $30.9B, $29.8B, $23.7B and $19.4B, respectively. The largest decliners over 12 months were seen by: JP Morgan (down $51.2B), Allspring (down $45.9B), BlackRock (down $38.8B), Northern (down $28.4B) and Morgan Stanley (down $19.1B). The largest decliners over 3 months included: JPMorgan (down $50.7B), BlackRock (down $47.3B), Northern (down $19.3B), Morgan Stanley (down $17.8B) and Allspring (down $10.5B).

Our latest domestic U.S. Money Fund Family Rankings show that Fidelity Investments remains the largest money fund manager with $919.5 billion, or 18.2% of all assets. Fidelity was up $1.3B in August, up $16.0 billion over 3 mos., and up $26.6B over 12 months. BlackRock ranked second with $477.6 billion, or 9.5% market share (down $22.0B, down $47.3B and down $38.8B for the past 1-month, 3-mos. and 12-mos., respectively). Vanguard ranked in third place with $457.6 billion, or 9.1% of assets (up $6.2B, up $4.4B and down $2.2B). JPMorgan ranked fourth with $421.0 billion, or 8.3% market share (down $9.2B, down $50.7B and down $51.2B), while Goldman Sachs was the fifth largest MMF manager with $379.4 billion, or 7.5% of assets (down $12.5B, up $15.5B and up $13.1B for the past 1-month, 3-mos. and 12-mos.).

Federated Hermes was in sixth place with $338.6 billion, or 6.7% (up $9.3B, up $29.8B and up $14.8B), while Morgan Stanley was in seventh place with $262.2 billion, or 5.2% of assets (down $6.4B, down $17.8B and down $19.1B). Dreyfus ($247.5B, or 4.9%) was in eighth place (up $6.4B, up $15.2B and up $11.3B), followed by American Funds ($218.4B, or 4.3%; unchanged, up $30.9B and up $84.0B). Schwab was in 10th place ($193.5B, or 3.8%; up $20.2B, up $46.1B and up $47.5B).

The 11th through 20th-largest U.S. money fund managers (in order) include: SSGA ($191.2B, or 3.8%), Allspring (formerly Wells Fargo) ($151.8B, or 3.0%), Northern ($151.1B, or 3.0%), First American ($116.7B, or 2.3%), Invesco ($113.8B, or 2.3%), HSBC ($63.8B, or 1.3%), UBS ($49.6B, or 1.0%), T. Rowe Price ($48.2B, or 1.0%), DWS ($36.4B, or 0.7%) and Western ($22.9B, or 0.5%). 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, Goldman moves up to the No. 4 spot and, Vanguard moves down to the No. 5 spot, And SSGA moves up to the No. 9 spot while American Funds drops down to the No. 10 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 ($930.4 billion), BlackRock ($680.9B), JP Morgan ($595.1B), Goldman Sachs ($510.8B) and Vanguard ($457.6B). Federated Hermes ($348.6B) was in sixth, Morgan Stanley ($324.5B) was seventh, followed by Dreyfus/BNY Mellon ($266.2B), SSGA ($224.0B) and American Funds ($218.4B), 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 September issue of our Money Fund Intelligence and MFI XLS, with data as of 8/31/22, shows that yields jumped again in August for the Crane Money Fund Indexes. The Crane Money Fund Average, which includes all taxable funds covered by Crane Data (currently 740), rose to 1.84% (up 37 bps) for the 7-Day Yield (annualized, net) Average, the 30-Day Yield increased to 1.76% (up 53 bps). The MFA's Gross 7-Day Yield rose to 2.25% (up 36 bps), and the Gross 30-Day Yield also moved up to 2.15% (up 51 bps). (Gross yields will be revised Friday afternoon, though, once we download the SEC's Form N-MFP data for 8/31/22.)

Our Crane 100 Money Fund Index shows an average 7-Day (Net) Yield of 2.00% (up 41 bps) and an average 30-Day Yield at 1.95% (up 57 bps). The Crane 100 shows a Gross 7-Day Yield of 2.29% (up 41 bps), and a Gross 30-Day Yield of 2.24% (up 57 bps). Our Prime Institutional MF Index (7-day) yielded 2.07% (up 40 bps) as of August 31. The Crane Govt Inst Index was at 1.87% (up 32 bps) and the Treasury Inst Index was at 1.93% (up 38 bps). Thus, the spread between Prime funds and Treasury funds is 14 basis points, and the spread between Prime funds and Govt funds is 20 basis points. The Crane Prime Retail Index yielded 1.96% (up 48 bps), while the Govt Retail Index was 1.56% (up 30 bps), the Treasury Retail Index was 1.68% (up 42 bps from the month prior). The Crane Tax Exempt MF Index yielded 1.18% (up 49 bps) as of August 31.

Gross 7-Day Yields for these indexes to end August were: Prime Inst 2.41% (up 40 bps), Govt Inst 2.16% (up 32 bps), Treasury Inst 2.25% (up 38 bps), Prime Retail 2.51% (up 48 bps), Govt Retail 2.11% (up 29 bps) and Treasury Retail 2.23% (up 42 bps). The Crane Tax Exempt Index jumped to 1.29% (up 33 bps). The Crane 100 MF Index returned on average 0.17% over 1-month, 0.35% over 3-months, 0.41% YTD, 0.42% over the past 1-year, 0.46% over 3-years (annualized), 0.97% over 5-years, and 0.56% over 10-years.

The total number of funds, including taxable and tax-exempt, dropped by 1 in August to 887. There are currently 740 taxable funds, up 2 from the previous month, and 146 tax-exempt money funds (down 4 from last month). (Contact us if you'd like to see our latest MFI XLS, Crane Indexes or Market Share report.)

The September issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Thursday morning, features the articles: "Short & Shorter: Record Low WAMs, Record High Repo," which discusses how short maturities have gotten; "EFAMA Fact Book Reviews European Money Funds in '21," which reviews statistics on European MMFs; and, "Lobbying Steps Up as SEC Prepares Final MMF Rules," which quotes from a recent ignites piece. We also sent out our MFI XLS spreadsheet earlier, and we've updated our database with 8/31/22 data. Our September Money Fund Portfolio Holdings are scheduled to ship on Monday, Sept. 12, and our September Bond Fund Intelligence is scheduled to go out on Thursday, Sept. 15. (Note: Our MFI, MFI XLS and Crane Index products are all available to subscribers via our Content center.)

MFI's "Short & Shorter" article says, "Weighted average maturities, or WAMs, of money market funds just keep getting shorter. The average WAM for Taxable money funds fell by 3 days to 18 days, down from 36 days at the start of the year and the lowest level ever. The maximum WAM for money funds was originally 120 days until the early 1990s, when it was reduced to 90 days. Then, it was cut to 60 days with the 2014 MMF Reforms. (The WAM measures how long, on average, portfolios turn over and reflect Fed rate hikes or cuts.)"

It continues, "WALs, or weighted average life, are also hitting record lows. Our Crane Money Fund Average for WALs sank to 61 days from 64 days in August, the lowest level since reporting began on this data point in 2014. (The SEC added a mandate that WAL, which doesn't include maturity adjustments for floating rate securities, be a maximum of 120 days.)"

Our "EFAMA Fact Book" piece explains, "A press release entitled, 'EFAMA publishes 2022 Industry Fact Book,' tells us, 'The European Fund and Asset Management Association (EFAMA) has released its 2022 Industry Fact Book. The 2022 Fact Book provides an in-depth analysis of trends in the European fund industry, with an emphasis on what happened in 2021. It also includes an extensive overview of the regulatory developments across 28 European countries and a wealth of data.' (`Note: EFAMA's Federico Cupelli will speak at our upcoming European Money Fund Symposium, which is Sept. 27-28 in Paris, France. We hope to see you there!)"

It also says, "EFAMA Director General Tanguy van de Werve comments, 'Beyond providing in-depth analysis of recent trends in the European investment fund industry, this year's ... Fact Book analyses several issues highly relevant for our industry, including ... some proposals to amend the money market funds regulation.'"

Our "SEC" piece states, "Last week, mutual fund news source ignites brought pending Money Fund Reforms back into the headlines with the piece, 'Shops Step Up Pressure on SEC to Revamp Money Fund Rules.' They explain, 'Industry firms and their trade groups appear to be making a last-ditch effort to convince the Securities and Exchange Commission to change several key parts of its money market fund rule proposal. The agency seeks to put out the final rule in October, according to its regulatory agenda. But some large money fund sponsors have argued that if the proposed rule is adopted in its current form, it would kill institutional prime funds and hurt government money funds.'"

MFI writes, "The ignites update tells us, 'The proposal was first floated in December and comments on it were due in April. On Aug. 10, nearly 30 industry executives met remotely with Securities and Exchange Commission officials about the proposed rule, disclosures show. The shops represented at that meeting included the largest managers of money funds: Fidelity, BlackRock, Vanguard, JPMorgan, Federated Hermes, Schwab and T. Rowe Price. The firms are members of the asset management group of the Securities Industry and Financial Markets Association, which organized the meeting.... The SEC's disclosure about the meeting states only that the money fund rule proposal was discussed, but does not provide details.'"

MFI also includes the News brief, "Money Fund Yield Average Hits 2.0%. Our Crane 100 Money Fund Index (​7-​Day Yield) rose 41 basis points in August to 2.​00%, its highest level since June 2019. Our broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (​currently 740), rose to 1.​84% last month."

Another News brief, "Big Rates Hikes to Continue, Stick Around, Says Powell in Jackson Hole," explains, "Federal Reserve Board Chair Jerome Powell spoke on 'Monetary Policy and Price Stability’ recently in Jackson Hole, Wyoming, and indicated that interest rate hikes will keep coming until inflation is back at 2%. He says, 'The Federal Open Market Committee's (FOMC) overarching focus right now is to bring inflation back down to our 2 percent goal.'"

A third News brief, "MMF Assets Flat, But Prime Grows," says, "Money fund assets inched higher in August, rising $2.3 billion to $5.044 trillon, according to Crane Data. Prime MMFs increased by $44.7 billion to $950.3 billion. ICI's weekly 'Money Market Mutual Fund' assets series shows money fund assets inching lower in the latest week, the 4th decline in the past 5 weeks."

Also, a sidebar, "SEC on MMFs & Treasuries," states, "The Securities & Exchange Commission's Division of Investment Management Analytics Office published, 'Money Market Funds in the Treasury Market,' which reviews Government money market fund investments in Treasuries and repos over the past decade. The authors write, 'This study analyzes portfolio holdings data filed by money market funds (MMFs) on Form N-MFP to gain insights about these funds' activity in the Treasury market. Since March 2020 the MMF industry, including both government and prime MMFs, increased investments in Treasury securities and Treasury repurchase agreements supporting Treasury auctions and repo market functioning. MMFs are also the main investors in the Federal Reserve's reverse repo facility supporting monetary policy implementation.'"

Our September MFI XLS, with August 31 data, shows total assets increased $2.3 billion to $5.044 trillion, after increasing $26.0 billion in July and $31.9 billion in June, but decreasing $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, $49.7 billion in November and $20.5 billion October. Our broad Crane Money Fund Average 7-Day Yield was up 41 bps to 1.84%, and our Crane 100 Money Fund Index (the 100 largest taxable funds) was up 38 bps to 2.00% in August.

On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA and the Crane 100 both were both higher at 2.25% and 2.29%, respectively. Charged Expenses averaged 0.41% and 0.29% for the Crane MFA and the Crane 100. (We'll revise expenses on Friday once we upload the SEC's Form N-MFP data for 8/31/22.) The average WAM (weighted average maturity) for the Crane MFA was a record low 19 days (down 3 days from previous month) while the Crane 100 WAM decreased 4 days to 19 days. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)

Money fund yields continued creeping higher again in the latest week, with our Crane 100 Money Fund Index (7-Day Yield) rising 3 basis points to 2.02% in the week ended Friday, 9/2. Yields rose by 2 basis points the previous week, 3 bps the week before that, and 5 basis points the week before that. On average, they're up from 1.57% on July 29, up from 1.18% on June 30 and more than triple their level of 0.58% on May 31. MMF yields are up from 0.21% on April 29, 0.15% on March 31 and 0.02% on February 28 (where they'd been for almost 2 years prior). (Note: With just 3 weeks to go until our European Money Fund Symposium, which is Sept. 27-28 in Paris, France, we're encouraging anyone interested to register ASAP!)

Yields should remain flat at just over 2.0% on average in coming weeks, but they should jump once again after the Fed hikes (likely by another 75 bps) at their Sept. 21 meeting. Our broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 679), shows a 7-day yield of 1.91%, up 3 bps in the week through Friday. The Crane Money Fund Average is up 88 bps since beginning of July and up 144 bps from 0.47% at the beginning of June.

Prime Inst MFs were up 1 bp to 2.14% in the latest week, up 87 bps since the start of July and up 150 bps since the start of June (close to double from the month prior). Government Inst MFs rose by 2 bps to 1.94%, they are up 84 bps since start of July and up 140 bps since the start of June. Treasury Inst MFs up 6 bps for the week at 1.97%, up 93 bps since beginning of July and up 147 bps since the beginning of June.

Treasury Retail MFs currently yield 1.72%, (up 6 bps for the week, up 92 bps since July and up 142 bps since June), Government Retail MFs yield 1.65% (up 3 bps for the week, up 86 bps since July started and up 139 bps since June started), and Prime Retail MFs yield 1.99% (up 1 bp for the week, up 92 bps from beginning of July and up 151 bps from beginning of June), Tax-exempt MF 7-day yields fell by 14 bps to 1.12%, they are up 56 bps since the start of July and up 74 bps since the start of June.

According to Monday's Money Fund Intelligence Daily, with data as of Friday (9/2), just 40 funds (out of 822 total) still yield between 0.00% and 0.99% with assets of $10.2 billion, or 0.2% of total assets; 180 funds yield between 1.00% and 1.49% with $203.1 billion in assets, or 4.1%; 102 funds yielded between 1.50% and 1.74% with $156.2 billion or 3.1%; 180 funds yielded between 1.75% and 1.99% ($1.347 trillion, or 26.9%); 232 funds yielded between 2.00% and 2.24% ($2.432 trillion, or 48.5%) and 88 funds yielded 2.25% or more ($865.4 billion, or 17.3%).

Brokerage sweep rates were mostly flat again over the past week. Our latest Brokerage Sweep Intelligence shows brokerages paying an average of 0.26% on FDIC insured deposits, up from 0.16% two months ago and up from 0.05% three months ago. 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 unchanged this past week at 0.26%. This follows increases over the past couple of months but also follows 2 straight years of yields at 0.01%. Sweep yields were 0.12% on average at the end of 2019 and 0.28% on average at the end of 2018. The latest Brokerage Sweep Intelligence, with data as of Sept. 2, shows just one rate change over the previous week.

Last week, RW Baird increased rates to 0.72% for all balances between $1K and $249K, to 0.82% for balances between $250K and $999K, to 1.07% for balances between $1 million and $1.9 million, and to 1.41% for balances of $5 million and over for the week ended September 2. Just three of 11 major brokerages still offer rates of 0.01% for balances of $100K (and most other tiers). These include: E*Trade, Merrill Lynch and Morgan Stanley.

In related news, The Wall Street Journal writes on "Inflation's Silver Lining: You Can Make Money on Your Savings Again." Subtitled, "Fed rate increases mean consumer banks such as Marcus and Ally are paying more on savings accounts and CDs," the piece says, "Higher interest rates mean rising borrowing costs for consumers. But they are finally able to earn some money on their savings in return."

It explains, "The Federal Reserve has raised interest rates several times since March in its bid to fight high inflation and has signaled more increases are likely. Banks, in response, have gradually increased the rates they pay to consumers on products like certificates of deposit and savings accounts, which plunged early in the pandemic. The average annual percentage yield on a one-year CD reached 0.46% in August, according to the Federal Deposit Insurance Corp. That is up from 0.15% since March. Likewise, the average rate on savings accounts rose to 0.13%, up from 0.06% in March."

The Journal tells us, "Online banks such as Ally Financial Inc. and Capital One Financial Corp. have been the early movers. They have raised CD rates, on average, by 0.43 percentage point and savings rates by 0.38 percentage point over the past month, analysts at Goldman Sachs Group Inc. said in a research note Monday. Goldman’s online bank, known as Marcus, recently offered 1.7% annually on its savings account, up from 0.5% in April."

They comment, "While online banks are boosting rates, bigger players such as JPMorgan Chase & Co. and Bank of America Corp. have barely budged. Large banks are typically slow to increase those rates, because their extensive branch networks and large marketing budgets mean they usually have plenty of deposits on hand. Pandemic stimulus further drove up deposits at the biggest banks."

Finally, the WSJ adds, "Still, the larger banks could boost their own rates in the months ahead because demand for loans is strong and further tightening is expected from the Fed, Goldman Sachs analyst Richard Ramsden said.... Deposits at commercial banks have held steady this year, but could decline if consumers find higher-yielding alternatives to park their money, he added. Meanwhile, [Adam] Stockton from Curinos said, 'We expect to see more rate competition filtering through the fourth quarter and intensifying in the first half of the next year.'"

Last week, mutual fund news source ignites brought pending Money Fund Reforms back into the headlines with the piece, "Shops Step Up Pressure on SEC to Revamp Money Fund Rules." They explain, "Industry firms and their trade groups appear to be making a last-ditch effort to convince the Securities and Exchange Commission to change several key parts of its money market fund rule proposal. The agency seeks to put out the final rule in October, according to its regulatory agenda. But some large money fund sponsors have argued that if the proposed rule is adopted in its current form, it would kill institutional prime funds and hurt government money funds." We quote from the article below, and we also look at one of the most recent comments on reforms from Federated Hermes' Peter Germain, who discusses the RDM, or reverse distribution mechanism

The ignites MMF Reforms update tells us, "The proposal was first floated in December and comments on it were due in April. On Aug. 10, nearly 30 industry executives met remotely with Securities and Exchange Commission officials about the proposed rule, disclosures show. The shops represented at that meeting included the largest managers of money funds: Fidelity, BlackRock, Vanguard, JPMorgan, Federated Hermes, Schwab and T. Rowe Price. The firms are members of the asset management group of the Securities Industry and Financial Markets Association, which organized the meeting.... The SEC's disclosure about the meeting states only that the money fund rule proposal was discussed, but it does not provide any details."

It says, "There's likely still 'a lot of wiggle room in the details' of the final rule, said Peter Crane, chief executive of Crane Data. The SEC could choose to further study certain parts of the proposed rule instead of making them requirements, for example, or could soften the final rule by choosing to make certain actions voluntary instead of mandatory, he said."

The article continues, "In early August, Investment Company Institute CEO Eric Pan submitted a letter to 'supplement' the trade group's earlier comments, and to set the record straight regarding swing pricing and its use in other jurisdictions. '[W]hile some non-money market funds in Europe do use swing pricing, money market funds in Europe do not use, and have not used, swing pricing,' Pan wrote. 'This point is worth repeating: European money market funds do not use swing pricing.' The SEC's rule proposal would require institutional prime and tax-exempt money funds that are experiencing net redemptions to use the mechanism, which allows firms to adjust the fund's net asset value so that the transaction price is borne by investors redeeming their shares."

It comments, "Federated Hermes' CEO Chris Donahue stated his opinions bluntly. 'Swing pricing is a plague on money market funds,' he wrote in a May letter to SEC Chair Gary Gensler. 'It will finish off the task of regulating institutional prime funds 'out of existence.' One trillion [dollars] was taken out during the last round of changes and the remaining $300 billion will be largely taken out with swing pricing.'"

Ignites adds, "The SEC in 2014 passed reforms that required institutional prime and tax-exempt products to adopt a fluctuating net asset value, rather than the $1.00-per-share stable NAV they had always used. The rule took effect in October 2016, and in the months prior to the effective date, about $1 trillion in assets moved out of institutional prime and tax-exempt money funds and into government ones. Institutional prime funds represented nearly $230 billion in assets as of Aug. 25, ICI data shows. The data does not include the unregistered prime funds that some of the largest money fund sponsors run for internal use."

While there haven't been many Comments on Money Market Fund Reforms since the April deadline passed, there have been a trickling of entries and meeting notices. The latest is from Federated Hermes' Chief Legal Officer Peter Germain. He writes to the SEC's Sarah ten Siethoff, "As a follow-up to our conversation on July 22, and as previewed in our letter on July 28, we are writing to provide further information and examples of how a reverse distribution mechanism ('RDM') could be utilized in a negative interest rate environment in such a way as to minimize any potential investor confusion."

Germain explains, "We have set-forth as exhibits to this letter a number of examples of disclosure documents which could be utilized in a negative interest rate environment or in other circumstances in which a four-digit NAV is required. These include: (i) an initial notice upon a fund's board adoption of new prospectus disclosure on the potential use of a RDM should the Federal Funds Rate fall below zero (Exhibit A); (ii) ongoing prospectus disclosure (Exhibit B); (iii) a draft website notice to be published if and when the Federal Reserve lowers the Federal Funds Rate below zero (Exhibit C); and (iv) a mock account statement informing investors that a RDM is in place and directing them to the fund's prospectus (Exhibit D)."

He continues, "Additionally, we discussed at length how investors in money market funds would receive the appropriate explanatory disclosure documents and be given an opportunity to have any questions they might have about a RDM addressed, even though end investors may often only have direct relationships with intermediaries who offer funds on behalf of fund companies. To provide comfort to the Commission on this point, we have confirmed that all of our intermediary agreements contain forms of the following provisions: Delivery of Disclosure Documents. Intermediary shall deliver or cause to be delivered to its customers copies of the current Prospectus for any Shares (including the SAI if expressly requested), periodic reports, proxy materials and other shareholder communications."

Federated's Counsel writes, "It is also our understanding that these provisions are industry standard for situations where funds are distributed primarily through intermediaries and would be included in any similar intermediary / distribution agreement. Given that, we are confident that the agreements that we have in place with intermediaries would require distribution of any required disclosure related to a RDM that we provide. It should also be noted that some intermediaries may prefer to create their own client communications, which would be provided to their clients in addition to the distribution of any material we may provide."

He adds, "We hope that after reviewing our examples of plain English disclosure regarding the use of a RDM that the Commission will include the potential use of a RDM as an option for a Board to elect to use in a negative rate environment, thereby avoiding negative consequences to U.S. investors and markets. We agree with your goal of having contingency tools in place should we ever encounter a negative rate environment and are hopeful that the Commission will allow the use of a RDM as a permissible contingency tool in a negative rate environment."

They write, "As previously noted, we remain very concerned that the Commission's proposal to mandate U.S. Government MMFs move to a four-digit NAV in a negative rate environment could lead to a loss of at least $1 Trillion in U.S. Government MMF assets via traditional sweep accounts and up to an additional $1 Trillion in assets invested into U.S. Government MMFs which are made as position trades. These position trades are entered into the cash sweep system manually at the end of the day. The position trades include, but are not limited to, investor funds relating to special items, such as mass-tort settlements, M&A, stimulus money, securities lending and custody.... Movement out of these investments would remove a stable source of support for these vital markets, as well as a source of funding for the Federal Government. These assets would most likely shift from U.S. Government MMFs into lower yielding bank deposit accounts or other less transparent products, which would disrupt the liquidity and functioning of these important markets, and would deprive investors of a market rate of return."

Finally, Germain states, "Given the complexity and importance of this matter and the reality that the risk of a near-term shift to negative interest rates is extremely remote, we urge the Commission to consider use of a RDM with proper plain English disclosure and withhold the requirement in the proposed MMF rule relating to the four-digit NAV until a RDM has been thoroughly vetted and approved. We very much appreciate your continued consideration on the use of RDM in a negative rate environment and we will continue to make ourselves available for any further follow-up questions or discussions as you deem appropriate."

For earlier letters, see our May 6 News, "May MFI Features: Comments on SEC Reforms, Fidelity Letter, Earnings," which quotes, "MFI's 'Comments' article says, 'The big news over the past month was the release of most of the major 'Comments on Money Market Fund Reform' sent to the SEC in response to its Money Fund Reform Proposal. Following the April 11 deadline, dozens of letters were posted, including entries from 17 of the 20 largest managers of MMFs. Click on the name for comments from each of the managers here: Fidelity (see article), BlackRock, Vanguard, J.P. Morgan, Federated Hermes, Morgan Stanley, Dreyfus, Northern, Allspring, SSGA, American Funds, Schwab, First American, Invesco, T. Rowe Price, HSBC and Western. (Goldman Sachs, UBS and DWS didn't submit letters.)'"

The Securities & Exchange Commission's Division of Investment Management Analytics Office published, "Money Market Funds in the Treasury Market," which reviews Government money market fund investments in Treasuries and repos over the past decade. Authors Viktoria Baklanova, Isaac Kuznits and Trevor Tatum write, "This study analyzes portfolio holdings data filed by money market funds (MMFs) on Form N-MFP to gain insights about these funds' activity in the Treasury market. Since March 2020 the MMF industry, including both government and prime MMFs, increased investments in Treasury securities and Treasury repurchase agreements supporting Treasury auctions and repo market functioning. MMFs are also the main investors in the Federal Reserve's reverse repo facility supporting monetary policy implementation."

They explain, "MMF investments in the Treasury market have increased substantially in recent years. One reason for this development is the growth of assets under management in government MMFs, which are required to invest at least 99.5% of their total assets in cash, U.S. government securities, or fully collateralized repurchase agreements (repos). Assets in government MMFs more than doubled in 2016 following implementation of the 2014 MMF reforms and increased considerably once again in the first half of 2020, when demand for government assets surged amidst the COVID-19 pandemic."

The paper continues, "In addition, prime MMFs, which can invest in a broad range of short-term, high quality assets, have increased their holdings of U.S. government securities, mostly Treasuries. As of June 30, 2022, the MMF industry allocated $3,783 billion, or 75% of total investments to Treasury securities and Treasury repos. This includes prime MMFs that sharply increased their allocations to Treasury securities and Treasury repos since the onset of the pandemic in March 2020."

It tells us, "MMFs participate in the Treasury market alongside other types of entities. The statistics about Treasury securities issuance and holdings collected by the Federal Reserve show that as of March 31, 2022, foreign and international investors, including hedge funds, were the largest holders of Treasury securities accounting for approximately 30% of $25.5 trillion in Treasury securities outstanding.... The second largest holder of Treasury securities was the Federal Reserve with around 23% of the total. The Federal Reserve's share grew markedly in 2020 when the central bank increased its holdings of Treasury securities to support the flow of credit to households and businesses during the pandemic, among other measures."

The SEC staffers say, "Investment companies (including MMFs) were the third largest investor in the Treasury market holding just under $3.6 trillion of Treasury securities and accounting for 14% of the total. MMFs account for around 7% of outstanding Treasury securities.... MMFs investments are limited to securities that have residual maturities of 397 days or less or government adjustable rate securities resetting within 397 days. Because of these limitations, MMFs mainly invest in Treasury bills.... MMFs have also become dominant investors in Treasury floating rate notes (FRN) since the FRN program was established in January 2014. As of June 30, 2022, MMFs held 60% of outstanding Treasury FRN and accounted for over 30% of outstanding Treasury bills."

They write, "MMFs' share of total Treasury securities outstanding increased markedly at the onset of the pandemic. Government MMFs, which received inflows of $838 billion in March 2020 and $347 billion in April 2020, increased their market share in Treasury bills. MMF Treasury bill holdings, which were 24% of the total outstanding in February 2020, increased to 32% of total outstanding in March 2020 and further increased to 43% of total outstanding in April 2020, supporting government debt issuance during the time of crisis."

The piece states, "Typically, MMFs purchase Treasury securities at auctions and hold to maturity. Portfolio holdings data filed by MMFs on Form N-MFP offer month-end snapshots, but doesn't provide complete visibility into asset turn-over. For example, if an MMF disposes of portfolio holdings intra month, the currently available data would not reflect this activity and could potentially underestimate the amount of asset liquidation. Given this limitation, estimates based on monthly filings of Form N-MFP suggest that, on average, MMFs hold around 70% of Treasury securities to the next month, while around 6% of such holdings are liquidated before maturity.... Around 23% of Treasury holdings mature during the month. Prime MMFs show even less Treasury securities turnover. Estimates based on monthly filings of Form N-MFP suggest that prime MMFs, on average, liquidate only 4% of their Treasury holdings before maturity."

It also says, "Holdings of Treasury securities enhance the liquidity parameters of MMF portfolios. These assets are considered daily liquid assets by MMF regulation. In the first half of 2020, at the onset of the pandemic, MMFs sharply increased their holdings of Treasury bills, providing additional demand at the Treasury auctions and supporting market liquidity. For example, in April 2020, MMFs absorbed around 64% of the additional $1.3 trillion in Treasury bill issuance."

The paper adds, "MMFs are also important investors in the Treasury repo market. As of June 30, 2022, MMF investments in Treasury repos were close to $2,317 billion, of which $2,063 billion were allocated to the Federal Reserve's reverse repo (RRP) facility. MMF investments accounted for over 70% of the Treasury repos settled on the triparty platform. At present, MMFs conduct most of their Treasury repos with the Federal Reserve, which has replaced securities dealers as the main MMF repo counterparty since mid-2021.... Before that, securities dealers had been the largest MMF repo counterparty. Dealer access to MMFs in the repo market facilitates settlement of the Treasury auctions and a range of dealers' market making strategies, indirectly connecting MMFs to a broader set of activity in the financial system."

The paper also says, "Since introduction, RRP has been actively utilized by MMFs. As of June 30, 2022, total RRP investments by all counterparties reached an all-time high of $2,330 billion with MMFs accounting for approximately 89% of the total. For MMFs, RRP investments represented close to 41% of industry investment assets. This was in contrast to 2020, when MMFs only sparsely used RRP amid the increased issuance of Treasury bills, which provided a yield advantage over the RRP offering rate of 0.0% at that time."

Finally, on the "Fixed Income Clearing Corporation," they comment, "Some MMF investments in repos are centrally cleared, netted and novated by the Fixed Income Clearing Corporation (FICC). FICC allows some clearing members to sponsor their eligible clients such as registered investment companies, including MMFs. Netting of trades between FICC members reduces dealer exposures and can make trading less expensive, potentially providing cost benefits to MMFs as sponsored members. As of June 30, 2022, MMFs had close to $63 billion in centrally cleared Treasury repos, or 3% of their total Treasury repo volume. Most of these MMF sponsored repos were settled outside the triparty platform, although FICC has recently developed a triparty sponsored repo service."

The money market mutual fund industry has a new champion, Somerset County (Pa.) Treasurer Anthony DeLuca. The Tribune Democrat of Johnstown, Pa, writes, "Somerset County considering money market to boost interest revenue." The piece explains, "With the county's general fund inflated to more than $31 million -- in part due to temporary American Rescue Plan money -- Somerset County Treasurer Anthony DeLuca sees a unique opportunity to grow that total. Advising the Somerset County commissioners that money market interest rates will grow to 2.25% on Sept. 1, he urged the board Tuesday to transfer those dollars into a market fund through an area bank. 'That's $35,130 per month the county could be gaining,' DeLuca said, adding that the total interest would add up to $427,433 a year."

The article continues, "Somerset County commissioners said the idea has their attention, but they pumped the brakes on DeLuca's call to act 'immediately.' `While moving the funds from a savings account that yields 0.55% to a market find that currently pays 1.75% might seem like a no-brainer, Commissioner Colleen Dawson said the board has a fiduciary responsibility to thoroughly explore whether a money market option, which has a monthly transaction limit, would be a fit."

The Tribune Democrat explains, "Monitoring investment opportunities is part of DeLuca's role as treasurer. He first pitched the idea in a committee meeting earlier this month. DeLuca obtained money market quotes from the bank the county currently deals with -- First National Bank, a Pittsburgh-based institution with a heavy presence in the region. While DeLuca said he'd reach out to other banks for proposals, he said the county is losing money each day -- and said he didn't understand why the county didn't act immediately to invest."

The paper adds, "President Commissioner Gerald Walker said the county has an obligation to act carefully and research the idea, given that taxpayers' money is involved. In the days since DeLuca first brought up the idea, the county spoke with officials from the Pennsylvania Local Government Investment Trust about directing general fund dollars into a money market, he said. The municipal government-created entity serves as a financial services resource for counties, townships and schools. The next step involves collecting quotes from banks and determining what percentage of its fund dollars the county could deposit in the fund, Walker said."

In other news, the Federal Reserve Bank of New York sent out a "Replay" version of an earlier Liberty Street Economics blog post, entitled, "The Fed's Balance Sheet Runoff and the ON RRP Facility." (We mentioned earlier in our April 13 Link of the Day, "The Fed's Balance Sheet and ON RRP," but briefly quoted.) They write, "A 2017 Liberty Street Economics post described the balance sheet effects of the Federal Open Market Committee's decision to cease reinvestments of maturing securities -- that is, the mechanics of the Federal Reserve's balance sheet 'runoff.' At the time, the overnight reverse repo (ON RRP) facility was fairly small (less than $200 billion for most of July 2017) and was not mentioned in the post for the sake of simplicity. Today, by contrast, take-up at the ON RRP facility is much larger (over $1.5 trillion for most of 2022). In this post, we update the earlier analysis and describe how the presence of the ON RRP facility affects the mechanics of the balance sheet runoff."

The blog explains, "In the exhibit below, we describe simplified balance sheets for the Fed, the Treasury, banks, and money market funds (MMFs). We only show the balance sheet items that are essential for understanding the mechanics related to the Fed's actions.... On MMFs' balance sheet, the asset side contains Treasury securities, deposits at banks, and investments in the ON RRP facility; on the liability side, there are MMF shares held by households. In contrast to banks and the Treasury, MMFs cannot hold balances in a Fed account; however, MMFs have access to the ON RRP facility (MMFs with ON RRP access accounted for approximately 80 percent of MMF assets under management at the end of 2021)."

It tells us, "We next consider what happens when newly issued Treasury securities are purchased by MMFs. MMFs can fund their purchases by withdrawing deposits at banks, reducing their investments in the ON RRP facility, or a combination of the two. The next exhibit shows what happens if MMFs use both deposits and ON RRP investments to purchase Treasury securities. Several transactions occur simultaneously: MMFs buy new securities from the Treasury, which holds the proceeds at the Fed, returning the TGA balance to its level before the Treasury securities held by the Fed matured. MMFs' deposits at banks decrease as MMFs use them to purchase a portion of the Treasury securities. Banks facilitate the purchase, transferring reserve balances to the TGA while debiting the accounts that MMFs have at the banks."

The blog says, "MMFs reduce their investments in the ON RRP facility to fund the purchase of the remainder of the Treasury securities. ON RRP balances decline and the TGA balance increases by an equal amount. Banks' balance sheet shrinks, with lower deposits on the liability side, and lower reserves on the asset side. The size of MMFs' balance sheet is unchanged, but its composition on the asset side has changed: the increase in Treasury securities holdings is offset by a decrease in deposits held at banks and investments in the ON RRP facility."

It states, "Since MMFs can only buy newly issued Treasury securities if they are Treasury bills or floating rate notes, only when these securities are issued in large amounts will MMFs be able to absorb a large fraction of the Fed's balance sheet reduction. Moreover, the extent to which MMFs are willing to buy Treasury securities depends on how the rates on these securities compare to the rates paid on alternative assets such as bank deposits and ON RRP investments. Finally, since a large fraction of the MMF industry -- namely government funds -- cannot invest in bank deposits, it is likely that a large proportion of purchases of Treasury securities by MMFs would be financed through reduced investments in the ON RRP facility."

Finally, they write, "In this post, we updated an earlier post illustrating the balance sheet mechanics of a runoff in the Fed's holdings of Treasury securities to illustrate the effect of the ON RRP facility. In all cases, the Fed's balance sheet decreases as the Fed doesn't reinvest the proceeds of its maturing Treasury securities. On the liability side of the Fed's balance sheet, the decrease may stem from either a reduction of reserves held by banks or a reduction in ON RRP take-up or a combination of both. Similar mechanics occur when agency mortgage-backed securities mature and banks purchase the newly issued securities, as was noted in this Liberty Street Economics post. As the exhibits in this post show, the runoff of the Fed's security holdings has potential implications for the balance sheets of a range of financial market participants."

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