News Archives: December, 2024
The ICI published its monthly "Trends in Mutual Fund Investing" for November 2024, and its monthly "Month-End Portfolio Holdings of Taxable Money Funds" Monday. ICI's monthly Trends shows money fund totals rising $171.5 billion, or 2.6%, in November to $6.713 trillion. MMFs have increased by $832.3 billion, or 14.2%, over the past 12 months (through 11/30/24). Money funds' November asset increase follows an increase of $117.4 billion in October, $158.6 billion in September, $124.8 billion in August, $46.6 billion in July, $13.0 billion in June, $90.9 billion in May and $4.3 billion in April. They decreased $73.0 billion in March, but increased $55.1 billion in February, $82.4 billion in January and $34.9 billion last December. Bond fund assets increased $69.0 billion to $5.124 trillion, and bond ETF assets increased to $1.78 trillion. (Note: Thank you for your support in 2024 and best of luck in 2025. Happy New Year!)
The monthly release states, "The combined assets of the nation's mutual funds increased by $971.36 billion, or 3.4 percent, to $29.14 trillion in November, according to the Investment Company Institute's official survey of the mutual fund industry. In the survey, mutual fund companies report actual assets, sales, and redemptions to ICI.... Bond funds had an inflow of $14.33 billion in November, compared with an inflow of $34.15 billion in October.... Money market funds had an inflow of $156.85 billion in November, compared with an inflow of $101.61 billion in October. In November funds offered primarily to institutions had an inflow of $129.87 billion and funds offered primarily to individuals had an inflow of $26.98 billion."
The Institute's latest statistics show that Taxable MMFs and Tax Exempt MMFs were both higher from last month. Taxable MMFs increased by $169.5 billion in November to $6.578 trillion. Tax-Exempt MMFs increased $2.1 billion to $135.8 billion. Taxable MMF assets increased year-over-year by $819.1 billion (14.2%), and Tax-Exempt funds rose by $13.3 billion over the past year (10.9%). Bond fund assets increased by $69.0 billion (after decreasing by $55.6 billion in October) to $5.124 trillion; they've increased by $515.2 billion (11.2%) over the past year.
Money funds represent 23.0% of all mutual fund assets (down 0.2% from the previous month), while bond funds account for 17.6%, according to ICI. The total number of money market funds was 259, down 1 from the prior month and down from 275 a year ago. Taxable money funds numbered 216 funds, and tax-exempt money funds numbered 43 funds.
ICI's "Month-End Portfolio Holdings" confirms a jump in Treasuries and a drop in Repo last month. Treasury holdings in Taxable money funds remained the largest composition segment last month, they increased $177.7 billion, or 6.5%, to $2.899 trillion, or 44.1% of holdings. Treasury securities have increased by $812.3 billion, or 38.9%, over the past 12 months. (See our Dec. 11 News, "Dec. Money Fund Portfolio Holdings: Treasuries Jump Again, Repo Dips.")
Repurchase Agreements were the second largest composition segment this past month, decreasing $41.5 billion, or -1.8%, to $2.235 trillion, or 34.0% of holdings. Repo holdings have decreased $196.9 billion, or -8.1%, over the past year. U.S. Government Agency securities were the third largest segment; they decreased $7.7 billion, or -1.0%, to $800.2 billion, or 12.2% of holdings. Agency holdings have increased by $138.7 billion, or 21.0%, over the past 12 months.
Certificates of Deposit (CDs) remained in fourth place; they increased by $28.1 billion, or 8.9%, to $345.0 billion (5.2% of assets). CDs held by money funds rose by $28.7 billion, or 9.1%, over 12 months. Commercial Paper remained in fifth place, up $4.3 billion, or 1.5%, to $287.6 billion (4.4% of assets). CP increased $48.8 billion, or 20.4%, over one year. Other holdings increased to $21.9 billion (0.3% of assets), while Notes (including Corporate and Bank) decreased to $26.3 billion (0.4% of assets).
The Number of Accounts Outstanding in ICI's series for taxable money funds increased to 74.176 million, while the Number of Funds was down 1 at 216. Over the past 12 months, the number of accounts rose by 11.043 million and the number of funds decreased by 13. The Average Maturity of Portfolios was 37 days, up 1 day from October. Over the past 12 months, WAMs of Taxable money have increased by 3.
The U.S. Securities and Exchange Commission published its latest monthly "Money Market Fund Statistics" summary yesterday, which shows that total money fund assets rose by $197.8 billion in November 2024 to a record $7.125 trillion. Assets jumped $93.3 billion in October and $166.6 billion in September 2024. The SEC shows Prime MMFs increased $12.9 billion in November to $1.187 trillion, Govt & Treasury funds increased $181.5 billion to $5.797 trillion and Tax Exempt funds increased $3.4 billion to $141.3 billion. Taxable yields fell again in November after plunging in October. The SEC's Division of Investment Management summarizes monthly Form N-MFP data and includes asset totals and averages for yields, liquidity levels, WAMs, WALs, holdings, and other money market fund trends. We review their latest numbers below. (In December month-to-date through 12/26, total money fund assets have increased by $101.8 billion to a record of $7.165 trillion, according to Crane Data's separate, and slightly smaller, MFI Daily series.)
November's asset jump follows an increase of $93.3 billion in October, $166.6 billion in September, $97.8 billion in August, $19.5 billion in July, $21.3 billion in June, and $89.7 billion in May. Assets decreased $17.7 billion in April and $68.5 billion in March, but increased $65.9 billion in February, $87.7 billion in January and $34.0 billion last December. Over the 12 months through 11/30/24, total MMF assets have increased by $787.7 billion, or 12.4%, according to the SEC's series.
The SEC's stats show that of the $7.125 trillion in assets, $1.187 trillion was in Prime funds, up $12.9 billion in November. Prime assets were up $16.4 billion in October, but down $5.6 billion in September and $25.1 billion in August. They fell $11.5 billion in July and $204.6 billion in June, but rose $19.7 billion in May. Assets were down $30.0 billion in April, up $8.1 billion in March and $33.5 billion in February, $52.5 billion in January and $1.2 billion in December. Prime funds represented 16.7% of total assets at the end of November. They've decreased by $132.2 billion, or -10.0%, over the past 12 months. (Note that the SEC's series includes a number of internal money funds not tracked by ICI, though Crane Data includes most of these assets in its collections.)
Government & Treasury funds totaled $5.797 trillion, or 81.4% of assets. They increased $181.5 billion in November, $73.2 billion in October, $171.2 billion in September, $121.9 billion in August, $31.3 billion in July, $229.2 billion in June, $65.5 billion in May and $9.3 billion in April. They decreased $78.8 billion in March, but increased $33.1 billion in February, $39.7 billion in January and $31.7 billion in December. Govt & Treasury MMFs are up $908.8 billion over 12 months, or 18.6%. Tax Exempt Funds increased $3.4 billion to $141.3 billion, or 2.0% of all assets. The number of money funds was 275 in November, unchanged from the previous month and down 15 funds from a year earlier.
Yields for both Taxable MMFs and Tax Exempt MMFs were lower in November. The Weighted Average Gross 7-Day Yield for Prime Institutional Funds on Nov. 30 was 4.78%, down 22 bps from the prior month. The Weighted Average Gross 7-Day Yield for Prime Retail MMFs was 4.79%, down 21 bps from the previous month. Gross yields were 4.70% for Government Funds, down 20 bps from last month. Gross yields for Treasury Funds were down 18 bps at 4.69%. Gross Yields for Tax Exempt Institutional MMFs were down 57 basis points to 2.97% in November. Gross Yields for Tax Exempt Retail funds were down 39 bps to 3.04%.
The Weighted Average 7-Day Net Yield for Prime Institutional MMFs was 4.67%, down 22 bps from the previous month and down 78 bps from 11/30/23. The Average Net Yield for Prime Retail Funds was 4.52%, down 21 bps from the previous month, and down 79 bps since 11/30/23. Net yields were 4.47% for Government Funds, down 21 bps from last month. Net yields for Treasury Funds were down 18 bps from the previous month at 4.47%. Net Yields for Tax Exempt Institutional MMFs were down 55 bps from October to 2.85%. Net Yields for Tax Exempt Retail funds were down 39 bps at 2.81% in November. (Note: These averages are asset-weighted.)
WALs and WAMs were mixed in November. The average Weighted Average Life, or WAL, was 51.1 days (up 0.5 days) for Prime Institutional funds, and 50.9 days for Prime Retail funds (down 0.6 days). Government fund WALs averaged 89.8 days (down 1.2 days) while Treasury fund WALs averaged 86.9 days (up 1.1 days). Tax Exempt Institutional fund WALs were 5.2 days (up 0.5 days), and Tax Exempt Retail MMF WALs averaged 31.3 days (down 1.2 days).
The Weighted Average Maturity, or WAM, was 31.3 days (up 1.2 days from the previous month) for Prime Institutional funds, 29.5 days (up 2.9 days from the previous month) for Prime Retail funds, 35.6 days (down 0.5 days from previous month) for Government funds, and 43.4 days (up 1.1 days from previous month) for Treasury funds. Tax Exempt Inst WAMs were up 0.5 days to 5.2 days, while Tax Exempt Retail WAMs were down 1.4 days from previous month at 30.5 days.
Total Daily Liquid Assets for Prime Institutional funds were 52.1% in November (down 1.0% from the previous month), and DLA for Prime Retail funds was 42.6% (down 2.0% from previous month) as a percent of total assets. The average DLA was 66.0% for Govt MMFs and 94.4% for Treasury MMFs. Total Weekly Liquid Assets was 65.6% (up 0.1% from the previous month) for Prime Institutional MMFs, and 59.3% (down 1.3% from the previous month) for Prime Retail funds. Average WLA was 76.9% for Govt MMFs and 98.2% for Treasury MMFs.
In the SEC's "Prime Holdings of Bank-Related Securities by Country table for November 2024," the largest entries included: Canada with $183.4 billion, the U.S. with $173.8B, Japan with $138.7 billion, France with $90.0 billion, the U.K. with $49.5B, Aust/NZ with $46.3B, the Netherlands with $44.6B, Germany with $34.8B and Switzerland with $3.7B. The gainers among the "Prime MMF Holdings by Country" included: Canada (up $21.6B), Germany (up $9.8B), Japan (up $7.7B), Netherlands (up $1.9B) and France (up $1.8B). Decreases were shown by: the U.S. (down $2.3B), Aust/NZ (down $1.2B), Switzerland (down $1.1B) and the U.K. (down $1.0B).
The SEC's "Prime Holdings of Bank-Related Securities by Region" table shows The Americas had $357.2 billion (up $19.3B), while Eurozone had $196.1B (up $10.9B). Asia Pacific subset had $216.6B (up $6.0B), while Europe (non-Eurozone) had $127.7B (up $3.4B from last month).
The "Prime MMF Aggregate Product Exposures" chart shows that of the $1.170 trillion in Prime MMF Portfolios as of November 30, $389.8B (33.3%) was in Government & Treasury securities (direct and repo) (down from $429.6B), $354.1B (30.3%) was in CDs and Time Deposits (up from $322.8B), $201.5B (17.2%) was in Financial Company CP (up from $200.2B), $147.8B (12.6%) was held in Non-Financial CP and Other securities (up from $133.5B), and $77.0B (6.7%) was in ABCP (down from $78.0B).
The SEC's "Government and Treasury Funds Bank Repo Counterparties by Country" table shows the U.S. with $420.7 billion, Canada with $195.8 billion, France with $222.9 billion, the U.K. with $107.0 billion, Germany with $18.8 billion, Japan with $140.0 billion and Other with $44.6 billion. All MMF Repo with the Federal Reserve was down $3.8 billion in November to $169.8 billion.
Finally, a "Percent of Securities with Greater than 179 Days to Maturity" table shows Prime Inst MMFs 8.5%, Prime Retail MMFs with 6.5%, Tax Exempt Inst MMFs with 0.0%, Tax Exempt Retail MMFs with 7.0%, Govt MMFs with 13.1% and Treasury MMFs with 11.7%.
As we enjoy the Holiday season and approach the New Year, Crane Data is ramping up preparations for its 2025 conference calendar. We just finished our "basic training" Money Fund University event last week, and we're getting ready for our next show, Bond Fund Symposium, which is March 27-28, 2025, in Newport Beach, Calif. But our focus will soon shift to our big show, Crane's Money Fund Symposium, which will take place June 23-25, 2025 at The Renaissance Boston Seaport, in Boston, Mass. The preliminary draft agenda for the largest gathering of money market fund managers and cash investors in the world is now available and registrations are now being taken. Money Fund Symposium attracts money fund managers, marketers and servicers, cash investors, money market securities dealers, issuers, and regulators. We review the MFS preliminary agenda, as well as Crane Data's other 2025 conferences, below. (Thanks once more to those who supported our Money Fund University in Providence last week! Attendees and subscribers may access the recordings and conference materials at the bottom of our "Content" page or via our "Money Fund University 2024 Download Center.")
Our Money Fund Symposium Agenda kicks off on Monday, June 23 with a "Keynote: Will the Money Fund Party Keep Going?" featuring Yie-Hsin Hung of State Street Global Advisors. The rest of the Day 1 Agenda includes: "Repo, Fed RRP & Treasury Clearing Issues," with Travis Keltner of State Street, Dina Marchioni of the Federal Reserve Bank of New York and Nathaniel Wuerffel of BNY Mellon; "New Frontier: Tokenized MMFs & MM ETFs" with Teresa Ho of J.P. Morgan Securities and Adam Ackermann of Paxos; and, a "Major Money Fund Issues 2025" panel with moderator Peter Crane of Crane Data, Laurie Brignac of Invesco, Kevin Gaffney of Fidelity Investments and Dan LaRocco, of Northern Trust A.M. The evening's reception is sponsored by Bank of America.
Day 2 of Money Fund Symposium 2025 begins with "Strategists Speak '25: Rates, Repo & Risks," with Joseph Abate of Barclays, Mark Cabana of BofA Securities and Gennadiy Goldberg of TD Securities; followed by a "Senior Portfolio Manager Perspectives" panel with Deborah Cunningham of Federated Hermes, Doris Grillo of J.P. Morgan Asset Mgmt, and John Tobin of Dreyfus. Next up is "Treasury & Government Money Fund Issues," with Tom Katzenbach of the US Dept of Treasury, Mike Bird of Allspring Global Investments and Nafis Smith of Vanguard. The morning concludes with a "Muni & Tax Exempt Money Fund Update," featuring John Vetter of Fidelity, Cameron Ullyatt of Schwab Asset Mgmt and David Elmquist of J.P. Morgan Securities.
The Afternoon of Day 2 (after a Dreyfus-sponsored lunch) features the segments: "Dealer's Choice: Supply, New Securities & CP" with moderator Rob Sabatino of UBS A.M., Robe Crowe of Citi Global Markets, John Kodweis of J.P. Morgan and Stewart Cutler of Barclays; "Local Government Investment Pool Briefing" with Laura Glenn of Public Trust Advisors, and Jeffrey Rowe of PFM Asset Management; "Deposits, Brokerage Sweeps & Retail Cash" with Michael Berkowitz of Citi Treasury & Trade Solutions; and "Investors, Portals & Distribution Topics" with Greg Fortuna of State Street Fund Connect and Vanessa McMichael of Wells Fargo Securities (The Day 2 reception is sponsored by Barclays.)
The third day of the Symposium features the sessions: "Regulations: Money Fund Reforms Round III" with Brenden Carroll of Dechert LLP, Jon-Luc Dupuy of K&L Gates LLP and Jamie Gershkow of Stradley Ronon; "Ratings Agency Outlook & Trend Review" with Robert Callagy of Moody’s Investors, Peter Gargiulo of Fitch Ratings and Michael Masih of S&P Global Ratings; "State of the Money Market Fund Industry" with Peter Crane and Pia McCusker of SSGA; and, "Money Fund Wisdom Demo & Training" with Peter Crane.
Visit the Money Fund Symposium website at www.cranesmfsymposium.com for more details. Registration is $1,000, and discounted hotel reservations are available. We hope you'll join us in Boston this June! Note that some of our speakers have yet to confirm their participation, and the agenda is still in the process of being finalized, so watch for tweaks in coming weeks. E-mail us at info@cranedata.com to request the full brochure.
We're also making plans for our eighth annual ultra-short bond fund event, Bond Fund Symposium, which will take place March 27-28, 2025 <b:>`_in `Newport Beach, Calif. at the Hyatt Regency. Crane's Bond Fund Symposium offers a concentrated and affordable educational experience, as well as an excellent networking venue, for bond fund and fixed-income professionals. Registrations are now being accepted ($1,000) and sponsorship opportunities are available. See the latest agenda here and details here.
Portfolio managers, analysts, investors, issuers, service providers, and anyone interested in expanding their knowledge of bond funds and fixed-income investing will benefit from our comprehensive program. A block of rooms has been reserved at the Newport Beach Hyatt Regency. We'd like to thank our past sponsors and exhibitors -- Wells Fargo Securities, Fitch Ratings, Fidelity Investments, J.P. Morgan Asset Management, Allspring Global, S&P Global Ratings, StoneX, Invesco, BofA Securities, Northern Trust, Bloomberg Intelligence, Goldman Sachs, Federated, GLMX, Payden & Rygel, PIMCO and Dechert -- for their support. (We'd love to get some new ones!) E-mail us for more details.
Finally, mark your calendars for our next European Money Fund Symposium, which is scheduled for Sept. 25-26, 2025, in Dublin, Ireland, and for our next Crane's Money Fund University, which is scheduled for Pittsburgh, Pa., Dec. 18-19, 2025. Let us know if you'd like more details on any of our events, and we hope to see you in Newport Beach in March, in Boston in June, in Dublin in September or in Pittsburgh in December 2025. Thanks for your patience and support in 2024, Happy Holidays and Happy New Year!
This month, Crane Data's Bond Fund Intelligence publication featured the story "Payden & Rygel's Kerry Rapanot on Rethinking Cash." The BFI piece explains, "Payden & Rygel recently hosted a media briefing on low duration bond strategies featuring Director Kerry Rapanot, a member of their Low Duration Strategy leadership team. Rapanot says, 'It's a good time to be talking about cash. We've reached a new peak in money fund assets at $7 trillion. We went from the lower band of zero back in 2022 all the way to 5.25% in the summer of 2023. Finally, this past September, the Fed began their easing cycle. We had a 50-basis points rate cut in September and then another 25-basis point cut just recently here in November [and another 25 bps cut last week.'" (Note: The following is reprinted from the December issue of BFI, which was published on December 13. Contact us at info@cranedata.com to request the full issue or to subscribe. BFI is $500 a year, $1,000 including our Bond Fund Intelligence XLS spreadsheet or $2,000 including our Bond Fund Portfolio Holdings dataset.)
She continues, "Now as yields are decreasing as the Fed is cutting the federal funds rate, yields on money market funds are declining. It's a bit of a surprise to us to see fund balances continuing to increase, as that $7 trillion number is eye-popping. While we've reached these new highs, prime institutional funds are the only category with net outflows this year. This is directly a result of the SEC's latest round of reforms, which went into place this year."
Rapanot explains, "As investors think about moving cash out of money market funds into longer bonds, a low duration strategy makes sense. A low duration strategy is a compelling solution for investors looking to balance safety, liquidity, and enhanced income. We're currently in a period of increased interest rate volatility and lower credit risk premiums, which means the additional yield investors earn by buying higher risk securities is lower than normal. With this backdrop, we don’t think it’s sensible to take on credit risk that doesn’t fairly compensate the investor."
She continues, "We have a similar view for interest rates, where we do not see value in taking on additional risk where youre not compensated. We came into January of this year with the market pricing in seven cuts. And now at the end of the year we've had three cuts.... Since we believe the market is pricing in fewer future cuts than what we think, we see value in extending out bond duration right now."
She asks, "So what are low duration strategies and how do they differ from money market funds? Low duration strategies have a lot of other alternative names. You may have heard ultra short, short duration, enhanced cash, enhanced income, etc. These strategies offer investors the potential to earn more than money market funds or bank deposits. They broaden the investible universe in two key ways. Number one, low duration strategies invest in bonds with maturities as long as five years, compared to the 397-day maturity limit on money market funds. This enables an investor the potential to lock in longer term yields, as well as take advantage of price appreciation as interest rates fall, something money market funds cannot do as effectively. And second, low duration strategies invest across the fixed income universe -- from Treasury bills to corporates to structured bond credit. `This investment diversification can generate greater returns while maintaining liquidity."
Rapanot says, "Now, expanding the guidelines does add some risk, as these strategies are not $1 net asset value (NAV). While they do offer the higher potential for return than money market funds, they come with greater price volatility due to owning longer maturities, and the inclusion of credit. However, the investments remain short-term enough to limit this risk, especially as bonds quickly approach maturities and their prices pull to par, which help to stabilize returns. By its nature, a low duration portfolio should be liquid. However, not every individual holding needs to be able to function as liquidity. Though money market securities have less price risk and lower trade costs than corporate bonds, both can be sold to generate liquidity. Through active management, portfolios can maintain liquidity and participate in total return opportunities."
She states, "Payden & Rygel's low duration strategy team manages two strategy solutions: Enhanced cash and low duration. Both aim to outperform passive cash strategies, but they differ in their benchmarks and duration profiles."
Rapanot comments, "Enhanced cash is your first step out beyond a money market fund. The duration is typically short, less than three quarters of a year, and the spread duration is typically under one and a quarter year. As a result, the volatility is low, and liquidity is exceptional. The next step out is what we call low duration. Typically a one- to three-year benchmark duration will range somewhere between one and a half and two and a half years and spread duration somewhere between one and three years. The price volatility here is going to be a little higher than the enhanced cash strategy but remains low when you look at it compared to longer, intermediate, or core bond strategies. And again, active management looks to minimize this price volatility over time."
She adds, "Many of our clients employ a mix of both enhanced cash and low duration strategies as they look to put their longer reserve cash to work. Within the strategy, we offer customized approaches to fulfill our clients' investment objectives."
The Payden PM also asks, "How does a low duration strategy differ from other fixed income strategies? With the Fed cutting interest rates to a more neutral level, this is going to have the greatest impact on short-term securities. That means money market yields will fall rapidly as the Fed lowers rates. However, low duration bond portfolio yields will not decrease as quickly. By investing a portion of the cash in longer duration bonds investors can lock in higher yields further out the maturity curve. Clients can customize the amount of duration or credit risk they wish to tolerate through their investment guidelines. The broader the guidelines, the more opportunity to earn higher long-term returns, along with some additional volatility than a money market fund. Low duration strategies are for investors who want a balance of liquidity and moderate returns with lower risk. While intermediate to core bond strategies are for those seeking higher returns, but over a long run, and willing to accept more volatility."
She adds, "Low duration strategies are positioned between the safer world of money funds, and the more volatile space of intermediate and core bond strategies. And while they do carry more price risk than a money market fund, they do have lower volatility and credit risk compared to other bond strategies."
Finally, Rapanot states, "So what factors should investors consider when seeking higher yields? Returns in a low duration strategy are primarily driven by sector allocations. Investment grade corporates and structured credit are integral parts of the portfolio. We invest in debt, ranging from zero to five years in maturity, both fixed rate and floating rate coupons. Diversification guidelines limit our exposure to any single issuer except within government securities, and we actively manage that credit exposure, selling and buying securities when changes in their valuations or fundamentals make it necessary or worthwhile. This multi-sector approach seeks to provide multiple sources of return and allows us to improve risk-adjusted performance across a variety of market environments."
The Wall Street Journal tells us, "Why You May Want to Cheer for Money-Market Funds." Subtitled, "Money funds remain an attractive place for excess cash and can help keep a lid on short-term borrowing costs," the article says, "Cash might be a trash asset to some risk-loving traders. But it's a pretty good thing to have sloshing around the economy. U.S. money-market fund assets have so far through mid-December grown by over $800 billion in 2024, bringing the nearly two-year gain since the end of 2022 to roughly $2 trillion, according to Investment Company Institute data. This continuing flow may be a surprise to some. At points in 2024, it often seemed that Federal Reserve interest-rate cuts, plus a bullish tilt to equity markets, would push more investors out of cash. Or, at the very least, lead them to begin to lock in some duration by moving from very short-term money markets to somewhat longer-term bond funds." (Note: Thanks again to those who attended and supported our Money Fund University last week in Providence! Attendees and Crane Data Subscribers may access the MFU Conference Materials here. Merry Christmas and Happy Holidays!)
The Journal comments, "But for one, thinking of investment flows as a zero-sum game is often not quite right, since every buyer of an asset is sending cash to the seller. In fact, even with U.S. money-market fund assets at nosebleed levels, north of $6.7 trillion, according to ICI's latest weekly figure, investors are quite aggressively positioned: The cash allocation level in Bank of America's Global Fund Manager Survey was recently at its lowest since the survey began in 2001. Instead, what is going on may be more about a shift in where cash lives."
They quote our Peter Crane, president of Crane Data, "Money funds are gaining market share from bank deposits, that is the big driver." The Journal piece tells us, "He further notes that a growing economy and government spending also play a role. Money-market funds offer an appealing return, at a 4.39% 7-day annualized net yield as of Dec. 19 in Crane Data's index of 100 money funds. That will likely come down with the latest Fed rate cut. But by contrast the national average annual yield for a bank savings account is close to half a percentage point, according to a survey by Bankrate -- though some banks may offer much more competitive rates."
The WSJ explains, "In general, many investors and savers have woken up to the possibility of higher rates on their cash. Plus, there is now a lot of attention being paid to the interest available on so-called sweep deposits at wealth managers and brokerages.... Consider this as well: Money funds' demand for government debt is one thing helping keep short-term yields in check. While the outstanding supply of Treasury bills has risen $2.5 trillion since March 2022, according to the recent note from Barclays strategists, government-only money-fund balances have risen by $1.7 trillion."
In other news, the Office of Financial Research (OFR) published an article titled, "OFR Monitor Shows U.S. Money Market Fund Asset Growth and Increased Exposure to Centrally Cleared Repo." They state, "U.S. money market funds (MMFs) experienced cash inflows in Q3 2024, pushing their assets to $6.9 trillion by quarter-end, according to the OFR U.S. Money Market Fund Monitor data. Attractive yields on money market instruments spurred these inflows. The average yield on MMFs was about 270% higher than the average national rate on a three-month bank certificate of deposit and 30% higher than the return on a short-term U.S. Treasury bond."
OFR continues, "MMF assets increased by $367 billion, or 5.6%, through the Q3 quarter-end. Government funds attracted more than 80% of the new cash, while retail prime funds saw outflows of $36 billion or 3%. Institutional investors were responsible for about three-quarters of the inflows into government funds, and about one-third of these flows were attributable to liquidations or conversions of mostly institutional prime fund assets to government-only holdings ahead of new Securities and Exchange Commission (SEC) rules that took effect in October. The rules require that institutional prime funds impose mandatory redemption fees in certain circumstances."
They explain, "The large inflows into government MMFs supported MMFs' demand for short-term Treasuries, government agencies, and repurchase agreements (repos) collateralized by these securities. MMFs eligible to participate in the Federal Reserve Overnight Reverse Repurchase Agreement Program (ON RRP) redirected some investments to U.S. Treasury bills. This increased the funds' total holdings of U.S. Treasuries to $2.7 trillion, 38% of total MMF assets. It also modestly extended their portfolio duration and locked in prevailing interest rates ahead of any potential additional Federal Reserve rate cuts."
The piece says, "MMFs continued to allocate cash to private repos, raising their exposure to private repo by 13% to almost $2.3 trillion at the end of Q3. Nearly all of this change was attributable to centrally cleared repos with the Fixed Income Clearing Corporation (FICC). With this growth, more than a third of MMFs' repo exposure is to FICC."
OFR's Dagmar Chiella writes, "Although most MMFs held a small share of assets in FICC-sponsored repo, the average fund's exposure was 16%, and a few funds held as much as 40% of their assets in such repos. SEC rules permit MMFs to look through to the underlying collateral for diversification purposes if the repo transaction meets certain conditions. MMFs may, however, still be subject to credit-rating agency limits on counterparty exposures. Many of the funds with more than 25% allocated to FICC are not subject to guidelines from a rating agency review."
The article adds, "The increased use of FICC-sponsored repos instead of other private repos reduces an MMF's direct exposure to any particular counterparty because FICC replaces the original dealer as counterparty to the MMF. However, the MMF retains indirect exposure to its sponsoring dealer, as it guarantees the performance of its sponsored members and generally contributes margin and clearing fund requirements to FICC on behalf of sponsored members. FICC uses those contributions to meet its funding needs in the event of a member default."
The Investment Company Institute published, "Retirement Assets Total $42.4 Trillion in Third Quarter 2024," which includes data tables showing that money market funds held in retirement accounts jumped to $842 billion (up from $810 billion) in the latest quarter, accounting for 13% of the total $6.424 trillion in money funds. MMFs represent just 6.3% of the total $13.4 trillion of mutual funds in retirement accounts. (Note: Thanks again to those who attended and supported our Money Fund University last week in Providence! Attendees and Crane Data Subscribers may access the MFU Conference Materials here. Merry Christmas and Happy Holidays!)
This release says, "Total US retirement assets were $42.4 trillion as of September 30, 2024, up 4.1 percent from June. Retirement assets accounted for 33 percent of all household financial assets in the United States at the end of September 2024. Assets in individual retirement accounts (IRAs) totaled $15.2 trillion at the end of the third quarter of 2024, an increase of 4.6 percent from the end of the second quarter of 2024."
It continues, "Defined contribution (DC) plan assets were $12.5 trillion at the end of the third quarter, up 4.7 percent from June 30, 2024. Government defined benefit (DB) plans—including federal, state, and local government plans -- held $8.8 trillion in assets as of the end of September 2024, a 3.6 percent increase from the end of June 2024. Private-sector DB plans held $3.4 trillion in assets at the end of the third quarter of 2024, and annuity reserves outside of retirement accounts accounted for another $2.5 trillion."
The ICI tables also show money funds accounting for $631 billion, or 10%, of the $6.608 trillion in IRA mutual fund assets and $211 billion, or 3%, of the $6.808 trillion in defined contribution plan holdings. (Money funds in 401k plans totaled $142 billion, or 3% of the $5.412 trillion of mutual funds in 401k's.)
In other news, the Federal Reserve Bank of New York’s Liberty Street Economics blog published, "Anatomy of the Bank Runs in March 2023," which says, "Runs have plagued the banking system for centuries and returned to prominence with the bank failures in early 2023. In a traditional run -- such as depicted in classic photos from the Great Depression -- depositors line up in front of a bank to withdraw their cash. This is not how modern bank runs occur: today, depositors move money from a risky to a safe bank through electronic payment systems. In a recently published staff report, we use data on wholesale and retail payments to understand the bank run of March 2023. Which banks were run on? How were they different from other banks? And how did they respond to the run?"
The piece states, "Banks send most large payments through the Fedwire Funds Service (from now, Fedwire), which moves money between banks' accounts at the Federal Reserve. When depositors run on a bank and wire large amounts of money to other banks, the run-on bank suffers large and unusual payment outflows but no compensating inflows. To check for unusual outflows in March 2023, we standardize each bank's daily net payment flows by subtracting the mean and dividing them by their standard deviation."
The blog tells us, "[A chart] shows the most extreme payment flows between January 1 and March 31, 2023, by plotting the 1st, 5th, 95th, and 99th percentiles of the daily cross-section of standardized net payments for a sample of banks that are active in Fedwire. As the chart shows, the 1st percentile drops significantly on Friday, March 10 -- following the run on Silicon Valley Bank (SVB) -- and on Monday, March 13, which means that 1 percent of sample banks suffered unusually large outflows on these two days. Even the 5th percentile of net payments notably declines on Monday, March 13. The outflows stop on March 14 with the runs stopping just as quickly as they started. In other words, the March 2023 run was very short-lived, with banks suffering highly unusual outflows over a period of only two days."
It explains, "We identify run-on banks as those banks whose net payments were more than five standard deviations below normal during the four business days window from Thursday, March 9, to Tuesday, March 14. Using this method, we identify twenty-two run-on banks, five of which suffered a run on Friday and nineteen on Monday (so two suffered a run on both days); this is far above the number of banks which failed during the episode (only two). The value of outgoing wire transfers from these banks more than tripled on the run days. Furthermore, the average size of run payments was more than three times what would have been expected absent the run, confirming that the run was mainly initiated by larger depositors."
The post adds, "Run banks had significantly lower tier-1 capital, consistent with the idea that depositors run on a bank when they are concerned with the bank’s fundamental solvency. Run banks also had significantly lower cash holdings, consistent with the idea of liquidity-driven runs as depositors try to withdraw before the bank is out of cash. Further, run-on banks had significantly more uninsured deposits and these were significantly more concentrated, consistent with the presence of stronger panic element when there are 'large players.' Finally, run-on banks were overwhelmingly banks that are publicly traded on the stock market; this points to a role for public information that we will discuss in a subsequent blog post."
It concludes, "In a recently issued staff report, we use payments data to study the March 2023 bank run. We find that the run was concentrated on only two days and was driven mainly by a relatively small number of large depositors. However, a large set of banks were run on, far in excess of the banks that ultimately failed. Although run-on banks had on average worse fundamentals, there are large overlaps between the balance sheet characteristics of run and non-run banks. Banks react to their run by increasing their borrowing, mainly from FHLBs and only as a last resort from the discount window."
ICI's latest "Money Market Fund Assets" report shows money funds falling $19.6 billion to $6.751 trillion in the latest week, after inching lower by $0.4 billion the previous week. Two weeks prior, assets jumped $95.9 billion to a record $6.771 trillion. Money fund assets have risen in 14 of the last 20, and 25 of the last 35, weeks, increasing by $447.5 billion (or 7.1%) since the Fed cut on 9/18 and increasing by $773.5 billion (or 12.9%) since April 24. MMF assets are up by $865 billion, or 14.7%, year-to-date in 2024 (through 12/18/24), with Institutional MMFs up $458 billion, or 12.7% and Retail MMFs up $407 billion, or 17.8%. Over the past 52 weeks, money funds have risen by $881 billion, or 15.0%, with Retail MMFs up by $420 billion (18.4%) and Inst MMFs rising by $461 billion (12.8%). (Note: Thank you to those who attended and supported our Money Fund University this week in Providence! Attendees and Crane Data Subscribers may access the MFU Conference Materials here.)
ICI's weekly release says, "Total money market fund assets decreased by $19.61 billion to $6.75 trillion for the week ended Wednesday, December 18, the Investment Company Institute reported.... Among taxable money market funds, government funds decreased by $18.35 billion and prime funds decreased by $160 million. Tax-exempt money market funds decreased by $1.10 billion." ICI's stats show Institutional MMFs decreasing $24.0 billion and Retail MMFs increasing $4.4 billion in the latest week. Total Government MMF assets, including Treasury funds, were $5.544 trillion (82.1% of all money funds), while Total Prime MMFs were $1.074 trillion (15.9%). Tax Exempt MMFs totaled $132.2 billion (2.0%).
It explains, "Assets of retail money market funds increased by $4.38 billion to $2.70 trillion. Among retail funds, government money market fund assets increased by $4.10 billion to $1.72 trillion, prime money market fund assets increased by $933 million to $855.75 billion, and tax-exempt fund assets decreased by $651 million to $121.07 billion." Retail assets account for over a third of total assets, or 39.9%, and Government Retail assets make up 63.8% of all Retail MMFs. They add, "Assets of institutional money market funds decreased by $23.99 billion to $4.05 trillion. Among institutional funds, government money market fund assets decreased by $22.45 billion to $3.82 trillion, prime money market fund assets decreased by $1.09 billion to $218.72 billion, and tax-exempt fund assets decreased by $451 million to $11.08 billion." Institutional assets accounted for 60.1% of all MMF assets, with Government Institutional assets making up 94.3% of all institutional MMF totals.
According to Crane Data's separate Money Fund Intelligence Daily series, money fund assets have risen by $9.2 billion in December through 12/18 to $7.072 trillion. On December 5, assets hit an all-time high of $7.124 trillion. But they've inched lower since. Assets rose by $200.5 trillion in November, $97.5 billion in October, $149.8 billion in September, $109.7 billion in August, $16.6 billion in July, $15.7 billion in June and $91.4 billion in May. They declined by $15.8 billion in April and $68.8 billion in March. They rose $72.1 billion in February, $93.9 billion in January and $32.7 billion last December. Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data, so they're about $340 billion lower than Crane's asset series.
In other news, J.P. Morgan writes in a "Mid-Week US Short Duration Update," titled, "November MMF holdings update: Sufficient supply meeting MMFs' demand." It states, "Taxable MMFs experienced another strong month of inflows in November, with AUMs increasing by nearly $200bn, bringing total balances to just under $7tn. Despite this significant rise in balances, MMFs successfully found enough supply to meet their demand throughout the month, aided by a rise in T-bill, repo, and time deposit outstandings. As a result, MMFs' use of ON RRP fell to an end-of-month low since May 2021."
JPM continues, "Almost all of November's inflows were directed towards government MMFs. Institutional government funds saw a drastic increase of $162bn, reaching a total of $4tn, while retail funds increased slightly by $21bn, bringing their total balance to approximately $1.8tn. From a holdings perspective, government funds significantly boosted their allocation to T-bills, absorbing over $220bn month over month."
They tell us, "This raised their portfolio's T-bills exposure to 44%, the highest level since May 2021. In terms of concentration, government MMFs allocated an additional $170bn towards T-bills with maturities in the 31–60 day range. Accordingly, Treasury and government WAMs increased by ~2 days and 1 day, respectively, during November. Meanwhile, repo exposure declined by $75bn, as government funds reduced their Treasury repo holdings by nearly $110bn, which was partially offset by a $31bn increase in Agency repo."
JPM says, "Prime funds, on the other hand, saw only a modest increase in balances during the month. Despite this, they shifted more of their allocations towards credit and non-Fed repo. From a credit perspective, these funds increased their exposure towards time deposits, which rose by $27bn in November. The majority of this increase was directed towards banks in the Eurozone, which saw a $10bn rise, and Canadian banks, with an $11bn increase. Non-Fed repo also grew by $20bn, with the increase concentrated in Treasury repo and other repo categories."
They state, "Notably, prime funds reduced their allocations to the ON RRP facility by $37bn, bringing their total balances down to just $21bn at the end of November, accounting for only 11% of the ON RRP facility's balance at November-end. Across all MMFs, their combined balances have decreased to $143bn, down $31bn month over month. From a percentage standpoint, total MMFs represent just 72% of the ON RRP balance, marking the lowest level since February 2021. At the end of November, the largest user of the facility allocated just $23bn to the ON RRP, while the second largest user allocated $10bn."
The update concludes, "Those outflows, combined with Treasury settlements, which raise Treasury repo supply, have caused ON RRP balances to drop to a low of $111bn on December 16. However, we anticipate that ON RRP balances will increase into 12/31, given the negative net T-bill supply in December and the typical year-end cash accumulation at the facility due to dealer balance sheet constraints. Additionally, MMF AUMs are likely to continue rising throughout the remainder of December given seasonal inflows, bringing total balances to ~$7tn."
The Investment Company Institute published, "Worldwide Regulated Open-Fund Assets and Flows, Third Quarter 2024," this week, which shows that money fund assets globally rose by $572.9 billion, or 5.4%, in Q3'24 to a record $11.215 trillion. Increases were led by a sharp jump in money funds in U.S., Ireland and China, while Luxembourg and France also rose. Meanwhile, money funds in Mexico and Korea were lower. MMF assets worldwide increased by $1.271 trillion, or 12.8%, in the 12 months through 9/30/24, and money funds in the U.S. now represent 60.4% of worldwide assets. We review the latest Worldwide MMF totals, below. (Note: For those attending our Money Fund University this week, welcome to Providence! Attendees and Crane Data Subscribers may access the MFU Conference Materials here.)
ICI's release says, "Worldwide regulated open-end fund assets increased 6.8 percent to $74.95 trillion at the end of the third quarter of 2024, excluding funds of funds. Worldwide net cash inflow to all funds was $913 billion in the third quarter, compared with $819 billion of net inflows in the second quarter of 2024. 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 third quarter of 2024 contains statistics from 44 jurisdictions."
It explains, "As reported in US dollars, the growth rate of total regulated open-end fund assets was higher due to US dollar depreciation in the third quarter of 2024. For example, on a US dollar–denominated basis, fund assets in Europe increased by 7.5 percent in the third quarter, compared with an increase of 2.8 percent on a euro-denominated basis."
ICI's quarterly continues, "On a US dollar–denominated basis, equity fund assets increased by 7.3 percent to $36.04 trillion at the end of the third quarter of 2024. Bond fund assets increased by 6.6 percent to $14.14 trillion in the third quarter. Balanced/mixed fund assets increased by 6.4 percent to $7.75 trillion in the third quarter, while money market fund assets increased by 5.4 percent globally to $11.22 trillion."
The release also tells us, "At the end of the third quarter of 2024, 48% of worldwide regulated open-end fund assets were held in equity funds. The asset share of bond funds was 19% and the asset share of balanced/mixed funds was 10%. Money market fund assets represented 15% of the worldwide total. By region, 57% of worldwide assets were in the Americas in the third quarter of 2024, 32% were in Europe, and 11% were in Africa and the Asia-Pacific regions."
ICI adds, "Net sales of regulated open-end funds worldwide were $913 billion in the third quarter of 2024.... Globally, bond funds posted an inflow of $244 billion in the third quarter of 2024, after recording an inflow of $424 billion in the second quarter.... Money market funds worldwide experienced an inflow of $403 billion in the third quarter of 2024 after registering an inflow of $266 billion in the second quarter of 2024."
According to Crane Data's analysis of ICI's "Worldwide" fund data, the U.S. sustained its position as the largest money fund market in Q3'24 with $6.424 trillion, or 60.4% of all global MMF assets. U.S. MMF assets increased by $332.2 billion (5.5%) in Q3'24 and have increased by $743.7 billion (13.1%) in the 12 months through September 30, 2024. China remained in second place among countries overall. China saw assets increase $42.4 billion (2.3%) in Q3 to $1.857 trillion (17.4% of worldwide assets). Over the 12 months through September 30, 2024, Chinese MMF assets have increased by $296.5 billion, or 19.0%.
Ireland remained third among country rankings, ending Q3 with $906.7 billion (8.5% of worldwide assets). Irish MMFs were up $92.7B for the quarter, or 11.4%, and up $185.1B, or 25.7%, over the last 12 months. Luxembourg remained in fourth place with $620.2 billion (5.8% of worldwide assets). Assets there increased $33.9 billion, or 5.8%, in Q3, and were up $110.4 billion, or 21.7%, over one year. France was in fifth place with $492.0B, or 4.6% of the total, up $31.4 billion in Q3 (6.8%) and up $64.8B (15.2%) over 12 months.
Australia was listed (by us) in sixth place with $268.7 billion, or 2.5% of worldwide assets. Its MMF data was unavailable for Q3, Q2 and Q1 so we kept the Q4 numbers. Korea was the 7th ranked country and saw MMF assets decrease $1.8 billion, or -1.3%, in Q3'24 to $136.3 billion (1.3% of the total); they've increased $7.7 billion (6.0%) for the year. Mexico was in 8th place with $130.1 billion (1.2%); assets there decreased $2.7 billion (-2.1%) in Q3 and increased by $14.3 billion (12.4%) over 12 months. Brazil was in 9th place, as assets increased $3.4 billion, or 2.9%, to $123.0 billion (1.2% of total assets) in Q3. They've increased $4.6 billion (3.9%) over the previous 12 months. ICI's statistics show Japan was listed in 10th place with $101.3B, or 1.0% of total assets, up $5.8 billion (6.1%) for the quarter.
India was in 11th place, increasing $4.4 billion, or 5.9%, to $79.3 billion (0.7% of total assets) in Q3 and increasing $16.6 billion (26.5%) over the previous 12 months. Canada ($60.7B, up $1.3 billion and up $7.4B over the quarter and year, respectively) ranked 12th ahead of Switzerland. ($49.0B, up $5.6B and up $9.5B). Chile ($35.6B, up $760M and up $4.1B) and United Kingdom ($29.7B, up $1.4B and up $3.6B), rank 14th and 15th, respectively. Chinese Taipei, Argentina, Turkey, South Africa and Spain round out the 20 largest countries with money market mutual funds.
ICI's quarterly series shows money fund assets in the Americas total $6.806 trillion, up $337.8 billion in Q3. Asian MMFs increased by $53.2 billion to $2.212 trillion, and Europe saw its money funds jump $180.9 billion in Q3'24 to $2.174 trillion. Africa saw its money funds increase $959 million to $23.8 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.)
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 Dec. 13) includes Holdings information from 60 money funds (up 14 from two weeks ago), or $3.538 trillion (up from $2.780 trillion) of the $7.079 trillion in total money fund assets (or 50.0%) tracked by Crane Data. (Our Weekly MFPH are e-mail only and aren't available on the website. See our latest Monthly Money Fund Portfolio Holdings here and our Dec. 11 News, "Dec. Money Fund Portfolio Holdings: Treasuries Jump Again, Repo Dips.") (Note: For those attending our Money Fund University Dec. 19-20 in Providence, R.I, you may access the latest MFU Conference Materials here. See you tomorrow in Providence!)
Our latest Weekly MFPH Composition summary shows Government assets dominating the holdings list with Treasuries totaling $1.811 trillion (up from $1.328 trillion two weeks ago), or 51.2%; Repurchase Agreements (Repo) totaling $1.138 trillion (up from $925.6 billion two weeks ago), or 32.2%, and Government Agency securities totaling $308.0 billion (up from $271.9 billion), or 8.7%. Commercial Paper (CP) totaled $115.3 billion (up from two weeks ago at $95.4 billion), or 3.3%. Certificates of Deposit (CDs) totaled $62.3 billion (up from $60.2 billion two weeks ago), or 1.8%. The Other category accounted for $70.5 billion or 2.0%, while VRDNs accounted for $32.7 billion, or 0.9%.
The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $1.811 trillion (51.2% of total holdings), Fixed Income Clearing Corp with $378.1B (10.7%), the Federal Home Loan Bank with $201.7 billion (5.7%), BNP Paribas with $78.6B (2.2%), JP Morgan with $77.8B (2.2%), RBC with $74.8B (2.1%), Federal Farm Credit Bank with $72.7B (2.1%), Citi with $66.9B (1.9%), Goldman Sachs with $47.4B (1.3%) and Wells Fargo with $38.8B (1.1%).
The Ten Largest Funds tracked in our latest Weekly include: JPMorgan US Govt MM ($288.9B), Goldman Sachs FS Govt ($251.4B), JPMorgan 100% US Treas MMkt ($232.4B), Fidelity Inv MM: Govt Port ($213.0B), Morgan Stanley Inst Liq Govt ($186.4B), BlackRock Lq FedFund ($175.1B), State Street Inst US Govt ($161.7B), BlackRock Lq Treas Tr ($151.1B), Fidelity Inv MM: MM Port ($142.4B) and Allspring Govt MM ($139.7B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary.)
In other news, State Street Global Advisors published "Monthly Cash Review December 2024 (USD)," which is titled, "End Nigh for Fed's Quantitative Tightening." Author William Goldthwait explains, "The Fed's Reverse Repurchase Program (RRP) is an important tool the Fed uses to manage short-term rates, particularly in recent years. From mid-2022 to mid-2023, the program was pulling over $2 trillion of cash from the system and helping the Fed keep short-term rates within its target rate range. Recently, RRP balances have dropped to below $200 billion, and if the current trend continues, balances may hit zero sometime in Q1 2025. If this happens, the Fed should stop its quantitative tightening (QT) program sometime after that."
He states, "The main driver of ending QT would be if the Fed felt that it was beginning to drain too much liquidity from the market, which could lead to disfunction in the repo markets. What happened in September 2019 was the result of too little liquidity, the exact opposite of what we experienced in 2022 and 2023, when there was too much liquidity in the system. We have already seen significant growth in the repo balances that primary dealers are carrying. We can see ... that those balances are up by over $1 trillion over the past three years, implying dealer resiliency in the current market."
Goldthwait writes, "We expect the Secured Overnight Financing Rate (SOFR) to yield more than the Fed's RRP rate, which we last saw at the end of the previous rate hike cycle (2018) and in 2019. General Collateral Financing (GCF) repo and SOFR are trending higher and perhaps headed for additional funding stress. To try to minimize this stress, the Fed reduced the pace of QT for US Treasuries back in May, with the aim to let QT run 'in the background' rather than causing similar stress to 2019. Given the size of the Fed's balance sheet, this approach makes sense, and will help to bring balances in line with historical averages."
SSGA says, "To help combat market stress, the Fed established the Primary Dealer Standing Repo Facility (SRF) as an overnight loan facility that provides funding to dealers in exchange for eligible collateral. This facility was utilized on 30 September with $2.3 bn of loans. There are some operational challenges that need to be worked out for the Fed to properly manage its policy rate and, most importantly, reduce volatility in the Secured Overnight Financing Rate – London Interbank Offer Rate's replacement and the rate that so many financial instruments are benchmarked to."
The piece concludes, "The most recent Fed Meeting Minutes detailed a discussion to drop the RRP rate to the lower end of the Fed's policy rate range. This means if it does cut rates by 25 bp in December, it could reduce the RRP rate by 30 bp, indicating that the Fed is keen to keep a close eye on short-term rates and bank reserves. This type of move is not unprecedented, with the 2018 rate hike cycle exhibiting similar moves, though in the opposite direction: The Fed raised the RRP and IOR rates by only 20 bp when it was raising policy rates by 25 bp."
It adds, "The leading indicator will be excess reserves that are held at the Fed by its member banks.... [B]eginning in 2017, those reserves started to decline as the Fed continued to drain liquidity with its QT program. At that time there was not the excess liquidity in the system there is today; the RRP was at zero balance. Today the RRP's balance has shrunk dramatically but is still well over $100 bn. Once the balance declines to zero, we should start to see reserves decline as they are needed to buy the assets rolling off the Fed's balance sheet. This shift should cause funding pressures, higher yields, and ultimately will be good for our cash investors, though a problem for the Fed."
The Federal Reserve released its latest quarterly "Z.1 Financial Accounts of the United States" statistical survey (a.k.a. "Flow of Funds") late last week. Among the 4 tables it includes on money market mutual funds, the Third Quarter 2024 edition shows that Total MMF Assets increased by $291 billion to $6.839 trillion in Q3'24. The Household Sector, by far the largest investor segment with $4.311 trillion, saw the biggest asset increase in Q3, followed by Nonfinancial Corporate Businesses. The Fed's latest Z.1 numbers, which contain one of the few looks at money fund investor segments available, also showed noticeable increases for the Other Financial Business (formerly Funding Corps) and Mutual Funds categories in Q3 2024. (Note: For those attending our upcoming Money Fund University, which is Dec. 19-20, 2024 in Providence, safe travels! See you Thursday!)
Mutual funds, Rest of World, Exchange-traded funds, Life Insurance Companies, State & Local Governments and Nonfin Noncorporate Business categories saw small asset increases in Q3, while the Private Pension Funds category saw the only asset decrease last quarter. Over the past 12 months, the Household Sector, Nonfinancial Corporate Business, Other Financial Business and Rest of World categories showed the biggest asset increases, while Private Pension Funds saw the biggest asset decrease.
The Fed's "Table L.206," "Money Market Mutual Fund Shares," shows that total assets increased by $291 billion, or 4.4%, in the third quarter to $6.839 trillion. The largest segment, the Household sector, totals $4.311 trillion, or 63.0% of assets. The Household Sector increased by $177 billion, or 4.3%, in the quarter. Over the past 12 months through September 30, 2024, Household assets were up $490 billion, or 12.8%.
Nonfinancial Corporate Businesses, the second-largest segment according to the Fed's data series, held $971 billion, or 14.1% of the total. Assets here increased by $49 billion in the quarter, or 5.3%, and they've increased by $104 billion, or 11.9%, over the past year. Other Financial Business was the third-largest investor segment with $504 billion, or 7.4% of money fund shares. This category jumped $27 billion, or 5.5%, in the latest quarter. Other Financial Business, which we believe includes Securities Lending, has increased by $23 billion, or 4.9%, over the previous 12 months.
The fourth-largest segment, Mutual Funds (a recent addition to the tables), held $235 billion (3.4%). The Rest of World moved up to fifth place in market share among investor segments with 2.9%, or $197 billion, Private Pension Funds was the 6th largest category with 2.8% of money fund assets ($194 billion); it was down $2 billion for the quarter and down $4 billion, or -1.9% over the last 12 months. while Nonfinancial Noncorporate Business held $141 billion (2.1%), Life Insurance Companies held $104 billion (1.5%), State & Local Governments held $78 billion (1.1%), Property-Casualty Insurance held $47 billion (0.7%), Exchange-traded Funds held $36 billion (0.5%), and State & Local Govt Retirement held $20 billion (0.3%) 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 $2.688 trillion, or 39.3% and "Debt Securities," or Credit Market Instruments, with $3.887 trillion, or 56.8% of the total. Debt securities includes: Open market paper ($293 billion, or 4.3%; we assume this is CP), Treasury securities ($2.660 trillion, or 38.9%), Agency and GSE-backed securities ($794 billion, or 11.6%), Municipal securities ($131 billion, or 1.9%) and Corporate and foreign bonds ($9 billion, or 0.1%).
Another large MMF position in the Fed's series includes `Time and savings deposits ($314 billion, or 4.6%). Money funds also hold minor positions in Miscellaneous assets ($-54 billion, or -0.8%) and Foreign deposits ($3 billion, 0.0%). Note: The Fed also lists "Variable Annuity Money Funds," which currently total $46 billion.
During Q3, Debt Securities were up $276 billion. This subtotal included: Open Market Paper (up $12 billion), Treasury Securities (up $210 billion), Agency- and GSE-backed Securities (up $52 billion), Corporate and Foreign Bonds (up $3 billion) and Municipal Securities (down $1 billion). In the third quarter of 2024, Security Repurchase Agreements were up $74 billion, Foreign Deposits were down $2 billion, Time and Savings Deposits were up by $9 billion, and Miscellaneous Assets were down $66 billion.
Over the 12 months through 9/30/24, Debt Securities were up $1.006 trillion, which included Open Market Paper (unchanged), Treasury Securities (up $893B), Agencies (up $104B), Municipal Securities (up $10B), and Corporate and Foreign Bonds (unchanged). Foreign Deposits (down $8 billion), Time and Savings Deposits were up $21B, Securities repurchase agreements were down $260 billion and Miscellaneous Assets were down $63B.
The L.121 table shows `Stable NAV money market funds with $6,493 billion, or 94.9% of the total (up $368B or 6.0% in Q3 and up $992 trillion or 18.0% over 1-year), and Floating NAV money market funds with $347 billion, or 5.1% (down $77.3B or -18.2% in Q3 and down $296B or -46.0% over 1-year). Government money market funds total $5.547 trillion, or 81.1% (up $320.3B or 6.1% in Q3 and up $786B or 16.5% over 1-year), Prime money market funds total $1.158 trillion, or 16.9% (down $30.3B or -2.6% in Q3 and down $100B or -8.0% over 1-year) and Tax-exempt money market funds $134B, or 2.0% (up $0.8B or 0.6% in Q3 and up $11B or 8.7% last year).
Note that the Federal Reserve made some changes to its Z.1 tables several years 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 latest Money Fund Intelligence International shows that assets in European or "offshore" money market mutual funds moved higher again over the past 30 days to a record $1.449 trillion, while yields moved lower. Assets for USD, EUR and GBP all rose over the past month. Like U.S. money fund assets, European MMFs have repeatedly hit record highs in 2023 and 2024. These U.S.-style money funds, domiciled in Ireland or Luxembourg and denominated in US Dollars, Pound Sterling and Euros, increased by $37.8 billion over the 30 days through 12/12. The totals are up $251.6 billion (21.0%) year-to-date for 2024, they were up $166.9 billion (16.2%) for the year 2023. (Note that currency moves in the U.S. dollar cause Euro and Sterling totals to shift when they're translated back into totals in U.S. dollars. See our latest MFI International for more on the "offshore" money fund marketplace. These funds are only available to qualified, non-U.S. investors and are almost entirely institutional.) (Note: For those attending our Money Fund University Dec. 19-20 in Providence, R.I, you may access the latest MFU Conference Materials here. See you in Providence!)
Offshore US Dollar money funds increased $20.0 billion over the last 30 days and are up $98.5 billion YTD to $748.0 billion; they increased $100.0 billion in 2023. Euro funds increased E8.3 billion over the past month. YTD, they're up E80.5 billion to E315.4 billion, for 2023, they increased by E54.5 billion. GBP money funds increased L6.5 million over 30 days, and they're up L30.2 billion YTD at L265.6B, for 2023, they fell L28.1 billion. U.S. Dollar (USD) money funds (260) account for over half (51.6%) of the "European" money fund total, while Euro (EUR) money funds (179) make up 24.0% and Pound Sterling (GBP) funds (171) total 24.3%. We summarize our latest "offshore" money fund statistics and our Money Fund Intelligence International Portfolio Holdings (which went out to subscribers Friday), below.
Offshore USD MMFs yield 4.55% (7-Day) on average (as of 12/12/24), down 8 basis points from a month earlier. Yields averaged 4.20% on 12/30/22 and 0.03% on 12/31/21. EUR MMFs, which left negative yield territory in the second half of 2022, yield 3.08% on average, down 7 bps from a month ago and up from 1.48% on 12/30/22 and -0.80% on 12/31/21. Meanwhile, GBP MMFs broke above the 5.0% barrier 16 months ago, but they broke back below 5.0% 5 months ago. They now yield 4.68%, down 6 bps from a month ago, but up from 3.17% on 12/30/22. Sterling yields were 0.01% on 12/31/21.
Crane's December MFI International Portfolio Holdings, with data as of 11/30/24, show that European-domiciled US Dollar MMFs, on average, consist of 26% in Commercial Paper (CP), 15% in Certificates of Deposit (CDs), 20% in Repo, 24% in Treasury securities, 14% in Other securities (primarily Time Deposits) and 1% in Government Agency securities. USD funds have on average 42.1% of their portfolios maturing Overnight, 6.0% maturing in 2-7 Days, 8.0% maturing in 8-30 Days, 12.6% maturing in 31-60 Days, 9.3% maturing in 61-90 Days, 15.6% maturing in 91-180 Days and 6.1% maturing beyond 181 Days. USD holdings are affiliated with the following countries: the US (37.9%), France (11.6%), Canada (9.8%), Japan (9.6%), Australia (4.8%), the U.K. (3.7%), Sweden (3.6%), the Netherlands (3.1%), Finland (2.7%) and Germany (2.4%).
The 10 Largest Issuers to "offshore" USD money funds include: the US Treasury with $179.9 billion (23.8% of total assets), Fixed Income Clearing Corp with $31.0B (4.1%), Credit Agricole with $21.2B (2.8%), Nordea Bank with $18.6B (2.5%), Mizuho Corporate Bank with $18.2B (2.4%), Toronto-Dominion Bank with $17.9B (2.4%), BNP Paribas with $17.5B (2.3%), RBC with $17.1B (2.3%), Australia & New Zealand Banking Group Ltd with $16.2B (2.1%) and Mitsubishi UFJ Financial Group Inc with $16.1B (2.1%).
Euro MMFs tracked by Crane Data contain, on average 38% in CP, 23% in CDs, 15% in Other (primarily Time Deposits), 20% in Repo, 4% in Treasuries and 0% in Agency securities. EUR funds have on average 39.1% of their portfolios maturing Overnight, 6.3% maturing in 2-7 Days, 6.1% maturing in 8-30 Days, 19.7% maturing in 31-60 Days, 14.1% maturing in 61-90 Days, 8.4% maturing in 91-180 Days and 6.3% maturing beyond 181 Days. EUR MMF holdings are affiliated with the following countries: France (30.8%), Japan (11.6%), Canada (8.8%), the U.S. (7.8%), Germany (6.8%), the Netherlands (6.0%), the U.K. (4.7%), Austria (3.9%), Australia (3.4%) and Spain (2.9%).
The 10 Largest Issuers to "offshore" EUR money funds include: Credit Agricole with E17.5B (6.2%), Republic of France with E16.1B (5.7%), BNP Paribas with E15.7B (5.5%), JP Morgan with E9.9B (3.5%), Societe Generale with E9.8B (3.5%), Mizuho Corporate Bank Ltd with E7.8B (2.8%), Mitsubishi UFJ Financial Group Inc with E7.7B (2.7%), Bank of Nova Scotia with E7.3B (2.6%), Toronto-Dominion Bank with E7.3B (2.6%) and Sumitomo Mitsui Banking Corp with E6.8B (2.4%).
The GBP funds tracked by MFI International contain, on average (as of 11/30/24): 38% in CDs, 18% in CP, 22% in Other (Time Deposits), 18% in Repo, 3% in Treasury and 1% in Agency. Sterling funds have on average 35.7% of their portfolios maturing Overnight, 6.3% maturing in 2-7 Days, 4.7% maturing in 8-30 Days, 15.7% maturing in 31-60 Days, 14.2% maturing in 61-90 Days, 14.8% maturing in 91-180 Days and 8.5% maturing beyond 181 Days. GBP MMF holdings are affiliated with the following countries: France (16.4%), Japan (14.2%), the U.K. (12.8%), Canada (12.5%), Australia (9.3%), the U.S. (8.4%), the Netherlands (5.0%), Singapore (3.5%), Finland (3.0%), and Abu Dhabi (2.6%).
The 10 Largest Issuers to "offshore" GBP money funds include: UK Treasury with L16.4B (6.7%), BNP Paribas with L11.1B (4.5%), RBC with L10.3B (4.2%), Toronto-Dominion Bank with L9.8B (4.0%), Mizuho Corporate Bank Ltd with L9.6B (3.9%), Sumitomo Mitsui Trust Bank with L9.5B (3.9%), JP Morgan with L7.8B (3.2%), Mitsubishi UFJ Financial Group Inc with L7.6B (3.1%), National Australia Bank Ltd with L7.3B (3.0%) and Commonwealth Bank of Australia with L6.9B (3.0%).
The December issue of our Bond Fund Intelligence, which was sent to subscribers Friday morning, features the stories, "WSJ Looks at Active vs. Passive Bond Funds: All About the Agg," which discusses the predominance of active funds in the space, and "Payden & Rygel's Kerry Rapanot on Rethinking Cash," which quotes from a recent media briefing. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund returns rebounded in November while yields were mixed. We excerpt from the new issue below. (Contact us if you'd like to see our latest Bond Fund Intelligence and BFI XLS spreadsheet, or our Bond Fund Portfolio Holdings data.) (Note: We're still taking registrations for our "basic training" event, Money Fund University, which is Dec. 19-20 in Providence, R.I. MFU Attendees and Subscribers may access the MFU Conference Materials here.)
BFI's "Active vs. Passive" article states, "The Wall Street Journal writes on 'Why Few Bond Funds Are Passively Managed -- and How to Create Your Own.' The article states, 'The index-fund revolution has been slow to take over bond funds. Investors are paying the price for that. Passive funds, which aim to match an underlying index rather than beat it, now make up 62% of all U.S. stock funds, according to Morningstar, driven in large part because the indexers tend to outperform active stock pickers and their fees are minimal.'"
They explain, "But active managers still hold 57% of assets in U.S. taxable bond funds. Some experts say that is partly because the most commonly used bond index -- the Bloomberg U.S. Aggregate, or Agg -- is easier to beat than stock indexes because it holds only investment-grade debt and omits several higher-performing but riskier categories."
Our "Payden" article states, "Payden & Rygel recently hosted a media briefing on low duration bond strategies featuring Director Kerry Rapanot, a member of their Low Duration Strategy leadership team. Rapanot says, 'It's a good time to be talking about cash. We've reached a new peak in money fund assets at $7 trillion. We went from the lower band of zero back in 2022 all the way to 5.25% in the summer of 2023. Finally, this past September, the Fed began their easing cycle. We had a 50-basis points rate cut in September and then another 25 basis point cut just recently here in November. The market is split 50/50 as to whether we will get another move at the final meeting of the year in December. The official Payden call is for another 25 basis points, so that would bring the lower band down to 4.25%.'"
She continues, "Now as yields are decreasing as the Fed is cutting the federal funds rate, yields on money market funds are declining. It's a bit of a surprise to us to see fund balances continuing to increase, as that $7 trillion number is eye popping. While we've reached these new highs, prime institutional funds are the only category with net outflows this year, down by over half of the assets under management and expected to continue to shrink. This is directly a result of the SEC’s latest round of reforms, which went into place this year."
Our first News brief, "Returns Rebound, Yields Mixed in Nov.," explains, "Bond fund returns were higher in November after a dip last month (which followed 5 straight months of gains). Yields were lower on the short-end and higher on the long end. Our BFI Total Index rose 0.98% over 1-month and 7.53% over 12 months. (Money funds rose 5.15% over 1-year as measured by our Crane 100 Index.) The BFI 100 increased 1.01% in Nov. and rose 7.73% over 12 mos. Our BFI Conservative Ultra-Short Index was up 0.46% over 1-month and 5.86% for 1-year; Ultra-Shorts rose 0.48% and 6.33%. Short-Term returned 0.47% and 6.64%, and Intm-Term rose 1.08% in Nov. and rose 7.62%. BFI's Long-Term Index was up 1.26% and up 8.31%. High Yield returned 1.12% in Nov. and 10.90% over 12 mos."
A second News brief, "Morningstar Says, 'Stock Funds Floundered in October, With Investors Opting for Bond Funds and Alternatives,' They write, 'Investors gravitated toward safety: Equity funds floundered; fixed-income funds enjoyed strong inflows.... Taxable-bond funds continued their tremendous year, gathering $59 billion of inflows in October. That marked their best month since April 2021 in absolute terms and when scaled for assets. Investors have piled $413 billion into taxable-bond funds in 2024, nearly 9 times the amount of the next-closest category.'"
Our next News brief, "MarketWatch Writes 'Bond Funds on Pace for Second-Biggest Yearly Inflows in a Decade,' They explain, 'U.S. bond funds were on pace for their second-highest year of inflows in a decade, according to Barclays Research. This year already has seen $517 billion of inflows stream into U.S. bond funds, behind only the $592 billion gathered in 2021, the highest yearly influx since 2014. Investors pulled about $250 billion out of bond funds as the Fed began cutting rates, reducing the appeal of low coupon bonds created in the past decade.'"
A BFI sidebar, "TCW Launches New ETFs," states, "'TCW Significantly Expands ETF Offerings, Unveiling Five New Actively Managed Fixed Income ETFs' says a press release. It explains, ‘The TCW Group ... announced today a significant expansion of TCW's suite of actively managed ETFs to advisors, investors, and institutions, with the launch of two new fixed income exchange-traded funds (ETFs) and the conversion of three other fixed income mutual funds to ETFs.'"
Finally, another sidebar, "Vanguard Debuts Muni ETFs," says, "A press release, 'Vanguard Launches Two Active Municipal ETFs,' tells us, 'Vanguard ... launched Vanguard Core Tax-Exempt Bond ETF (VCRM) and Vanguard Short Duration Tax-Exempt Bond ETF (VSDM), two active municipal ETFs managed by Vanguard Fixed Income Group. The new ETFs offer diversified exposure to municipal bonds across sectors, states, and credit quality with the potential to outperform their benchmarks over the long term.'"
CityWire published an article titled, "Schwab sued over Cash Features sweep program," which tells us, "Charles Schwab is facing another cash sweep-related lawsuit from a customer claiming to hold brokerage and retirement accounts with the financial services giant. The suit was filed by California resident Abraham Atachbarian in US District Court for the Southern District of New York. The complaint accuses Schwab of paying an unfairly low interest rate to clients for whom it holds uninvested cash. Atachbarian's legal complaint specifically fingers Schwab Cash Features, a program which includes bank sweep options for both brokerage and retirement account holders." (Note: We're still taking registrations for our "basic training" event, Money Fund University, which is Dec. 19-20 in Providence, R.I!)
The piece explains, "In response to a request for comment on the complaint, a Schwab spokesperson said the company has sought to align its cash management offerings with client goals. 'For managed accounts, we offer a streamlined, hands-off approach where our experts handle the investment decisions, ensuring stability and simplicity,' the spokesperson said. 'For self-directed accounts, we support client autonomy by providing a wide array of options, educational resources, and ensuring security with FDIC insurance. We believe this dual approach offers both comprehensive support and flexibility, enabling clients to manage their cash in a way that best fits their individual financial goals.'"
CityWire's piece explains, "Schwab is one of several Wall Street giants that have faced lawsuits from customers over their cash sweep programs. LPL Financial, Ameriprise Financial Services, Raymond James and others have been hit with court complaints in which customers have made similar claims about fiduciary duty breaches and unjust enrichment. Schwab itself faced a lawsuit over its cash sweep practices about three months ago. That suit claimed the company failed to disclose cash sweep agreements with affiliates of TD Ameritrade, following its 2020 acquisition of TD Ameritrade Holding Corp."
They add, "With interest rates broadly increasing over the last three years, customers have asked the courts to enforce claims that they should earn more on their uninvested cash.... Schwab previously disclosed that it pays customers an annual yield of 0.45% on uninvested cash in brokerage accounts, a rate that Atachbarian cited in his lawsuit. As benchmarks for a potentially fairer rate, Atachbarian's complaint cited the higher cash sweep rates of 2-5% paid by some competitors, as well as the rates of at least 4.88% that Schwab's money market funds were offering as of September."
For more on lawsuits over brokerage sweeps, see these Crane Data News stories: "Wells Quiet on Sweeps on Q3 Call" (10/18/24), "Barron's Writes on Brokerage Sweep Woes; Reuters on Rate Cuts, MMFs" (9/23/24), "Alight Money Fund Liquidates; Bloomberg Law on Brokerage Sweep Suits" (9/19/24), "Sept. MFI: Sticking with Prime Inst; MMFs Hit Record; Sweeps Scrutiny" (9/9/24), "Barron's: JPMorgan Sued on Sweeps" (8/29/24), "More on SEC Sweeps Scrutiny; Inv News on Sweeps, UBS's Earnings Call" (8/20/24), "Law Firm Says Bolster Disclosures, Rates on Sweeps; Crane Index 5.11%" (8/13/24), "Barron's: BofA Cites Risk from Sweeps" (8/8/24), "Central Bank of Ireland on Fund Regulations; Brokerage Sweeps Lawsuits" (8/5/24), "Tradeweb Completes ICD Acquisition; AdvisorHub on Wells Sweep Suit" (8/2/24) and "IN: Ameriprise Sued Over Sweeps" (7/31/24).
In other news, Reuters posted the brief, "BlackRock sees investor shift from cash after even 'modest' rate cuts." It states, "Investors are expected to increase their allocations to stocks and bonds from cash after even 'modest' Federal Reserve interest rate cuts, BlackRock's chief financial officer said on Tuesday. Lower interest rates are expected to eventually pull yields in money markets down from well above 4%, which is where cash-like instruments like T-bills currently stand."
Reuters adds, "So far, however, there has been little evidence that investors are abandoning cash. Assets in U.S. money markets stood at $6.77 trillion as of last week, data from the Investment Company Institute showed, up from $6.3 trillion in early September."
According to the Seeking Alpha transcript from the CFO's appearance at the Goldman Sachs 2024 U.S. Financial Services Conference, Small comments, "There's still enough political and economic uncertainty in the world that cash is an attractive safe haven for clients. Market expectations for rate cuts, I think, are kind of shallower and fewer. And then also the terminal rate [is lower] relative to where we would have thought it was going to be a year ago."
He continues, "Then the last thing I'd say is I don't think ... barring another pandemic or a real global catastrophe ... we're going to see ZIRP and large-scale asset purchases and twists anytime soon from central banks. `So the totality of those factors I think have made money market fund balances stickier for sure. There's a tremendous amount of cash sitting in institutional cash funds, 2a-7 funds, lots of cash proxies."
Small comments, "I think that just cash will be a stickier part of client, more normalized client portfolio allocation. But I'd flag two things. The first of which is for investors that track some kind of global blended benchmark, a traditional 60-40 kind of stock and bond benchmark, those investors that are overweigh cash are underperforming. That can only persist so long, and I think that will fuel a healthy amount of re-risking into equities and into the private market. So that fear of missing out, of trailing your benchmark, I think is contributing meaningfully to re-risking. And the second thing is, while there hasn't been this flood of cash coming out of money market funds and fixed income, it is happening, right?"
He adds, "So at BlackRock, ... we're now at $3 trillion of assets in fixed income across the platform. That's been on 9% organic growth, so it's on very healthy organic growth. Bond ETFs and iShares have logged about $120 billion of organic flows through to the year here. We've seen very strong flows broadly across fixed income. So it is not the floodgate that has happened, but `we definitely see more normalized allocations, legging into fixed income."
Finally, Small says, "I think with some modest rate cuts, I think you'll start to see investors begin to normalize those allocations. I would expect that they'll favor kind of corporates over traditional government bonds a little bit more. I expect that we will see a little bit of a more of a skew towards ETFs than traditional active, but if that's a two-thirds, one-third or a 50-50 on a fee rate basis, we are in a great place, I think to capture either of those flows."
Crane Data's December Money Fund Portfolio Holdings, with data as of Nov. 30, 2024, show that Treasuries jumped sharply last month while Repo holdings declined. Money market securities held by Taxable U.S. money funds (tracked by Crane Data) increased by $190.8 billion to $7.001 trillion in November, after increasing $82.8 billion in October, $233.8 billion in September, $57.2 billion in August and $90.4 billion in July. Taxable holdings decreased by $0.4 billion in June, increased $105.6 billion in May, and decreased $61.4 billion in April. Treasuries, the largest segment, increased $244.6 billion in November after increasing $236.2 billion in October and $92.0 billion in September. They decreased $40.2 billion in August and $21.5 billion in July. Repo, the second largest portfolio composition segment, decreased by $82.6 billion. 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. (Visit our Content center to download, or contact us to request our latest Portfolio Holdings reports.) (Note: We're still accepting registrations for our "basic training" event, Money Fund University, which takes place next week, Dec. 19-20, in Providence, R.I.)
Among taxable money funds, Repurchase Agreements (repo) decreased $82.6 billion (-3.4%) to $2.345 trillion, or 33.5% of holdings, in November, after decreasing $242.8 billion in October and increasing $151.7 billion in September. Repo decreased $40.2 billion in August and $21.5 billion in July. Treasury securities increased $244.6 billion (8.5%) to $3.111 trillion, or 44.4% of holdings, after increasing $236.2 billion in October, $92.0 billion in September, $85.8 billion in August and $24.3 billion in July. Government Agency Debt was down $2.4 billion, or -0.3%, to $846.9 billion, or 12.1% of holdings. Agencies increased $70.3 billion in October, $20.9 billion in September, $11.2 billion in August and $22.9 billion in July. Repo, Treasuries and Agency holdings now total $6.303 trillion, representing a massive 90.0% of all taxable holdings.
Money fund holdings of Other (Time Deposits), CD and CP all rose in November. Commercial Paper (CP) increased $2.6 billion (0.9%) to $296.3 billion, or 4.2% of holdings. CP holdings increased $12.2 billion in October, $0.3 billion in September and $4.5 billion in August. Certificates of Deposit (CDs) increased $0.5 billion (0.3%) to $187.7 billion, or 2.7% of taxable assets. CDs increased $2.1 billion in October, but decreased $1.7 billion in September and $13.9 billion in August. Other holdings, primarily Time Deposits, increased $27.6 billion (16.1%) to $199.7 billion, or 2.9% of holdings, after increasing $3.9 billion in October, decreasing $29.4 billion in September and increasing $9.3 billion in August. VRDNs increased to $14.4 billion, or 0.2% of assets. (Note: This total is VRDNs for taxable funds only. We will post our Tax Exempt MMF holdings separately Wednesday around noon.)
Prime money fund assets tracked by Crane Data increased to $1.171 trillion, or 16.7% of taxable money funds' $7.001 trillion total. Among Prime money funds, CDs represent 16.0% (down from 16.1% a month ago), while Commercial Paper accounted for 25.3% (unchanged from October). The CP totals are comprised of: Financial Company CP, which makes up 17.2% of total holdings, Asset-Backed CP, which accounts for 6.5%, and Non-Financial Company CP, which makes up 1.6%. Prime funds also hold 0.4% in US Govt Agency Debt, 4.9% in US Treasury Debt, 16.6% in US Treasury Repo, 0.9% in Other Instruments, 14.2% in Non-Negotiable Time Deposits, 8.9% in Other Repo, 11.4% in US Government Agency Repo and 0.9% in VRDNs.
Government money fund portfolios totaled $3.862 trillion (55.2% of all MMF assets), up from $3.755 trillion in October, while Treasury money fund assets totaled another $1.969 trillion (28.1%), up from $1.891 trillion the prior month. Government money fund portfolios were made up of 21.8% US Govt Agency Debt, 16.1% US Government Agency Repo, 39.6% US Treasury Debt, 22.0% in US Treasury Repo, 0.4% in Other Instruments. Treasury money funds were comprised of 77.5% US Treasury Debt and 22.4% in US Treasury Repo. Government and Treasury funds combined now total $5.830 trillion, or 83.3% of all taxable money fund assets.
European-affiliated holdings (including repo) decreased by $24.6 billion in November to $749.8 billion; their share of holdings fell to 10.7% from last month's 11.4%. Eurozone-affiliated holdings decreased to $507.4 billion from last month's $520.7 billion; they account for 7.3% of overall taxable money fund holdings. Asia & Pacific related holdings fell to $313.9 billion (4.5% of the total) from last month's $315.7 billion. Americas related holdings rose to $5.930 trillion from last month's $5.714 trillion, and now represent 84.7% of holdings.
The overall taxable fund Repo totals were made up of: US Treasury Repurchase Agreements (down $111.5 billion, or -7.0%, to $1.486 trillion, or 21.2% of assets); US Government Agency Repurchase Agreements (up $20.8 billion, or 2.8%, to $753.9 billion, or 10.8% of total holdings), and Other Repurchase Agreements (up $8.1 billion, or 8.4%, from last month to $104.7 billion, or 1.5% of holdings). The Commercial Paper totals were comprised of Financial Company Commercial Paper (up $1.4 billion to $201.5 billion, or 2.9% of assets), Asset Backed Commercial Paper (down $1.0 billion at $76.5 billion, or 1.1%), and Non-Financial Company Commercial Paper (up $2.2 billion to $18.3 billion, or 0.3%).
The 20 largest Issuers to taxable money market funds as of Nov. 30, 2024, include: the US Treasury ($3.111T, 44.4%), Fixed Income Clearing Corp ($752.7B, 10.8%), Federal Home Loan Bank ($648.3B, 9.3%), RBC ($166.0B, 2.4%), JP Morgan ($165.6B, 2.4%), Citi ($157.6B, 2.3%), Federal Farm Credit Bank ($150.4B, 2.1%), BNP Paribas ($150.3B, 2.1%), the Federal Reserve Bank of New York ($142.6B, or 2.0%), Goldman Sachs ($107.2B, 1.5%), Bank of America ($101.2B, 1.4%), Barclays PLC ($96.2B, 1.4%), Mitsubishi UFJ Financial Group Inc ($77.2B, 1.1%), Credit Agricole ($70.3B, 1.0%), Wells Fargo ($67.7B, 1.0%), Canadian Imperial Bank of Commerce ($62.7B, 0.9%), Sumitomo Mitsui Banking Corp ($58.9B, 0.8%), Toronto-Dominion Bank ($58.3B, 0.8%), Bank of Montreal ($49.7B, 0.7%), and Mizuho Corporate Bank Ltd ($46.8B, 0.7%).
In the repo space, the 10 largest Repo counterparties (dealers) with the amount of repo outstanding and market share (among the money funds we track) include: Fixed Income Clearing Corp ($733.3B, 31.3%), JP Morgan ($157.1B, 6.7%), Citi ($145.6B, 6.2%), the Federal Reserve Bank of New York ($142.6B, 6.1%), BNP Paribas ($137.6B, 5.9%), RBC ($130.8B, 5.6%), Goldman Sachs ($106.7B, 4.6%), Barclays PLC ($86.4B, 3.7%), Bank of America ($80.1B, 3.4%) and Wells Fargo ($66.5B, 2.8%).
The largest users of the $142.6 billion in Fed RRP include: Vanguard Market Liquidity Fund ($22.8B), Vanguard Federal Money Mkt Fund ($20.7B), Fidelity Cash Central Fund ($10.4B), Schwab Treasury Oblig MF ($7.7B), Goldman Sachs FS Treas Sol ($7.1B), State Street Inst US Govt ($7.0B), Northern Instit Treasury MMkt ($6.9B), Columbia Short-Term Cash Fund ($6.4B), DWS Govt MM ($6.1B) and Dreyfus Govt Cash Mgmt ($5.5B).
The 10 largest issuers of "credit" -- CDs, CP and Other securities (including Time Deposits and Notes) combined -- include: Toronto-Dominion Bank ($37.1B, 6.0%), RBC ($35.1B, 5.7%), Mizuho Corporate Bank Ltd ($32.1B, 5.2%), Mitsubishi UFJ Financial Group Inc ($28.5B, 4.6%), DNB ASA ($25.9B, 4.2%), Australia & New Zealand Banking Group Ltd ($24.8B, 4.0%), Skandinaviska Enskilda Banken AB ($23.3B, 3.8%), ING Bank ($23.0B, 3.7%), Canadian Imperial Bank of Commerce ($22.6B, 3.7%), and Bank of America ($21.1B, 3.4%).
The 10 largest CD issuers include: Mitsubishi UFJ Financial Group Inc ($21.1B, 11.3%), Sumitomo Mitsui Trust Bank ($17.1B, 9.1%), Mizuho Corporate Bank Ltd ($14.3B, 7.6%), Bank of America ($12.6B, 6.7%), Toronto-Dominion Bank ($11.6B, 6.2%), Sumitomo Mitsui Banking Corp ($11.6B, 6.2%), Credit Agricole ($10.2B, 5.4%), Canadian Imperial Bank of Commerce ($8.4B, 4.5%), Mitsubishi UFJ Trust and Banking Corporation ($8.0B, 4.3%) and Bank of Nova Scotia ($6.4B, 3.4%).
The 10 largest CP issuers (we include affiliated ABCP programs) include: RBC ($21.8B, 7.9%), Toronto-Dominion Bank ($20.8B, 7.5%), Bank of Montreal ($15.2B, 5.5%), Australia & New Zealand Banking Group Ltd ($10.7B, 3.9%), Citi ($9.4B, 3.4%), Barclays PLC ($9.2B, 3.3%), BPCE SA ($9.1B, 3.3%), DNB ASA ($9.0B, 3.3%), Canadian Imperial Bank of Commerce ($8.7B, 3.2%) and Bank of Nova Scotia ($8.6B, 3.1%).
The largest increases among Issuers include: US Treasury (up $244.6B to $3.111T), RBC (up $17.1B to $166.0B), Canadian Imperial Bank of Commerce (up $11.8B to $62.7B), Federal Home Loan Bank (up $8.7B to $648.3B), Bank of Montreal (up $6.0B to $49.7B), Federal National Mortgage Association (up $5.4B to $25.5B), Northcross Capital Management (up $4.2B to $7.1B), Svenska Handelsbanken (up $3.8B to $13.2B), Federal Farm Credit Bank (up $3.3B to $150.4B) and National Bank of Canada (up $2.6B to $10.1B).
The largest decreases among Issuers of money market securities (including Repo) in October were shown by: Federal Reserve Bank of New York (down $31.1B to $142.6B), Fixed Income Clearing Corp (down $24.2B to $752.7B), JP Morgan (down $10.6B to $165.6B), Barclays PLC (down $10.1B to $96.2B), Goldman Sachs (down $8.9B to $107.2B), BNP Paribas (down $6.0B to $150.3B), Sumitomo Mitsui Banking Corp (down $4.5B to $58.9B), Societe Generale (down $4.4B to $46.7B), Banco Santander (down $4.1B to $20.2B) and Deutsche Bank AG (down $3.9B to $21.1B).
The United States remained the largest segment of country-affiliations; it represents 79.3% of holdings, or $5.552 trillion. Canada (5.4%, $378.5B) was in second place, while France (4.5%, $312.6B) was No. 3. Japan (4.0%, $279.4B) occupied fourth place. The United Kingdom (2.3%, $162.6B) remained in fifth place. Australia (0.8%, $58.8B) was in sixth place, followed by Netherlands (0.8%, $57.3B), Germany (0.7%, $47.4B), Sweden (0.6%, $44.7B), and Norway (0.4%, $25.9B). (Note: Crane Data attributes Treasury and Government repo to the dealer's parent country of origin, though money funds themselves "look-through" and consider these U.S. government securities. All money market securities must be U.S. dollar-denominated.)
As of Nov. 30, 2024, Taxable money funds held 42.8% (down from 44.7%) of their assets in securities maturing Overnight, and another 12.3% maturing in 2-7 days (up from 11.5%). Thus, 55.1% in total matures in 1-7 days. Another 10.2% matures in 8-30 days, while 13.9% matures in 31-60 days. Note that over three-quarters, or 79.2% 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 7.5% of taxable securities, while 10.7% matures in 91-180 days, and just 2.7% matures beyond 181 days.
Crane Data's latest monthly Money Fund Portfolio Holdings statistics will be sent out Tuesday, and we'll be writing our regular monthly update on the new November 30 data for Wednesday's News. But we also already uploaded a separate and broader Portfolio Holdings data set based on the SEC's Form N-MFP filings on Monday. (We continue to merge the two series, and the N-MFP version is now available via our Portfolio Holdings file listings to Money Fund Wisdom subscribers.) Our new N-MFP summary, with data as of November 30, includes holdings information from 986 money funds (up 2 from last month), representing assets of $7.131 trillion (up from $6.925 trillion). Prime MMFs fell to $1.058 trillion (down from $1.158 trillion), or 14.8% of the total. We review the new N-MFP data, and we also look at our revised MMF expense data, which shows charged expenses were mostly flat and money fund revenues rose to $19.1 billion (annualized) in November. (Note: We're still adjusting to the SEC's new Form N-MFP format, so there continue to be some distortions in our data. Let us know if you see any issues or questions!)
Our latest Form N-MFP Summary for All Funds (taxable and tax-exempt) shows Treasuries and Repurchase Agreements (Repo) remain the largest types of portfolio holdings in money market funds. Treasury holdings in money market funds now total $3.050 trillion (up from $2.632 trillion), or 42.8% of all assets, while Repo holdings rose to $2.390 trillion (up from $2.217 billion), or 33.5% of all holdings. Government Agency securities total $852.1 billion (up from $813.2 billion), or 11.9%. Holdings of Treasuries, Government agencies and Repo (almost all of which is backed by Treasuries and agencies) combined total $6.292 trillion, or a massive 88.2% of all holdings.
The Other category (primarily Time Deposits) totals $206.5 billion (down from $696.2 billion), or 2.9%, and Commercial paper (CP) totals $306.7 billion (up from $270.3 billion), or 4.3% of all holdings. Certificates of Deposit (CDs) total $187.6 billion (up from $161.0 billion), 2.6%, and VRDNs account for $138.2 billion (up from $134.8 billion), or 1.9% of money fund securities.
Broken out into the SEC's more detailed categories, the CP totals were comprised of: $201.5 billion, or 2.8%, in Financial Company Commercial Paper; $76.5 billion or 1.1%, in Asset Backed Commercial Paper; and, $28.7 billion, or 0.4%, in Non-Financial Company Commercial Paper. The Repo totals were made up of: U.S. Treasury Repo ($1.540 trillion, or 21.6%), U.S. Govt Agency Repo ($740.7B, or 10.4%) and Other Repo ($109.5B, or 1.5%).
The N-MFP Holdings summary for the Prime Money Market Funds shows: CP holdings of $263.4 billion (up from $259.6 billion), or 24.9%; Repo holdings of $406.6 billion (down from $421.0 billion), or 38.4%; Treasury holdings of $52.8 billion (down from $62.0 billion), or 5.0%; CD holdings of $162.3 billion (up from $160.9 billion), or 15.3%; Other (primarily Time Deposits) holdings of $158.5 billion (down from $239.1 billion), or 15.0%; Government Agency holdings of $4.7 billion (down from $5.2 billion), or 0.4% and VRDN holdings of $9.9 billion (unchanged from $9.9 billion), or 0.9%.
The SEC's more detailed categories show CP in Prime MMFs made up of: $180.2 billion (up from $179.4 billion), or 17.0%, in Financial Company Commercial Paper; $66.2 billion (up from $65.3 billion), or 6.3%, in Asset Backed Commercial Paper; and $17.1 billion (up from $14.9 billion), or 1.6%, in Non-Financial Company Commercial Paper. The Repo totals include: U.S. Treasury Repo ($183.9 billion, or 17.4%), U.S. Govt Agency Repo ($131.0 billion, or 12.4%), and Other Repo ($91.7 billion, or 8.7%).
In related news, money fund charged expense ratios (Exp%) were mostly flat in November. Our Crane 100 Money Fund Index and Crane Money Fund Average were 0.27% and 0.39%, respectively, as of Nov. 30, 2024. 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 Monday 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.) Visit our "Content" page for the latest files.
Our Crane 100 Money Fund Index, a simple average of the 100 largest taxable money funds, shows an average charged expense ratio of 0.27%, unchanged from last month's level (also 19 bps higher than 12/31/21's 0.08%). The Crane Money Fund Average, a simple average of all taxable MMFs, showed a charged expense ratio of 0.39% as of Nov. 30, 2024, unchanged from the month prior and slightly below the 0.40% at year-end 2019.
Prime Inst MFs expense ratios (annualized) average 0.23% (up 1 bp from last month), Government Inst MFs expenses average 0.30% (up 4 bps from last month), Treasury Inst MFs expenses average 0.29% (unchanged from last month). Treasury Retail MFs expenses currently sit at 0.53%, (unchanged from last month), Government Retail MFs expenses yield 0.55% (up 1 bp from last month). Prime Retail MF expenses averaged 0.50% (unchanged from last month). Tax-exempt expenses were also unchanged at 0.39% on average.
Gross 7-day yields were down during the month ended November 30, 2024. The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 723), shows a 7-day gross yield of 4.72%, down 19 bps from the prior month. The Crane Money Fund Average was 1.72% at the end of 2019, 0.15% at the end of 2020 and 0.09% at the end of 2021. Our Crane 100's 7-day gross yield was also down 20 bps, ending the month at 4.71%.
According to our revised MFI XLS and Crane Index numbers, we now estimate that annualized revenue for all money funds is $19.105 billion (as of 11/30/24), a new record high. Our estimated annualized revenue totals increased from $18.473B last month and $18.265B seen two months ago. Revenue levels are more than six times larger than May's 2021's record-low $2.927B level. Charged expenses and gross yields are driven by a number of variables, but revenues should continue their climb higher as inflows resume to money funds following a pause around April 15.
Crane Data's latest monthly Money Fund Market Share rankings show assets increasing among most of the largest U.S. money fund complexes in November, after rising in October, September, August, July, June and May. Assets fell in March and April. Money market fund assets rose by $196.1 billion, or 2.9%, last month to a record $7.064 trillion. Total MMF assets have increased by $443.5 billion, or 6.7%, over the past 3 months, and they've increased by $777.2 billion, or 12.4%, over the past 12 months. The largest increases among the 25 largest managers last month were seen by BlackRock, JPMorgan, Vanguard, Morgan Stanley and Fidelity, which grew assets by $32.8 billion, $31.2B, $27.6B, $27.1B and $19.9B, respectively. Declines in November were seen by SSGA and HSBC, which decreased by $4.3 billion and $1.2B, 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 were lower in November.
Over the past year through Nov. 30, 2024, Fidelity (up $195.7B, or 15.8%), Schwab (up $117.0B, or 25.0%), BlackRock (up $110.8B, or 22.1%), Vanguard (up $92.9B, or 16.9%) and JPMorgan (up $78.3B, or 11.9%) were the `largest gainers. Fidelity, JPMorgan, BlackRock, Morgan Stanley and SSGA had the largest asset increases over the past 3 months, rising by $67.4B, $58.0B, $51.4B, $44.6B and $42.7B, respectively. The largest declines over 12 months were seen by: American Funds (down $21.3B), Invesco (down $11.8B), HSBC (down $10.2B), PGIM (down $5.1B) and RBC (down $37M). The largest declines over 3 months included: American Funds (down $5.2B) and Columbia (down $1.1B).
Our latest domestic U.S. Money Fund Family Rankings show that Fidelity Investments remains the largest money fund manager with $1.434 trillion, or 20.3% of all assets. Fidelity was up $19.9B in November, up $67.4 billion over 3 mos., and up $195.7B over 12 months. JPMorgan ranked second with $736.3 billion, or 10.4% market share (up $31.2B, up $58.0B and up $78.3B for the past 1-month, 3-mos. and 12-mos., respectively). Vanguard ranked in third place with $644.1 billion, or 9.1% of assets (up $27.6B, up $29.1B and up $92.9B). BlackRock ranked fourth with $611.6 billion, or 8.7% market share (up $32.8B, up $51.4B and up $110.8B), while Schwab was the fifth largest MMF manager with $585.7 billion, or 8.3% of assets (up $10.5B, up $30.5B and up $117.0B for the past 1-month, 3-mos. and 12-mos.).
Federated Hermes was in sixth place with $463.5 billion, or 6.6% (up $4.3B, up $13.8B and up $37.5B), while Goldman Sachs was in seventh place with $437.2 billion, or 6.2% of assets (up $7.1B, up $38.6B and up $13.0B). Dreyfus ($289.7B, or 4.1%) was in eighth place (up $1.6B, up $15.5B and up $28.5B), followed by Morgan Stanley ($285.5B, or 4.0%; up $27.1B, up $44.6B and up $33.3B). SSGA was in 10th place ($257.2B, or 3.6%; down $4.3B, up $42.7B and up $44.5B).
The 11th through 20th-largest U.S. money fund managers (in order) include: Allspring (formerly Wells Fargo) ($215.1B, or 3.0%), Northern ($179.1B, or 2.5%), First American ($158.4B, or 2.2%), American Funds ($151.3B, or 2.1%), Invesco ($135.6B, or 1.9%), UBS ($112.5B, or 1.6%), T. Rowe Price ($51.8B, or 0.7%), DWS ($44.6B, or 0.6%), HSBC ($40.6B, or 0.6%) and Western ($33.9B, 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: BlackRock moves up to the No. 3 spot, and Vanguard moves down to No. 4. Goldman Sachs moves up to the No. 6 spot, while Federated Hermes moves down to the No. 7 spot. Morgan Stanley moves up to the No. 8 spot while Dreyfus moves down to the No. 9 spot. Global Money Fund Manager Rankings include the combined market share assets of our MFI XLS (domestic U.S.) and our MFI International ("offshore") products.
The largest Global money market fund families include: Fidelity ($1.453 trillion), JP Morgan ($992.7B), BlackRock ($931.7B), Vanguard ($644.1B) and Schwab ($585.7B). Goldman Sachs ($584.8B) was in sixth, Federated Hermes ($475.8B) was seventh, followed by Morgan Stanley ($379.3B), Dreyfus/BNY Mellon ($319.1B) and SSGA ($308.2B), which round out the top 10. These totals include "offshore" U.S. Dollar money funds, as well as Euro and Pound Sterling (GBP) funds converted into U.S. dollar totals.
The December issue of our Money Fund Intelligence and MFI XLS, with data as of 11/30/24, shows that yields were lower in November across most Crane Money Fund Indexes. The Crane Money Fund Average, which includes all taxable funds covered by Crane Data (currently 723), was 4.34% (down 21 bps) for the 7-Day Yield (annualized, net) Average, the 30-Day Yield was also down 19 bps at 4.39%. The MFA's Gross 7-Day Yield was at 4.71% (down 21 bps), and the Gross 30-Day Yield was down 20 bps at 4.76%. (Gross yields will be revised once we download the SEC's Form N-MFP data for 11/30/24 on Monday.)
Our Crane 100 Money Fund Index shows an average 7-Day (Net) Yield of 4.44% (down 20 bps) and an average 30-Day Yield at 4.50% (down 18 bps). The Crane 100 shows a Gross 7-Day Yield of 4.71% (down 20 bps), and a Gross 30-Day Yield of 4.77% (down 18 bps). Our Prime Institutional MF Index (7-day) yielded 4.57% (down 23 bps) as of Nov. 30. The Crane Govt Inst Index was at 4.45% (down 21 bps) and the Treasury Inst Index was at 4.40% (down 19 bps). Thus, the spread between Prime funds and Treasury funds is 17 basis points, and the spread between Prime funds and Govt funds is 12 basis points. The Crane Prime Retail Index yielded 4.29% (down 24 bps), while the Govt Retail Index was 4.15% (down 22 bps), the Treasury Retail Index was 4.17% (down 18 bps from the month prior). The Crane Tax Exempt MF Index yielded 2.63% (down 45 bps) as of November.
Gross 7-Day Yields for these indexes to end November were: Prime Inst 4.79% (down 23 bps), Govt Inst 4.71% (down 21 bps), Treasury Inst 4.69% (down 20 bps), Prime Retail 4.79% (down 24 bps), Govt Retail 4.68% (down 24 bps) and Treasury Retail 4.70% (down 18 bps). The Crane Tax Exempt Index fell to 3.02% (down 46 bps). The Crane 100 MF Index returned on average 0.38% over 1-month, 1.19% over 3-months, 4.68% YTD, 5.15% over the past 1-year, 3.63% over 3-years (annualized), 2.27% over 5-years, and 1.57% over 10-years.
The total number of funds, including taxable and tax-exempt, was unchanged in October at 838. There are currently 723 taxable funds, up 5 from the previous month, and 115 tax-exempt money funds (unchanged from last month). (Contact us if you'd like to see our latest MFI XLS, Crane Indexes or Market Share report.)
The December issue of our flagship Money Fund Intelligence newsletter, which was sent to subscribers Friday morning, features the articles: "Money Fund Assets Break Over $7.0 Trillion; Still Going," which reviews the continued jump in MMF assets; "Top 10 Stories of 2024: Asset Surge Continues, Yields Peak," which looks back at some of Crane Data's top stories of the year; and, "BlackRock Files for Money Market ETFs: Will They Fly?" which looks at the new ETF filing. We also sent out our MFI XLS spreadsheet Friday a.m., and we've updated our Money Fund Wisdom database with 11/30/24 data. Our Dec. Money Fund Portfolio Holdings are scheduled to ship on Tuesday, December 10, and our Dec. Bond Fund Intelligence is scheduled to go out on Friday, December 13. (Note: We're still taking registrations for our "basic training" event, Money Fund University, which is Dec. 19-20 in Providence, R.I.)
MFI's "$7.0 Trillion" article says, “Money market mutual fund assets broke the $7.0 trillion barrier for the first time ever on Wednesday, Nov. 13, according to our Money Fund Intelligence Daily. Assets jumped following the Federal Reserve's Nov. 7 25 basis point rate cut, and they've continued surging higher in December, rising $58.0 billion month-to-date (through 12/3) to a record $7.121 trillion. Money fund assets have increased by $816.0 billion (13.0%) year-to-date in 2024 (through 12/4).
It continues, "According to our monthly MFI XLS, money fund assets increased by $196.1 billion in November to a record $7.066 trillion. Assets rose by $97.5 billion in October, $149.8 billion in September, $109.7 billion in August, $16.6 billion in July, $15.7 billion in June and $91.4 billion in May. They declined by $15.8 billion in April and $68.8 billion in March. They rose $72.1 billion in February, $93.9 billion in Jan., $32.7 billion in December and $226.4 billion last November."
We write in our Top 10 article, "Dramatic asset growth was again the biggest story of the year, as money market fund assets jumped by $800 billion to a record $7.0 trillion (after jumping by over $1.0 trillion last year). With still almost a month to go, money fund asset growth could approach $1.0 trillion by yearend. In 2023, rising yields were the big news. Though yields have begun declining, and are now below 4.5%, yields remained above 5% for most of the past year. So great yields were another theme of 2024. Other major headlines of 2024 included: the implementation (and minor impact) of the SEC's latest Money Fund Reforms, the birth of tokenized money market funds (and money fund ETFs), the continued growth of Social (and shrinkage of ESG) MMFs and the increase in assets and now decline in yields in European and other worldwide markets. Below, we excerpt from a number of our biggest and most representative news stories of 2024 to highlight the major trends of the past year."
It states, "Crane Data's Top 10 Stories of 2024 include (in chronological order): 'Dreyfus Liquid Assets Celebrates 50th Birthday; ICI Trends for December' (1/31/24); 'American Funds Central Cash to Convert to Govt to Avoid Liquidity Fees' (2/6/24); 'BlackRock Launches Private Tokenized Money Fund, BUIDL; BVI Domicile' (3/22/24); 'ICI: Worldwide MF Assets Jump in Q4'23, Break $10 Trillion; US Leads' (3/25/24); 'Goldman Files to Liquidate Prime Inst MMFs; Barron's: MMFs Tempting' (4/22/24); 'More AFP Liquidity Survey: Banks, MMFs, T-Bills Kings of Cash; MMFs Up' (6/27/24); 'WSJ, Investment News on Brokerage Deposit, Advisory Sweep Pressures' (7/19/24); 'SSGA Sticks w/Prime Inst Money Funds; Discusses Reforms; Benchmarks' (8/29/24); 'MMF Assets Break $6.7 Trillion; Crane 100 Falls Below 5.0%; FT on MMFs' (9/24/24); 'Bloomberg, ignites on Latest MMF Reforms; Prime Inst Shift a Nonevent' (10/3/24); and, 'Money Fund Assets Break Over $7.0 Trillion; S&P on AAA Rated MFs in Q3' (11/13/24)."
Our "BlackRock" piece says, "A Form N-1A Registration Statement for the BlackRock ETF Trust and its new iShares Prime Money Market ETF tells us, 'The iShares Prime Money Market ETF seeks as high a level of current income as is consistent with liquidity and stability of principal.... The Fund seeks to achieve its investment objective by investing, under normal circumstances, in a broad range of U.S. dollar-denominated money market instruments, including government, U.S. and foreign bank, and commercial obligations and repurchase agreements. The Fund invests in securities maturing in 397 days or less (with certain exceptions) and the portfolio will have a dollar-weighted average maturity of 60 days or less and a dollar-weighted average life of 120 days or less.'"
The piece continues, "The Fund's Board of Trustees has determined that the Fund will qualify as a 'money market fund' pursuant to Rule 2a-7 under the Investment Company Act of 1940, as amended ('Rule 2a-7'). The securities purchased by the Fund are subject to the quality, diversification, and other requirements of Rule 2a-7, and other rules of the Securities and Exchange Commission ('SEC'). Unlike a traditional money market fund, the Fund operates as an exchange traded fund ('ETF'). As an ETF, the Fund's shares will be traded on [an exchange] and will generally fluctuate in accordance with changes in net asset value ('NAV') per share as well as the relative supply of, and demand for, shares on [the exchange]."
MFI also includes the News brief, "Reuters: 'America's $7 Trillion Cash Stash Isn't Going Anywhere.' They write, 'A record-high $7 trillion of cash is currently sitting 'on the sidelines' in money market funds.... Anyone hoping to see a significant chunk of this flooding the wider investment field in the coming months may be disappointed. Many strategists assume this massive pile of cash will start to shrink now that the Federal Reserve is cutting interest rates as investors seek a more profitable home for their capital in the face of diminishing cash yields.... Not so fast.'"
Another News brief, "Money Fund Yields Dip Below 4.5%," states, "Money fund yields declined by 20 basis points to 4.44% on average during the month ended November 30 (as measured by our Crane 100 Money Fund Index), after falling 11 bps in October and 35 bps in September. Yields now reflect the majority of the Fed's 25 bps cut on November 7, but they should continue inching lower this week and next. They've declined by 58 bps since the Fed cut its target rate by 50 bps on Sept. 18 and by 15 bps since the Fed cut rates by 1/4 point on 11/7."
A third News brief, "Northern Trust A.M.'s 'Global Investment Outlook 2025," quotes NTAM, "Money fund assets up while rates go down.... Importantly for money market investors, we and the markets see little chance rates return to the zero lower bound anytime soon -- a welcome change from much of the past 15 years of very low yields on cash."
A sidebar says, "Barron's asks, 'Can Cash Be King Again? Suddenly, T-Bills Look More Attractive.' Subtitled, 'The potential for higher-for-longer rates means cash vehicles, including Treasury bills, money market funds and savings accounts, could continue to offer attractive yields into next year,' the article says, 'Cash could be the best game in town. That’s the argument of one prominent Wall Street analyst after market shifts make short-term investments look a lot more attractive.'"
Our December MFI XLS, with Nov. 30 data, shows total assets increased $196.1 billion to a record $7.066 trillion, after increasing $89.9 billion in October, $155.2 billion in September, $105.6 billion in August, $19.7 billion in July, $11.8 billion in June and $79.7 billion in May. They decreased $17.6 billion in April and $66.7 billion in March, but increased $50.0 billion in February, $87.0 billion in January and $24.5 billion last December.
Our broad Crane Money Fund Average 7-Day Yield was down 20 bps at 4.34%, and our Crane 100 Money Fund Index (the 100 largest taxable funds) was also down 20 bps at 4.44% in November. On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA and the Crane 100 averaged 4.71% and 4.71%. Charged Expenses averaged 0.38% and 0.27% for the Crane MFA and the Crane 100. (We'll revise expenses once we upload the SEC's Form N-MFP data for 11/30/24 on Monday, 12/9.) The average WAM (weighted average maturity) for the Crane MFA was 36 days (up 1 bp) and the Crane 100 WAM was up 1 bp from the previous month at 37 days. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
Federated Hermes' Money Market CIO Deborah Cunnigham writes, "Record high: Money market assets have reached a new mark," in her latest monthly commentary. She comments, "Records, as they say, are made to be broken. But some seem so out of reach we don't pay attention to them until they are nearly upon us.... That's the case with the record amount of money market fund assets under management reached in late November. That number? $7,000,000,000,000. Yes, the convention is to abbreviate it to $7 trillion, but spelling it out shows just how big that number is, and it's cause for celebration. The broader liquidity market (including products denominated in euros and pounds, pooled investments, private funds, and other forms) is also at an all-time high. In its conference in Pittsburgh last summer, Crane Data also wedded sports and money markets with a version of the Steelers terrible towel that touted how close the industry was to $7 trillion in assets. We might soon need a new one to wave."
Cunningham continues, "Of course, the tremendous inflows started when the Federal Reserve began hiking rates in March 2022 and continued as rates climbed through 3%, 4% and 5%. But this accomplishment is decades in the making. Federated Hermes history dates to 1974 when we launched the first mutual fund to use the term 'money market' in its name. From convincing investors of the value of 'money market funds' to battling regulators, steering past market upheavals, and navigating a zero-rate environment, we have championed them because we believe in their worth to clients as both a tool for cash management and as a critical part of portfolio allocation."
She explains, "But with the Fed cutting rates, surely the recent success is coming to an end, right? We don't think so. A hypothetical theme popular in the markets in the coming months might be that clients can hardly wait to transfer their 'sideline cash' to the stock and bond markets if yields dip much further. We believe that for most investors, cash is not coal waiting to be shoveled into a furnace to power riskier asset classes. Liquidity vehicles' utility as a mechanism to pay expenses with the potential for an attractive return and as a crucial part of a balanced portfolio will persist. If the Fed's terminal fed funds rate settles in the mid 3s (we now think 3.5% to 4% is possible) all segments of the market—government, prime and muni money funds especially -- should remain a robust asset class."
Finally, Cunningham says, "It is still too early to truly assess the ramifications on the liquidity markets of Trump's return to the White House. We don't invest based on rumor, speculation or promises. However, we continue to think many of his potential policies, especially on tariffs and immigration, could be inflationary. Those primarily impact the money markets through the Fed, which should be factored into its updated Summary of Economic Projections released after its meeting on Dec. 18."
She adds, "In fact, that document is probably more important than the Committee's decision to lower or maintain the target range -- at present a coinflip -- as we expect policymakers to adopt an every-other-meeting cut approach in 2025. A pause in December likely means a cut in January; a cut likely means a pause. If policymakers slow the pace of easing due to concerns about inflation stalling or trending back up, money markets likely will see yields stabilize at elevated levels."
In related news, Hong Kong-based publication The Asset features the article, "Money market funds, good bet under Trump 2.0." They tell us, "When massive uncertainty and volatility prevail in the financial markets as the US government transitions to the Trump administration, Asian investors who are seeking a relatively stable, low-risk, but well-performing asset class would do well to consider US dollar money market funds."
The piece quotes Aidan Shevlin, head of international liquidity fund management at J.P. Morgan Asset Management, "It's pretty attractive, and that's actually what we're seeing. If we look at money market funds in the ultra-short duration space at this point in time, maybe one year duration or a maximum of three-year final maturity, we're seeing a huge amount of money coming into these funds."
The Asset says, "For Asian investors, US money market funds present very attractive opportunities after years when they were earning 0% on their cash holdings. Also, the slowdown in the Asian market, and prevailing uncertainty and volatility makes investing in equities and bonds more challenging for more conservative and risk-averse investors."
Shevlin adds, "Asia does well in a scenario where China is growing strongly and where the Fed policy is loose; and, unfortunately, we're not in that situation right now. China's growth is weaker, and the Fed is keeping rates higher, and is likely to keep them higher than people initially expected. So, under these circumstances, it will be a tougher environment for Asia to do well in the coming times."
The article tells us, "On the bright side, the relatively high interest rates provide higher real yields on cash, which is an opportunity for more conservative investors who wish to avoid the uncertainty and volatility of other asset classes.... 'For investors who are more cautious,' Shevlin shares, 'the fact that we've got really high real yields on cash at this moment in time gives you a good place to hide out if you're getting 4% or 5% yield on your US dollars, Aussie dollars, and so forth.'"
It concludes, "US dollar money market funds can be a good investment when the US dollar is strengthening because this asset class can benefit from a more stable environment as it invests in low-risk instruments like US treasury bills, certificates of deposit and commercial paper. These instruments are less volatile and can provide a safe haven during economic uncertainty or fluctuations."
Dramatic asset growth was again the biggest story of the year, as money market fund assets jumped by $800 billion to a record $7.1 trillion (after jumping by over $1.0 trillion last year). With still almost a month to go, money fund asset growth could approach $1.0 trillion by yearend. In 2023, rising yields were the big news. Though yields have begun declining, and are now below 4.5%, yields remained above 5% for most of the past year. So great yields were another theme of 2024. Other major headlines of 2024 included: the implementation (and minor impact) of the SEC's latest Money Fund Reforms, the birth of tokenized money market funds (and money fund ETFs), the continued growth of Social (and shrinkage of ESG) MMFs and the increase in assets and now decline in yields in European and other worldwide markets. Below, we excerpt from a number of our biggest and most representative news stories of 2024 to highlight the major trends of the past year. (Note: As a reminder, register ASAP for our Money Fund University, Dec. 19-20 in Providence, at the Renaissance Providence Downtown. Clients and friends are also welcome to stop by Crane Data's Holiday Cocktail Party at MFU on 12/19 from 5-7:30pm!)
Crane Data's Top 10 Stories of 2024 include (in chronological order): "Dreyfus Liquid Assets Celebrates 50th Birthday; ICI Trends for December" (1/31/24); "American Funds Central Cash to Convert to Govt to Avoid Liquidity Fees" (2/6/24); "BlackRock Launches Private Tokenized Money Fund, BUIDL; BVI Domicile" (3/22/24); "ICI: Worldwide MF Assets Jump in Q4'23, Break $10 Trillion; US Leads" (3/25/24); "Goldman Files to Liquidate Prime Inst MMFs; Barron's: MMFs Tempting" (4/22/24); "More AFP Liquidity Survey: Banks, MMFs, T-Bills Kings of Cash; MMFs Up" (6/27/24); "WSJ, Investment News on Brokerage Deposit, Advisory Sweep Pressures" (7/19/24); "SSGA Sticks w/Prime Inst Money Funds; Discusses Reforms; Benchmarks" (8/29/24); "MMF Assets Break $6.7 Trillion; Crane 100 Falls Below 5.0%; FT on MMFs" (9/24/24); "Bloomberg, ignites on Latest MMF Reforms; Prime Inst Shift a Nonevent" (10/3/24); and, "Money Fund Assets Break Over $7.0 Trillion; S&P on AAA Rated MFs in Q3" (11/13/24).
Our Jan. 31 story, "Dreyfus Liquid Assets Celebrates 50th Birthday; ICI Trends for December," discusses the 50th birthday of Dreyfus's oldest money fund. The piece says, "A press release entitled, 'Dreyfus Celebrates 50 Years of Liquidity Management,' tells us, 'Dreyfus, one of the largest liquidity managers and affiliate of BNY Mellon (BK), celebrates the 50th anniversary of the launch of its first Dreyfus money market fund and the start of its journey as a trusted leader in the space. On January 28, 1974, Dreyfus introduced Dreyfus Liquid Assets, Inc., one of the first money market funds offered to investors. This year, BNY Mellon is also celebrating its 240-year anniversary and position as one of the pioneers of US financial services.'" See also our Jan. 5 story, "Rolling w/Reform Changes V: Little Change in '23 Ahead of MMF Reforms."
Our Feb. 6 story describes the start of the shift from Prime Inst to Government ahead of the SEC's MMF Reforms. The piece, "American Funds Central Cash to Convert to Govt to Avoid Liquidity Fees." It says, "Capital Group's $144.4 billion American Funds Central Cash fund, the largest Prime Inst money market fund, has filed to convert to a Government MMF, making it the first major Prime MMF casualty of the latest round of the SEC's pending Money Fund Reforms. A Form N-1A filing for the Capital Group Central Fund Series' American Funds Central Cash M (CMQXX) tells us, 'On or about June 7, 2024 (the 'Effective Date'), the fund intends to operate as a government money market fund pursuant to rule 2a-7 under the 1940 Act.'" See also our Feb. 2 story, "ICI: Money Fund Assets Jump to Record $6.0 Trillion; Ameriprise Q4 Cash."
In March, we published, "BlackRock Launches Private Tokenized Money Fund, BUIDL; BVI Domicile," which reviews one of the first major 'tokenizations' of an MMF. It states, "A press release entitled, 'BlackRock Launches Its First Tokenized Fund, BUIDL, on the Ethereum Network,' explains, 'BlackRock unveil[ed] its first tokenized fund issued on a public blockchain, the BlackRock USD Institutional Digital Liquidity Fund (BUIDL). BUIDL will provide qualified investors with the opportunity to earn U.S. dollar yields by subscribing to the Fund through Securitize Markets, LLC.' BlackRock's Head of Digital Assets Robert Mitchnick comments, 'This is the latest progression of our digital assets strategy. We are focused on developing solutions in the digital assets space that help solve real problems for our clients, and we are excited to work with Securitize.'" See also our March 20 story, "Vanguard Market Liquidity Fund Files to Go Government, Joins American."
Later in March, we wrote about money fund markets outside the U.S. in, "ICI: Worldwide MF Assets Jump in Q4'23, Break $10 Trillion; US Leads." This piece says, "The Investment Company Institute published, 'Worldwide Regulated Open-Fund Assets and Flows, Fourth Quarter 2023,' last week, which shows that money fund assets globally jumped by $497.0 billion, or 5.1%, in Q4'23 to $10.441 trillion. The increases were led by a sharp jump in money funds in U.S., while Ireland, Luxembourg, France and China also rose. Meanwhile, money funds in Argentina and Belgium were lower. MMF assets worldwide increased by $1.585 trillion, or 19.1%, in the 12 months through 12/31/23, and money funds in the U.S. now represent 56.7% of worldwide assets."
Our April 22 news discussed more shifts away from Prime Inst MMFs and the overall attraction of MMFs in, "Goldman Files to Liquidate Prime Inst MMFs; Barron's: MMFs Tempting." This piece says, "The hits keep coming to the Prime Institutional money fund sector, as Goldman Sachs becomes the latest fund firm to announce an exit from the space. A Prospectus Supplement filing Friday for the $1.6 billion Goldman Sachs Financial Square Money Market Fund and the $2.9 billion Goldman Sachs Financial Square Prime Obligations Fund, including its Administration, Capital, Institutional, Preferred, Select, Service, and Drexel Hamilton Class Shares, explains, 'At a meeting held on April 16-17, 2024, upon the recommendation of Goldman Sachs Asset Management, L.P., the Board of Trustees of Goldman Sachs Trust approved a proposal to liquidate the Goldman Sachs Financial Square Money Market Fund and Goldman Sachs Financial Square Prime Obligations Fund.... The Funds are expected to be liquidated on or about September 16, 2024, pursuant to Plans of Liquidation approved by the Board. The Liquidation Date may be changed without notice at the discretion of the Trust's officers.' This brings the total of Prime Institutional money funds declaring either pending conversions to Government or pending liquidations to 5 funds to date, representing $229.3 billion in assets, or 34.9% of the $657.0 billion total in Prime Inst MMFs (assets as of 3/31/24)."
Crane Data's June 27 News, "More AFP Liquidity Survey: Banks, MMFs, T-Bills Kings of Cash; MMFs Up," states, "We wrote earlier this week on the '2024 AFP Liquidity Survey.' (See our June 24 News, 'AFP 2024 Liquidity Survey: Cash Still King Among Corporates, Increasing.') Today, we continue our excerpts from the annual survey of corporate investors' cash habits. Discussing 'Current Allocations of Short-Term Investments,' AFP says, 'Companies maintain their investments in relatively few vehicles. Organizations invest in an average 2.7 vehicles for their cash and short-term investments -- unchanged from the average reported in 2023. Most organizations continue to allocate a large share of their short-term investment balances -- an average of 83% — in safe and liquid investment vehicles: bank deposits, money market funds (MMFs) and Treasury securities. This result is four percentage points higher than the 79% reported in 2023 -- and the highest percentage on record since AFP began tracking the data. The typical organization currently maintains 47% of its short-term investments in bank deposits. This allocation is the same as reported last year (2023) but is 8 percentage points lower than the 55% reported in 2022.'" See also our June 13 story, "Invesco Files to Liquidate Prime Inst MMFs; UBS MF Converting to Retail."
Our July 19 update, "WSJ, Investment News on Brokerage Deposit, Advisory Sweep Pressures," discussed pressures on brokerage sweep accounts. It explains, "We wrote earlier this week on a number of earnings reports which show a continued shift from bank deposits into money market funds. (See our July 17 News, 'Schwab, BlackRock Q2 Earnings: Cash Migration Slowing, But Continues.') The Wall Street Journal covers the topic in, 'Yield-Hungry Wealth Management Clients Are Becoming a Headache for Big Banks.' They explain, 'Brokerage customers are still demanding more for their cash. And banks are scrambling to keep up. Across several banks with large wealth-management businesses, a common theme in second-quarter earnings reports was continuing to have to pay higher rates to hang on to brokerage customers' cash.... Wells Fargo and Morgan Stanley called out increases in some of the rates they pay on certain brokerage account deposit products, and Bank of America noted a rise in rates paid on wealth-management deposits.'" Also check out our July 18 piece, "Schwab, JPM, Meeder Announce Prime Inst Conversions to Government."
Our August 29 News, "SSGA Sticks w/Prime Inst Money Funds; Discusses Reforms; Benchmarks," explains, "State Street Global Advisors (SSGA) recently confirmed that they'll be sticking with their Prime Institutional money fund offering. They published an update titled, 'Money Market Reform 2024,' which reviews the current round of regulatory changes impacting money market mutual funds. It explains, 'During March of 2020 and the onset of the pandemic, there was broader stress in the short-term funding markets and significant redemptions of Prime Fund assets. In response, the SEC proposed additional regulations to further strengthen the Institutional Prime Fund space during periods of volatility with the goal to disincentivize any first mover advantage. In October 2024, the final wave of the SEC's money market fund reform rule changes will take effect, marking the most substantial shift since the 2016 reforms. These changes are set to redefine the landscape of Institutional Prime Money Market funds. This transition signifies a pivotal moment for the industry, reflecting the evolving regulatory environment and the drive for greater stability and transparency in the financial markets.'" Also, see: "DFA Short-Term Investment Fund Converts to Ultra-Short; FT on Flows" (8/6/24) and "More on SEC Sweeps Scrutiny; Inv News on Sweeps, UBS's Earnings Call" (8/20/24).
Our September 24 story, "MMF Assets Break $6.7 Trillion; Crane 100 Falls Below 5.0%; FT on MMFs," signals the end of 5% yields, stating, "Money market mutual fund assets surged on Thursday and Friday following the Federal Reserve's 50 basis point rate cut, jumping by $81.8 billion over 2 days to a record $6.717 trillion. (They increased another $28.1 billion yesterday, Sept. 23.) Money fund yields slid lower to 4.94% (down 12 bps) on average in the week ended Sept. 20 (as measured by our Crane 100 Money Fund Index, an average of 7-day yields for the 100 largest taxable money funds) after falling 2 bps the week prior. (Yields fell another 7 bps on Monday to 4.87%.) Yields were 5.10% on 8/31, 5.13% on 7/31 and 6/28, 5.14% on 5/31, 5.13% on 4/30, 5.14% on 3/31 and 2/29/24, 5.17% on 1/31/24, 5.20% on 12/31/23, 4.94% on 6/30/23, 4.61% on 3/31/23 and 4.05% on 12/31/22." See also our Sept. 18 piece, "Janus Offers MMF to Support American Cancer Society; Weekly Holdings."
In October, we published, "Bloomberg, ignites on Latest MMF Reforms; Prime Inst Shift a Nonevent," which says, "Bloomberg published an article titled, 'Money-Market Funds Stay in Vogue Even as Reforms Go Into Effect,' which recapped the latest changes to the Prime Institutional money fund space. They write, 'Money-market funds are attracting record amounts of cash, even as a regulatory overhaul pins the industry with costly mandatory fees. The US Securities and Exchange Commission approved measures last year designed to make the $6.42 trillion industry more transparent and prevent investors from yanking money from such funds during market volatility or financial stress like in March 2020. The final piece of the reform requiring fund managers to impose mandatory liquidity fees went into effect on Wednesday.'"
Finally, we cover the year-end surge in MMF assets in "Money Fund Assets Break Over $7.0 Trillion; S&P on AAA Rated MFs in Q3." This article says, "Money market mutual fund assets broke the $7.0 trillion barrier for the first time ever on Wednesday, Nov. 13, according to our Money Fund Intelligence Daily. Assets have jumped following the Federal Reserve's 25 basis point rate cut last Thursday (11/7), increasing by $91.4 billion in the week through Wednesday to a record $7.001 trillion. Money fund assets have increased by $147.3 billion in November month-to-date through 11/13, and they have increased by $709.4 billion (11.3%) year-to-date in 2024."
For more 2024 (and soon 2025) News (and prior years going back to 2006), see Crane Data's News Archives. We'll continue to provide daily updates on the money fund marketplace in the coming year, so `keep reading our News and Link of the Day commentaries in 2025. Let us know if you need web access (unlimited access is for subscribers only), or if you'd like to see our latest Money Fund Intelligence, Bond Fund Intelligence or MFI Daily publications. Thanks to all of our readers and subscribers for your support in 2024, and we wish you all the best in the coming year. Merry Christmas, Happy Holidays and Happy New Year!
Money fund yields declined by 1 basis point to 4.44% on average during the week ended Friday, Nov. 29 (as measured by our Crane 100 Money Fund Index), after falling 3 bps the week prior and 9 bps two weeks prior. Yields are now reflecting most of the Federal Reserve's 25 basis point cut on November 7, but they may continue inching lower this week and next. They've declined by 62 bps since the Fed cut its Fed funds target rate by 50 bps percent on Sept. 18 and they've declined by 19 bps since the Fed cut rates by 1/4 point on 11/7. Yields were 4.65% on average on 10/31, 4.75% on 9/30, 5.10% on 8/31, 5.13% on 7/31 and 6/28, 5.14% on 5/31, 5.13% on 4/30, 5.14% on 3/31 and 2/29/24, 5.17% on 1/31/24, and 5.20% on 12/31/23.
The broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 672), shows a 7-day yield of 4.35%, down 1 bp in the week through Friday. Prime Inst money fund yields were unchanged at 4.56% in the latest week. Government Inst MFs were down 1 bp at 4.45%. Treasury Inst MFs were down 1 bp at 4.40%. Treasury Retail MFs currently yield 4.19%, Government Retail MFs yield 4.15%, and Prime Retail MFs yield 4.34%, Tax-exempt MF 7-day yields were down 19 bps to 2.67%.
Assets of money market funds rose by $70.1 billion last week to a new record high $7.063 trillion, according to Crane Data's Money Fund Intelligence Daily. For the month of November, MMF assets have surged by $200.5 billion, after increasing by $97.5 billion in October and $149.8 billion in September. Weighted average maturities were up 1 bp at 37 days for the Crane MFA and unchanged at 37 days for the Crane 100 Money Fund Index.
According to Monday's Money Fund Intelligence Daily, with data as of Friday (11/29), 112 money funds (out of 786 total) yield under 3.0% with $134.8 billion in assets, or 1.9%; 76 funds yield between 3.00% and 3.99% ($77.3 billion, or 1.1%), 598 funds yield between 4.0% and 4.99% ($6.851 trillion, or 97.0%) and following the recent rate cut there continues to be zero funds yielding 5.0% or more.
Our Brokerage Sweep Intelligence Index, an average of FDIC-insured cash options from major brokerages, was unchanged at 0.46%, after dropping 2 basis points two weeks prior. The latest Brokerage Sweep Intelligence, with data as of Nov. 29, shows that there was one change over the past week. Merrill Lynch lowered rates once again for their advisory accounts; they're now at 4.47% (down 1 bp from the week prior). Three of the 10 major brokerages tracked by our BSI still offer rates of 0.01% for balances of $100K (and lower tiers). These include: E*Trade, Merrill Lynch and Morgan Stanley.
In sweep-related news, Investment News writes, "Fidelity to move RIA clients' sweep balances to in-house product." They explain, "Cash sweep account options have long been a source of contention. These programs, used by major broker-dealers as a short holding place for client cash that is between investments, are often criticized for prioritizing profits."
The piece tells us, "Recently, Fidelity began notifying RIAs that it will default all non-retirement cash to its in-house option, FCASH. Beginning in 2025, RIAs partnered with Fidelity will find sweep account cash going from money market funds to FCASH. That decision adds to the recent dilemmas of cash sweep practices. Industrywide, companies have been criticized for having low rates in their sweep options.... There have been numerous lawsuits filed over the issue, and companies have responded to the pressure by increasing the rates they pay clients for those cash positions [on advisory-type accounts]."
It states, "Last year, Fidelity disclosed that FCASH, which has a much lower yield than money market funds, would become the only available option for RIAs' non-retirement core sweep accounts. 'To provide consistency for our advisor clients, custody non-retirement brokerage accounts will convert and default into FCASH as the core sweep position, beginning in 2025,' a Fidelity spokesperson said in an email. 'The FCASH rate is 2.32 percent as of Nov. 8, 2024.' Advisors who prefer other cash options for their clients continue to have access to a wide array of cash management choices with the ability to transact directly from those cash management vehicles, the spokesperson said."
The article quotes, "A Fidelity spokesperson told InvestmentNews via email that that the company does not resell client deposits to other banks. Fidelity's cash option, at its current rate of 2.32 percent, is significantly below the 4.27 percent available on the firm's government money market fund. RIAs could seek alternative options that maximize yield for their clients' cash holdings."
Ryan Halliday, managing partner at Crewe Advisors tells Investment News, "We still have the ability to purchase money market funds, even if they force everything back to FCASH. We just have to make sure we're watching and paying attention." The article adds, "Citywire earlier reported on Fidelity's pending switch to FCASH for all non-retirement sweep assets."
J.P. Morgan published "Short-Term Fixed Income 2025 Outlook" last week, which explains, "Cash continued to flood into MMFs as investors sought refuge in this asset class while earning 5% yields. More importantly, an inverted yield curve and low bank deposit yields made MMFs a very attractive liquidity investment. The inflows continued even as the Fed cut rates, pushing AUMs to a record $7tn, underscoring the abundance of liquidity in the system, most of which seemed to be sitting in the front end. To that end, money market spreads traded largely in a narrow range, even in the face of MMF reform." (Note: We're still taking registrations for our "basic training" event, Money Fund University, which will be held Dec. 19-20, 2024 in Providence, R.I. Please join us too for Crane Data's Holiday Party on Thursday, Dec. 19 at the Renaissance Providence from 5-7pm!)
JPM tells us, "In 2025, yields are heading lower, though we remain constructive on the money markets. Fed cuts are not going to shake off the attractive appeal of MMFs given the shallower easing cycle and uncertainty with respect to how the economy will unfold under the new US administration. We believe MMF AUMs will remain elevated at around $7tn, continuing to provide steady demand for money market instruments. In contrast to prior years, supply in the money markets in 2025 will not be driven by T-bills. Instead, it will be driven by collateral, as continued growth in net Treasury supply and demand for levered equity exposure translate into more Treasury repo, equity repo, and ABCP supply."
They write, "All told, we see total money market supply increasing by $775bn to $17.9tn in 2025. While demand for money market investors should persist, prices might need to adjust to incentivize continued absorption of that supply, particularly as RRP liquidity has fallen to low levels and hit a floor."
A section titled, "MMFs: Lower rates, no problem," states, "If we're right about our Fed interest rate forecast, a 3.75% terminal rate by 3Q25 is hardly a low yield. Cash will remain an attractive asset class even as the Fed cuts rates. This was certainly evident in the demand for MMFs this year, refuting the notion that lower rates would prompt imminent outflows. Through 11/21, total taxable money fund balances grew by $691bn (+11%) YTD and now register nearly $6.9tn. Even accounting for seasonality, this year's inflows were substantially higher than those of prior years, including 2020 but excluding 2023 when the COVID crisis and the regional banking crisis respectively drove cash into MMFs."
The outlook continues, "In the face of an inverted yield curve and volatile markets, MMFs provided a safe haven for investors seeking stability and yields -- and at extremely attractive yields at that for an overnight asset. So it was not surprising then that flows were widespread this year, with notable gains across different types of taxable MMFs with the exception of prime institutional funds as they underwent structural reforms."
JPM says, "We expect MMF AUMs to remain elevated next year. While the degree to which cash moves into MMFs may abate, we certainly do not foresee any outsized flows out of MMFs. Indeed, a look at MMF flows going back three decades, spanning over four easing cycles (1995, 2001, 2007, 2019), shows that MMFs continue to see inflows even as the Fed begins to cut rates.... In fact, in 1995, which we think is most reflective of the shallow cycle we are about to embark on and is also more comparable on an absolute yield basis, MMFs continued to see inflows throughout the entire cycle."
They add, "Fundamentally, the relative attractiveness between bank deposits and MMFs should also continue to favor the latter asset class.... [T]he spread between bank deposits and MMFs remains wide, with MMFs yielding 60bp above online bank savings accounts and 425bp above national bank deposit accounts. With a Fed that is expected to bring rates back down to neutral, we suspect banks are not going to be increasing their deposit yields anytime soon, particularly on non-operational deposits which banks still do not necessarily want. And while cuts will push MMF yields incrementally lower, the spread over deposits will remain large enough for MMFs to continue to attract incremental cash."
Finally, the piece summarizes, "All told, combination of a flat front-end yield curve and low deposit rates should keep taxable MMF balances relatively elevated. AUMs around $7tn are here to stay, which means steady demand for money market instruments."
In other news, a press release titled, "Archax Provides Access to abrdn Money Market Fund on the XRP Ledger in Collaboration With Ripple," tells us, "Archax, the first FCA regulated digital asset exchange, broker and custodian, has provided access to a money market fund from UK asset manager abrdn in tokenized form on the XRP Ledger (XRPL), a decentralized blockchain. The fund comprises part of abrdn's £3.8 billion US dollar Liquidity Fund (Lux) and represents the first tokenized money market fund on the XRPL, further establishing it as one of the leading blockchains for real-world asset (RWA) tokenization and institutional decentralized finance (DeFi)."
The release continues, "This milestone is the result of an ongoing collaboration between Archax and Ripple, the leader in enterprise blockchain and crypto solutions. It marks an important step towards unlocking operational cost savings and settlement efficiencies by deploying capital markets infrastructure on the XRPL. According to McKinsey, tokenized money market funds already exceed USD$1 billion in assets under management, and some projections estimate the value of tokenized assets could reach $16 trillion by 2030.... Ripple will allocate USD$5 million into tokens on abrdn's Lux fund."
Markus Infanger, Senior Vice President of RippleX, comments, "The arrival of abrdn's money market fund on XRPL demonstrates how real-world assets are being tokenized to enhance operational efficiencies, while further reinforcing the XRPL as one of the leading blockchains for real-world asset tokenization. There is no question that the on-chain economy is gaining traction. By working with companies like Archax, we are excited to help financial institutions like abrdn to seize the incredible opportunity represented by blockchain and digital assets technology to deliver utility at scale."
Graham Rodford, CEO of Archax, adds, "Financial institutions are understanding the value of adopting digital assets for real world use cases. There is now real momentum building for tokenized real-world assets, and Archax is at the forefront of tokenizing assets such as equities, debt instruments and money market funds. In collaboration with Ripple, we are excited to help our clients such as abrdn, which manages over half a trillion pounds in assets (as at Q2 2024), to bring them to the XRPL using Archax's tokenization engine. Institutional buyers can now purchase abrdn's Lux fund directly from Archax in token form."
