News Archives: March, 2024

The Federal Reserve Bank of New York published a "Liberty Street Economics" blog entry titled, "Deposits and the March 2023 Banking Crisis -- A Retrospective," which explains, "In this post, we evaluate how deposits have evolved over the latter portion of the current monetary policy tightening cycle. We find that while deposit betas have continued to rise, they did not accelerate following the bank runs in March 2023. In addition, while overall deposit funding has remained stable, we find that the banks most affected by the March 2023 events are offering higher deposit rates and are growing their deposit funding relative to the broader banking industry."

Authors Stephan Luck and Matthew Plosser write, "The beginning of 2022 saw unique conditions in the banking sector relative to prior cycles. Deposits and reserves were at their highest levels since the global financial crisis (GFC) of 2007-08, while policy rates were effectively at the zero lower bound. These conditions were in part attributable to the unique nature of the COVID recession and the various forms of government support that sought to minimize disruptions to banks, businesses, and households."

They tell us, "The Federal Reserve embarked on a rapid tightening cycle in March 2022 to counter a significant increase in inflation. By March 2023, interest rate increases had reduced the value of various fixed-rate assets, like securities and mortgages, resulting in substantial unrealized losses in the banking sector. Typically, such losses remain unrealized because banks can hold their fixed-rate assets to maturity since these are funded by relatively fixed, long-maturity liabilities.... In this case, however, several banks experienced depositor flight in response to solvency concerns."

The piece states, "Given these disruptions, there was a risk that pervasive unrealized losses might inspire a revision in depositor behavior that would imperil the broader banking system by forcing additional institutions to raise deposit rates or seek expensive funding to avoid selling assets and realizing interest-rate-related losses."

It also says, "The cost of deposits relative to prevailing interest rates has continued to increase, but the pace of change has appeared stable following the events in March 2023. [A] chart ... depicts the change in overall deposit rates relative to changes in the federal funds rates -- or the cumulative beta -- over the course of the last five tightening cycles for the banking industry. Since 2023:Q1, the cumulative beta of deposits has continued to rise. While the current tightening cycle now resembles those prior to the GFC, there does not appear to have been a sharp change in the progression of deposit pricing following the events in March. Nevertheless, the composition of bank funding has continued to evolve."

The blog continues, "[T]he industry grew substantially during the downturn, with assets up approximately 30 percent through 2021:Q4 relative to 2019:Q2.... The growth in assets was primarily funded by the growth in interest-bearing ... and noninterest-bearing ... deposits. Since 2021:Q4, assets have remained roughly flat: declines in noninterest deposits were offset by a rise in other debt ... such as advances from Federal Home Loan Banks (FHLB) and interest-bearing deposits (including time deposits). These trends appear unchanged following the events of 2023:Q1.... These banks ["super regionals"] experienced large deposit outflows that were mostly directed toward the largest banks (those with assets of at least $250 billion)."

It adds, "The chart below illustrates the evolution of cumulative deposit betas during the current tightening cycle across the distribution of bank size. There are meaningful differences in the cumulative deposit betas, with super-regionals ... being a key outlier. Deposit betas for these institutions have generally been higher than those of smaller banks throughout this tightening cycle.... For the largest banks, betas have been going up at a slower pace than those of other banks. This may reflect the perceived safety of these institutions relative to other banks and is consistent with the flow of deposits to the largest banks around the Silicon Valley Bank episode."

Finally, the piece says, "The events of March 2023 increased the saliency of the sensitivity of deposit funding to macroeconomic and bank-specific conditions. Our review of deposit pricing and funding since that time indicates that the industry appears to have avoided a significant change in depositor behavior that would further pressure earnings and capital. This may in part have been due to government interventions, such as the guarantees extended to depositors and creation of the Bank Term Funding Facility. Further, we document that the deposit pricing of super-regional banks has exhibited a greater sensitivity to rising rates. In line with higher rates, these banks have also grown deposit funding relative to the broader banking industry. In our next post, we will explore the future path of deposit rates given the current neutral stance of monetary policy."

In other news, Wells Fargo's Vanessa McMichael writes in yesterday's "Fixed Income Strategy: Daily short stuff" on "Rates and MMF reform." She comments, "Compared to the start of the year, front-end rates have been relatively stable this month.... Money market fund rates have also remained relatively stable, though they have declined a few basis points YTD across both government and prime categories. Despite the slight retreat in yield, investors are still enjoying rates that are comfortably above 5.0% and are likely to stay that high until the Fed is well within easing. While rates have been a major appeal and discussion topic for MMF investors, compliance dates for the final MMF reform adjustments are nearing. Few corporate and public entity clients have engaged in discussions around the new MMF rules, which is likely because so many exclusively invest in government MMFs and the changes to this category are quite minor in consideration of today's rate environment (converting NAVs to floating or implement RDM in the event of a negative rate environment). Nonetheless, [Tuesday] we partnered with Allspring Global Investments to provide an update on money market fund reform."

The brief says, "The second wave of compliance deadlines that impact investors become effective next week and include an increase in liquidity requirements mandating that funds maintain 25% of portfolio holdings in daily liquid assets and 50% in weekly liquid assets. This is a notable increase compared to the prior 10% and 30% minimums required for prime and tax-exempt MMFs but investors should find comfort in knowing that many, if not most, funds are already able to meet these new requirements. Further, gates and fees that are triggered by a breach of liquid asset levels no longer exist, so if a fund does not have sufficient liquid assets, portfolio managers have to invest in a manner that brings the fund back into compliance. Importantly, with these new liquidity requirements, there is no longer a potential gate that would limit an investor from redeeming nor is there a fee assessed to an investor when redeeming because of the liquidity level."

It explains, "The other rule effective next week is discretionary fees, which are not new, but akin to the prior liquidity fees enacted in 2016. These fees are specific for prime and tax-exempt MMFs and are designed to aid a fund during times of stress, and not serve as a trigger of a breach of the above referenced minimum daily and weekly liquidity mandate. This discretionary fee provides a fund with flexibility should market conditions develop that warrant it. Finally, the last and arguably the biggest rule for the prime and tax-exempt fund space is the mandatory liquidity fees that are effective in October."

Lastly, Wells tells us, "We find that many corporate and public entity investors have largely adopted government MMFs as the primary fund exposure today, so this is likely the reason why we don't hear many questions about the latest MMF reform. Regardless, we think that organizations should review their investment policies for tweaks in language around these new rules and take a look at how current funds will be impacted if any of the rules are implemented, whether for government, prime, or tax-exempt categories."

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 March 22) includes Holdings information from 82 money funds (up 14 from a week ago), or $3.531 trillion (up from $3.143 trillion) of the $6.465 trillion in total money fund assets (or 54.6%) 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.)(Note: Thank you to those who attended our Bond Fund Symposium earlier this week in Philadelphia! Attendees and Crane Data subscribers may access the conference binder, Powerpoints and recordings (after the show) via our "Bond Fund Symposium 2024 Download Center.")

Our latest Weekly MFPH Composition summary shows Government assets dominating the holdings list with Treasuries totaling $1.589 trillion (up from $1.468 trillion a week ago), or 45.0%; Repurchase Agreements (Repo) totaling $1.270 trillion (up from $1.158 trillion a week ago), or 36.0%, and Government Agency securities totaling $303.7 billion (up from $268.4 billion), or 8.6%. Commercial Paper (CP) totaled $126.0 billion (up from a week ago at $77.0 billion), or 3.6%. Certificates of Deposit (CDs) totaled $96.6 billion (up from $71.6 billion a week ago), or 2.7%. The Other category accounted for $102.0 billion or 2.9%, while VRDNs accounted for $43.3 billion, or 1.2%.

The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $1.589 trillion (45.0% of total holdings), Fixed Income Clearing Corp with $301.1B (8.5%), Federal Home Loan Bank with $231.3B (6.6%), the Federal Reserve Bank of New York with $146.4 billion (4.1%), RBC with $88.3B (2.5%), BNP Paribas with $81.6B (2.3%), JP Morgan with $78.6B (2.2%), Citi with $72.1B (2.0%), Federal Farm Credit Bank with $68.4B (1.9%) and Bank of America with $59.5B (1.7%).

The Ten Largest Funds tracked in our latest Weekly include: JPMorgan US Govt MM ($259.5B), Goldman Sachs FS Govt ($220.3B), Fidelity Inv MM: Govt Port ($203.2B), JPMorgan 100% US Treas MMkt ($199.5B), Federated Hermes Govt ObI ($154.6B), BlackRock Lq FedFund ($147.6B), State Street Inst US Govt ($139.0B), Morgan Stanley Inst Liq Govt ($135.4B), Fidelity Inv MM: MM Port ($127.7B) and BlackRock Lq Treas Tr ($114.8B). (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, Fitch Ratings posted a press release titled, "Global Market Funds Assets under Management Grew Significantly in 2023." It tells us, "Money market fund (MMF) flows are set to stabilise in 2024 after significant inflows in 2023, Fitch Ratings says in a new report. Global MMF assets under management (AUM) were USD9.9 trillion at end-2023, up 17% from the previous year with most of the increase coming in 2H23."

Fitch explains, "US MMF AUM rose 21% to USD6.3 trillion in 2023 driven by investors taking advantage of high interest rates and deposit outflows after the US regional bank failures. Fitch estimates that European MMFs' AUM increased by 11% to EUR1.8 trillion with short-term MMFs the main contributor. Chinese MMF assets rose 8% to CNY11.3 trillion after a strong performance in the first six months of the year."

The brief adds, "Fitch expects central banks' interest rates cuts in 2H24, and regulatory reform in the US and China money fund sector to have a limited impact on overall flows, although faster-than-expected rate cuts may accelerate MMF outflows. Nevertheless, we expect balanced industry flows given the presence of the duration effect, allowing MMFs to delay the impact from policy rate cuts to funds yields."

Late last week, mutual fund trade group the Investment Company Institute published a press release entitled, "Mutual Fund Expense Ratios Have Declined Substantially over the Past 27 Years," along with the report, "Trends in the Expenses and Fees of Funds, 2023." The full report tells us, "On average, expense ratios for long-term mutual funds have declined substantially over the past 27 years.... In 1996, equity mutual fund investors incurred expense ratios of 1.04 percent, on average, or $1.04 for every $100 in assets. By 2023, that average had fallen to 0.42 percent. Average expense ratios of hybrid and bond mutual funds, as well as money market funds, have also declined meaningfully since 1996." (Note: Thank you to those who attended our Bond Fund Symposium Monday and Tuesday in Philadelphia! Attendees and Crane Data subscribers may access the conference binder, Powerpoints and recordings (after the show) via our "Bond Fund Symposium 2024 Download Center.")

A table, "Average Expense Ratios Incurred by Mutual Fund Investors Have Declined Substantially Since 1996," presents expense ratios by type from 1996 to 2023 and shows bonds fund averages falling from 0.84% to 0.37% over this period and money fund ratios falling from 0.52% to 0.22%. (Note: Crane Data shows the average expense ratio for money market mutual funds at 0.26% as of 2/29/24 as measured by our Crane 100 Money Fund Index.)

It explains, "Like the prices of most goods and services, the expense ratios of individual mutual funds differ considerably across the array of available products. For example, fund size and asset growth play an important role in mutual fund expense ratios. Some fund costs -- such as transfer agency fees, accounting and audit fees, and director fees -- are relatively fixed in dollar terms, regardless of fund size. As a result, when fund assets rise, these relatively fixed costs make up a smaller proportion of a fund's expense ratio."

ICI writes, "Fund expense ratios can also vary by fund type.... For example, bond and money market mutual funds tend to have lower expense ratios than equity and hybrid mutual funds." Another table, "Mutual Fund Expense Ratios Vary Across Investment Objectives," shows bond fund expenses averaging 0.34% at the 10th percentile, 0.72% at the Median, 1.55% at the 90th percentile, 0.37% for the asset-weighted average and 0.83% for the simple average. For money market funds, it shows averages of 0.12% at the 10th percentile, 0.28% at the Median, 0.70% at the 90th percentile, 0.22% for the asset-weighted average and 0.36% for the simple average."

The section on "Money Market Funds," comments, "The average expense ratio of money market funds increased 9 basis point to 0.22 percent in 2023.... Over the past 15 years, movements in average money market fund expense ratios have largely been driven by changes in short-term interest rates that altered funds' use of expense waivers."

It continues, "For example, over 2008–2009, the Federal Reserve reduced short-term interest rates to nearly zero where they remained until the end of 2015. Because gross yields on taxable money market funds (the yield before deducting the fund's expense ratio) closely track short-term interest rates, most money market funds adopted expense waivers during this period to ensure that net yields (the yield on a fund after deducting fund expenses) did not fall below zero."

ICI writes, "With an expense waiver, a fund's adviser agrees to absorb the cost of all or a portion of a fund's fees and expenses for some time. The expense waiver, by reducing the fund's expense ratio, boosts the fund's net yield. These expense waivers are costly for fund advisers, reducing their revenues and profits. From 2009 to 2015, advisers waived an estimated $36 billion in money market fund expenses and average expense ratios fell accordingly."

The report states, "In 2022 and 2023, the Federal Reserve aggressively raised the federal funds rate from near zero to more than 5 percent to combat high inflation. As a result, money market funds were able to pare back expense waivers put in place in 2020 and 2021 -- total money market fund waivers decreased from $8.4 billion in 2021 to $1.6 billion in 2023.... The percentage of money market funds offering waivers declined from 97 percent at year-end 2021 to 65 percent by year-end 2023. With fewer expense waivers in 2022 and 2023, the average expense ratio for money market funds naturally increased from 0.11 percent in 2021 to 0.22 percent in 2023."

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. We review the latest Worldwide MMF totals, below. (Note: For those attending our Bond Fund Symposium Monday in Philadelphia, welcome! Attendees and Crane Data subscribers may access the conference binder, Powerpoints and recordings (after the show) via our "Bond Fund Symposium 2024 Download Center.")

ICI's release says, "Worldwide regulated open-end fund assets increased 8.6 percent to $68.85 trillion at the end of the fourth quarter of 2023, excluding funds of funds. Worldwide net cash inflow to all funds was $700 billion in the fourth quarter, compared with $403 billion of net inflows in the third quarter of 2023. 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 fourth quarter of 2023 contains statistics from 45 jurisdictions."

It explains, "The growth rate of total regulated open-end fund assets reported in US dollars was increased by US dollar depreciation over the fourth quarter of 2023. For example, on a US dollar–denominated basis, fund assets in Europe increased by 9.3 percent in the fourth quarter, compared with an increase of 4.7 percent on a euro-denominated basis."

ICI's quarterly continues, "On a US dollar–denominated basis, equity fund assets increased by 11.0 percent to $31.79 trillion at the end of the fourth quarter of 2023. Bond fund assets increased by 7.7 percent to $12.89 trillion in the fourth quarter. Balanced/mixed fund assets increased by 5.8 percent to $7.30 trillion in the fourth quarter, while money market fund assets increased by 5.0 percent globally to $10.44 trillion."

The release also tells us, "At the end of the fourth quarter of 2023, 46% 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 11%. Money market fund assets represented 15% of the worldwide total. By region, 54% of worldwide assets were in the Americas in the fourth quarter of 2023, 31% were in Europe, and 14 percent were in Africa and the Asia-Pacific regions."

ICI adds, "Net sales of regulated open-end funds worldwide were $700 billion in the fourth quarter of 2023.... Globally, bond funds posted an inflow of $152 billion in the fourth quarter of 2023, after recording an inflow of $108 billion in the third quarter.... Money market funds worldwide experienced an inflow of $355 billion in the fourth quarter of 2023 after registering an inflow of $275 billion in the third quarter of 2023."

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 Q4'23 with $5.919 trillion, or 56.7% of all global MMF assets. U.S. MMF assets increased by $238.8 billion (4.4%) in Q4'23 and have increased by $1.143 trillion (25.0%) in the 12 months through December 31, 2023. China remained in second place among countries overall. China saw assets increase $27.8 billion (1.8%) in Q4 to $1.588 trillion (15.2% of worldwide assets). Over the 12 months through December 31, 2023, Chinese MMF assets have increased by $72.7 billion, or 4.8%.

Ireland remained third among country rankings, ending Q4 with $806.4 billion (7.7% of worldwide assets). Irish MMFs were up $84.8B for the quarter, or 11.9%, and up $68.4B, or 10.9%, over the last 12 months. Luxembourg remained in fourth place with $570.7 billion (5.5% of worldwide assets). Assets there increased $60.9 billion, or 12.1%, in Q4, and were up $106.2 billion, or 26.2%, over one year. France was in fifth place with $459.8B, or 4.4% of the total, up $32.5 billion in Q4 (7.6%) and up $76.2B (24.7%) over 12 months.

Australia was listed in sixth place with $268.7 billion, or 2.6% of worldwide assets. Its MMFs increased by $19.7 billion, or 7.8%, in Q4. Korea was the 7th ranked country and saw MMF assets increase $4.7 billion, or 3.6%, in Q4'23 to $133.3 billion (1.3% of the total); they've increased $11.8 billion (11.9%) for the year. Brazil was at 8th place with $125.0 billion (1.2%); assets there increased $6.6 billion (5.6%) in Q4 and increased by $27.8 billion (27.9%) over 12 months. Mexico remained in 9th place, as assets increased $8.9 billion, or 8.0%, to 124.8 billion (1.2% of total assets) in Q4. They've increased $39.0 billion (47.0%) over the previous 12 months. ICI's statistics show Japan was listed in 10th place with $106.8B, or 1.0% of total assets, up $5.4 billion (5.1%) for the quarter.

India was in 11th place, increasing $53 million, or 0.1%, to $62.8 billion (0.6% of total assets) in Q4 and increasing $1.2 billion (2.1%) over the previous 12 months. Canada ($57.8B, up $4.5B and up $20.3B over the quarter and year, respectively) ranked 12th ahead of Switzerland. ($38.6B, down $891M and up $8.2B). Chile ($33.3B, up $1.7B and up $8.2B) and Chinese Taipei ($28.2B, up $2.3B and up $2.5B), rank 14th and 15th, respectively. The United Kingdom, South Africa, Argentina, Spain and Germany round out the 20 largest countries with money market mutual funds.

ICI's quarterly series shows money fund assets in the Americas total $6.281 trillion, up $253.6 billion in Q4. Asian MMFs increased by $60.8 billion to $2.196 trillion, and Europe saw its money funds jump $181.7 billion in Q4'23 to $1.943 trillion. Africa saw its money funds increase $818 million to $22.1 billion.

Note that Ireland and Luxembourg's totals are primarily "offshore" money funds marketed to global multinationals, while most of the other countries in the survey have mainly domestic money fund offerings. Contact us if you'd like our latest "Largest Money Market Funds Markets Worldwide" spreadsheet, based on ICI's data. (Let us know too if you'd like to see our latest Money Fund Intelligence International product, which tracks "offshore" money market funds domiciled in Europe and outside the U.S.)

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 the filing for BUIDL, which is domiciled in the British Virgin Islands, here.) (Note: We look forward to seeing those of you attending our Bond Fund Symposium Monday in Philadelphia! Attendees and Crane Data subscribers may access the conference binder, Powerpoints and recordings (after the show) via our "Bond Fund Symposium 2024 Download Center.")

The release tells us, "Tokenization remains a key focus of BlackRock's digital asset strategy. Through the tokenization of the Fund, BUIDL will offer investors important benefits by enabling the issuance and trading of ownership on a blockchain, expanding investor access to on-chain offerings, providing instantaneous and transparent settlement, and allowing for transfers across platforms. BNY Mellon will enable interoperability for the Fund between digital and traditional markets."

Securitize co-founder and CEO Carlos Domingo says, "Tokenization of securities could fundamentally transform capital markets. Today's news demonstrates that traditional financial products are being made more accessible through digitization. Securitize is proud to be BlackRock's transfer agent, tokenization platform and placement agent of choice in digitizing and expanding access to its investment products."

BlackRock states, "BUIDL seeks to offer a stable value of $1 per token and pays daily accrued dividends directly to investors' wallets as new tokens each month. The Fund invests 100% of its total assets in cash, U.S. Treasury bills, and repurchase agreements, allowing investors to earn yield while holding the token on the blockchain. Investors can transfer their tokens 24/7/365 to other pre-approved investors. Fund participants will also have flexible custody options allowing them to choose how to hold their tokens. The initial ecosystem participants in BUIDL include Anchorage Digital Bank NA, BitGo, Coinbase, and Fireblocks, among other market participants and infrastructure providers in the crypto industry."

They add, "BlackRock Financial Management, Inc., will be the investment manager of the Fund and Bank of New York Mellon will serve as the custodian of the Fund's assets and its administrator. Securitize will act as a transfer agent and tokenization platform, managing the tokenized shares and reporting on Fund subscriptions, redemptions, and distributions. Securitize Markets will act as placement agent, making the Fund available to eligible investors. PricewaterhouseCoopers LLP has been appointed as the Fund's auditor for the period ending December 31, 2024."

Finally, the release states, "The Fund will issue shares pursuant to Rule 506(c) under the Securities Act of 1933 and Section3(c)(7) of the Investment Company Act. The Fund's initial investment minimum is $5 million. BlackRock has also made a strategic investment in Securitize. As part of the investment, Joseph Chalom, BlackRock's Global Head of Strategic Ecosystem Partnerships, has been appointed to Securitize's Board of Directors."

The Wall Street Journal comments on the news in, "BlackRock Launches First Tokenized Fund on Ethereum Blockchain." They write, "BlackRock said Wednesday that it has partnered with digital-assets specialist Securitize Markets to launch a tokenized money market fund on the Ethereum blockchain. The private fund, called BlackRock USD Institutional Digital Liquidity Fund, is BlackRock's first tokenized fund on a public blockchain. It follows the asset manager's successful launch of a bitcoin exchange-traded fund, which has seen about $13 billion in inflows since January."

The piece explains, "This is how the fund works: Qualified purchasers -- in this case, generally institutions with at least $25 million in investable assets -- who create a digital wallet and sign up with Securitize will be able to invest in the fund. The minimum investment for those institutions is $5 million. Investors will then receive a token that has a stable price of $1 and accrue interest in the form of the token. Investors will be able to transfer the tokens from wallet to wallet on the blockchain."

It adds, "Both traditional financial firms and crypto players have launched similar products to explore how tokenization could bring more transparency in financial markets. Asset manager Franklin Templeton has a tokenized money-market fund, while crypto startup Ondo Finance offers a tokenized version of the iShares Short Treasury Bond ETF. Securitize also works with private equity firms KKR and Hamilton Lane for tokenized funds."

The Wall Street Journal writes that, "The Era of No-Brainer 5% Returns on Cash Is Ending. The article explains, "It's getting more complicated to hold cash. Certificates of deposit, money-market funds and various other cashlike investments have offered healthy returns, in many cases over 5%, since the Federal Reserve started lifting interest rates two years ago. But with the central bank now considering cutting rates, some cashlike investments are staying strong while others have begun to decline in yield." (Note: We look forward to seeing those of you attending our Bond Fund Symposium next week in Philadelphia! Registrations are still being taken for the show, which is March 25-26. Attendees and Crane Data subscribers may access the conference binder, Powerpoints and recordings (after the show) via our "Bond Fund Symposium 2024 Download Center.")

It tells us, "CDs show the shift under way. Last year, it was easy to lock in a 5% rate for 12 months or longer. Now, the top rates are shorter-term offers. Three-month CDs pay as much as 5.5% annually. CDs that stretch out two years, however, offer under 5%, down from about 5.5% late last year, according to Bankrate data that tracks the highest rates financial institutions are offering. About 70% of high-rate CDs opened in February lasted less than a year, said Adam Stockton, managing director at the data and consulting firm Curinos."

The Journal states, "Americans have been focusing more closely on where they stow their cash since the Fed hiked its interest rates starting in early 2022. At the time, stocks and bonds fell sharply. Cash products started offering loftier interest after years of paying next to nothing. When regional banks failed last year, more money poured into money-market funds, which now have a record $6.5 trillion in assets. The average rate on these funds peaked at 5.2% in December and is now 5.14%, according to Crane Data."

The piece then says, "It is unclear when the Fed will cut rates or how many cuts will happen this year. Though central bankers have penciled in three, they could revise those plans if inflation remains high. Inflation in February was slightly stronger than expected. For the moment, returns on cash remain high. Sixty percent of all CDs that consumers purchased in February were yielding above 5%, and nearly all stood above 4.5%, according to Curinos."

It adds, "When the Fed does cut rates, high-yield savings rates could fall first since they change monthly, followed by Treasury bills and CDs that are bought over periods of time, according to financial advisers. As a result, investors have a new set of considerations. For example, if interest rates fall this year, someone who buys a one-year CD today at 5% or above might end up gaining more in interest than someone who locks in a higher rate for only six months, Stockton said."

In other news, the Fed's release, "Federal Reserve issues FOMC statement," explains, "Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are moving into better balance. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks."

It comments, "In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent. In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans. The Committee is strongly committed to returning inflation to its 2 percent objective."

Finally, the FOMC writes, "In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments."

The $75.9 billion Vanguard Market Liquidity Fund, the second largest Prime Institutional money market fund, has filed to "go Government," joining the largest fund, American Funds Central Cash, in exiting the Prime sectorA "Form N-1A Registration Statement" for the Vanguard CMT Funds explains, "Vanguard has designated Vanguard Market Liquidity Fund as a government money market fund. Government money market funds are required to invest at least 99.5% of their total assets in cash, U.S. government securities, and/or repurchase agreements that are collateralized solely by U.S. government securities or cash (collectively, government securities). The Fund generally invests 100% of its assets in government securities and therefore satisfies the 99.5% requirement for designation as a government money market fund. Government money market funds may, but are not required to, maintain a stable NAV through the use of amortized cost accounting and may, but are not required to, implement liquidity fees. The Fund will maintain a floating NAV and does not currently intend to voluntarily implement liquidity fees." (Note: There's still time to register for our Bond Fund Symposium next week in Philadelphia, March 25-26! Attendees and Crane Data subscribers may access the conference binder, Powerpoints and recordings (after the show) via the "Bond Fund Symposium 2024 Download Center.")

It continues, "Liquidity fees are designed to transfer the costs of liquidating securities from shareholders who remain in the Fund to those who leave the Fund during periods when liquidity is limited. Discretionary liquidity fee. The Fund may impose a liquidity fee of up to 2% on all redemptions if the board of trustees of Vanguard Market Liquidity Fund (the Board) determines that it is in the best interest of the Fund. The Board may delegate liquidity fee determinations to the Advisor or its officers, subject to written guidelines. Subject to practical limitations necessary to implement the fee, the discretionary liquidity fee may be implemented the same day that the Board determines to impose a fee. Any liquidity fee imposed will remain in effect until the Board determines that imposing such liquidity fee is no longer in the best interests of the Fund."

Crane Data's Feb. 6 News featured the story, "American Funds Central Cash to Convert to Govt to Avoid Liquidity Fees," which 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. Under rule 2a-7, a government money market fund is a money market fund that invests at least 99.5% of its total assets in cash, U.S. Treasury securities and other government securities guaranteed or issued by an agency or instrumentality of the U.S. government, and repurchase agreements that are fully collateralized by cash or government securities."

The largest Prime Inst MMFs (who will be subject to the new emergency liquidity fee regime) tracked by Crane Data currently include: American Funds Central Cash (CMQXX, $134.6B), Vanguard Market Liquidity Fund (VAN01, $75.9B), BlackRock Cash Inst MMF SL (BISXX, $68.7B), Fidelity Cash Central Fund (FID01, $53.7B), JPMorgan Prime MM Capital (CJPXX, $42.7B), Fidelity Sec Lending Cash Central Fund (FID05, $31.6B), Federated Hermes Inst Prime Obligs IS (POIXX, $21.4B), JPMorgan Prime MM Institution (JINXX, $18.5B), Columbia Short-Term Cash Fund (COL01, $17.1B), Morgan Stanley Inst Liq Prime Inst (MPFXX, $16.1B), DFA Short Term Investment Fund (DFA01, $15.5B), Federated Hermes Inst Prime Value Obl IS (PVOXX, $15.2B), PGIM Inst Money Market Fund (PRU01, $15.1B), State Street Inst Liquid Res Prem (SSIXX, $14.6B), BlackRock Lq TempCash Inst (TMCXX, $14.1B), JPMorgan Prime MM IM (JIMXX, $13.3B), UBS Select Prime Money Mkt Inst (SELXX, $11.4B), UBS Select Prime Money Mkt Pref (SPPXX, $11.4B), Schwab Variable Share MF Ultra (SVUXX, $6.0B) and MFS Inst Money Market A (MFS01, $5.4B).

The largest Prime Retail MMFs (who won't be subject to liquidity fees) include: Schwab Value Adv MF Inv (SWVXX, $180.4B), Schwab Value Adv MF Ultra (SNAXX, $101.0B), Fidelity Money Market Fund Premium (FZDXX, $94.5B), Fidelity Inv MM: MM Port Inst (FNSXX, $69.8B), Federated Hermes Prime Cash Oblig WS (PCOXX, $60.7B), Fidelity Inv MM: MM Port I (FMPXX, $55.1B), Allspring MMF Prm (WMPXX, $33.6B), JPMorgan Liquid Assets Premier (PJLXX, $25.7B), JPMorgan Liquid Assets Capit (CJLXX, $14.9B), Fidelity Money Market Fund (SPRXX, $11.0B), JPMorgan Liquid Assets Instit (IJLXX, $10.3B), UBS Prime Reserves Fund (UPRXX, $7.6B), JPMorgan Liquid Assets Morgan (MJLXX, $7.1B), UBS Prime Preferred Fund (UPPXX, $6.6B), Goldman Sachs Investor MM Inst (FMJXX, $6.6B), Invesco Premier Institutional (IPPXX, $6.3B), T Rowe Price Cash Reserves (TSCXX, $4.6B), Federated Hermes Capital Reserves (FRFXX, $3.9B), JPMorgan Liquid Assets Agen (AJLXX, $3.9B) and Federated Hermes Prime Cash Oblig SS (PRCXX, $3.8B).

For more info, see these Crane Data News stories: "More from the SEC's Money Market Fund Reforms: Liquidity Fee Excerpts" (7/24/23), "Big Shift Out of Prime and Muni MMFs Hits $1 Trillion" (9/30/16), "ICI on Orderly Prime to Govt Transition; Managing Flows; Reforms, Rates" (9/29/16), "HSBC Latest to Exit Prime; Turn Off the Lights? BlackRock on NRSROs" (9/12/16), "Prime Asset Declines Attracting Attention; Prime/Govt Spread Shrinks" (8/2/16), "UBS Liquidates Sweeps, Goes Govt; Vanguard Floats Internal Money Fund" (6/29/16), "Northern Streamlines MMFs: One Prime to Govie, Two T-E Liquidations" (6/2/16), "Another Two Bite the Dust: SEI Liquidates Prime; Wilmington Goes Govt" (3/29/16), "Even More Prime to Govie: Great West; Columbia, ProFund, Rydex File" (3/16/16), "Harbor, Payden Convert from Prime to Govt; JPM on Flows; iTreasurer" (3/15/16), "Govt MMF Assets Surpass Prime for First Time Ever; Highest in 5 Yrs" (2/26/16) and "Latest Guessing Game: How Much Investor Cash Will Leave Prime MMFs <i:>`_?" (2/3/16).

See also: "More Funds Jump on Prime to Govt Conversion Bandwagon; Mergers" (12/22/15), "Dec. MFI: Asset Flat in '15, Prime Exodus; BlackRock's Henderson, T-E" (12/7/15), "RBC Latest to Abandon Prime MMFs; BlackRock Designates Retail, Inst" (12/1/15), "OppenheimerFunds Latest MF to Go Govt; Deutsche Unveils Ultra-Short" (11/25/15), "Columbia Threadneedle Going Govt; Dreyfus Details MF Moves; Deutsche" (11/18/15), "JP Morgan Global Liquidity Survey Shows 70 Percent Will Stick w/Prime" (11/16/15), "ICI on Prime to Govt Reclassifications; Ignites Recaps Shifts To-Date" (11/13/15), "Sungard Survey Shows Majority of Corps Will Stick w/Prime; Portals" (11/9/15), "JPM: 650 Billion Could Move from Prime; BNY Mellon on Floating NAVs" (11/4/15), "Pioneer, Nationwide Converting Prime to Govt; 2 More Exit MMF Space" (10/29/15), "Franklin Goes Government; $200 Billion To-Date to Convert from Prime" (9/1/15), "August MFI Features Going Govt, PIMCO's Schneider; SEC FAQ Update" (8/10/15), "BlackRock to Liquidate 3 Muni MMFs, Convert Old Merrill Primes to Govt" (7/31/15), "American Funds Leans Government; Abate on Fidelity; Fido on TBills" (7/29/15), "UBS Announces Govt MF Plans, Private MMFs; Bloomberg on Repo Trend" (6/12/15), "Will There Be Enough Supply in the Government Money Fund Space?" (5/6/15) and "Fidelity Announces Major Changes to MMFs; Staying Stable, Going Govt" (2/2/15).

In other news, State Street Global Advisors latest "Monthly Cash Review February 2024 (USD)," "The current positioning of money market funds leans toward long durations, aiming to target the point just shy of where the yield curve inverts so as not to dilute the current yield and be fooled by the mispricing of the term premium. Meanwhile, Treasury Bills remain attractively priced, whereas discount notes offer limited value. We recognized the inherent seasonal shortage of T-Bills in the spring months as tax payments leave the US Treasury flush."

They write, "Commercial paper (CP) appears rich compared to the levels over the past year. We remain cautious on credit given the expectation that recessionary pricing has yet to arrive. Prime MMF yields stand at approximately 15 bp over government MMF yields, slightly tighter than the past one-year average of 18 bp. Overall, MMF flows exhibit notable strength, and we continue to see record levels of total assets under management in MMFs."

SSGA says, "The upcoming March meeting carries significant weight, particularly as discussions revolve around the tapering of quantitative tightening (QT). Fed Chair Jerome Powell's remarks during the January Federal Open Market Committee press conference made it clear that a policy easing is not on the table for the March meeting. As a result, our attention is focused on the potential reduction in QT."

They conclude, "Though we do not expect a change in approach to MBS holdings, we do anticipate a reduction in the amount of US Treasuries that roll off the balance sheet. There is an expectation that the volume of Treasuries rolling off will decrease, potentially by around $30 billion. This adjustment reflects the Fed's ongoing efforts to gradually normalize its balance sheet while carefully managing market expectations and economic conditions. In essence, as we navigate through the turbulence of market repositioning, it is imperative to remain vigilant and adaptable, recognizing the nuanced signals amid the noise."

With money market fund assets continuing to hit record levels (assets broke $6.5 trillion last week), our next Money Fund Symposium, seems destined to break our pre-pandemic record of 570 attendees. Money Fund Symposium 2024 is scheduled for June 12-14, 2024 at The Westin Pittsburgh, in Pittsburgh, Pa. The full agenda for the largest gathering of money market fund managers and cash investors in the world is available and registrations are being taken. Money Fund Symposium attracts money fund managers, marketers and servicers, cash investors, money market securities dealers, issuers, and regulators. We review our latest agenda, as well as Crane Data's other 2024 conferences, below. (Note: We look forward to seeing those of you attending our Bond Fund Symposium next week in Philadelphia! Registrations are still being taken for the show, which is March 25-26. Attendees and Crane Data subscribers may access the conference binder, Powerpoints and recordings (after the show) via our "Bond Fund Symposium 2024 Download Center.")

Our MF Symposium Agenda kicks off on Wednesday, June 12 with a "Keynote: Fifty Years of Managing Money Funds" featuring Chris Donahue of Federated Hermes. The rest of the Day 1 Agenda includes: "Alt-Cash: Ultra-Short Bonds, SMAs & Offshore" with Teresa Ho of J.P. Morgan Securities, Rob Sabatino of UBS Asset Mgmt. and Jeff Weaver of Allspring Global; "Local Government Investment Pool Briefing," with Laura Glenn of Public Trust Advisors, Marty Margolis of Public Funds Investment Institute and Jeffrey Rowe of PFM Asset Management; and, a "Major Money Fund Issues 2024" panel with moderator Peter Crane of Crane Data, Laurie Brignac of Invesco, Doris Grillo of J.P. Morgan Asset Mgmt. and John Tobin of Dreyfus. The evening's reception is sponsored by Bank of America.

Day 2 of Money Fund Symposium 2024 begins with "Strategists Speak '24: Fed, Rates & Reforms," with Joseph Abate of Barclays, Mark Cabana of BofA Securities and Gennadiy Goldberg of TD Securities; followed by a "Senior Portfolio Manager Perspectives" panel featuring Deborah Cunningham of Federated Hermes, Dan LaRocco of Northern Trust A.M. and Nafis Smith of Vanguard. Next up is "Government Money Fund & Repo Issues," moderated by Chris Horvatin of Goldman Sachs with Mike Bird of Allspring Global Investments, Geoff Gibbs of DWS and Lynn Paschen of Schwab Asset Mgmt. The morning concludes with a "Muni & Tax Exempt Money Fund Update," featuring Mary Jo Ochson of Federated Hermes, John Vetter of Fidelity Investments, Sean Saroya of J.P. Morgan Securities 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" moderated by Pia McCusker of SSGA with Rob Crowe of Citi Global Markets, Stewart Cutler of Barclays and John Kodweis of J.P. Morgan Securities; "Ratings Agency Outlook & Trend Review" with Marissa Zuccaro of S&P Global, Robert Callagy of Moody’s Investors and Peter Gargiulo of Fitch Ratings; "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. The day's wrap-up presentation is a "Corporate Investor Concerns & MM Portals" involving Greg Fortuna of State Street Fund Connect, `Tory Hazard of ICD and Vanessa McMichael of Wells Fargo Securities. (The Day 2 reception is sponsored by Barclays.)

The third day of the Symposium features the sessions: "The State of the Money Fund Industry" with Peter Crane of Crane Data; "Treasury, Agency & RRP Issues & Issuance," which features Sue Hill of Federated Hermes, Tom Katzenbach of the U.S. Dept. of the Treasury and Dina Marchioni of the Federal Reserve Bank of NY; "Deposits, Brokerage Sweep & Stablecoins" with Michael Berkowitz of Citi Treasury & Trade Solutions and Adam Ackermann from Paxos; and, "Money Fund Wisdom Demo & Training" with Peter Crane of Crane Data.

We'd like to thank our sponsors and exhibitors so far -- Bank of America, Barclays, J.P. Morgan, TD Securities, Dreyfus, Federated Hermes, First American Funds, Fidelity Investments, Goldman Sachs, Invesco, Moody's, J.P. Morgan Asset Management, Nearwater Capital, BNY Mellon, Daiwa, Deutsche Bank, Mizuho, Nomura, Fitch Ratings, Allspring Global, Citi, Natixis, BlackRock, Mayer & Brown, Northern Trust A.M., IntraFi, Tradeweb, Toyota, Morgan Stanley I.M., UBS, S&P Global Ratings, Seelaus, Mischler, Lummis and Stradley Ronon -- for their support. E-mail us for more details.

Visit the Money Fund Symposium website at for more information. Registration is $1,000, and discounted hotel reservations are available. We hope you'll join us in Pittsburgh in June! Note that the agenda is still being tweaked, so watch for minor changes in coming weeks. E-mail us at to request the full brochure.)

We're also making plans for our next European Money Fund Symposium, which is scheduled for Sept. 19-20, 2024, in London, England. Our 2023 event in Edinburgh, Scotland attracted a record 166 attendees, so we expect our 2024 event to be even bigger. Watch for the draft agenda to be posted in coming weeks and registration ($1000 to attend) is now live. European Money Fund Symposium offers "offshore" money fund portfolio managers, and money market investors, issuers, dealers and service providers a concentrated and affordable educational experience, as well as an excellent and informal networking venue.

Finally, mark your calendars for our next Money Fund University "basic training" event, scheduled for Dec. 19-20, 2024, in Providence, R.I. Let us know if you'd like more details on any of our events, and we hope to see you in Philly next week, in Pittsburgh in June, in London in September or in Providence in December!

The Wall Street Journal writes, "Sorry Stock Bulls, the 'Wall of Cash' Isn't All Headed Your Way" in its "Heard on the Street" column. They explain, "Trillions of dollars are seemingly available to move out of cash funds and be put to work in the stock market. That possibility has had stock-market bulls salivating, but they are probably in for disappointment. Despite the expectation that the Federal Reserve's next move is to cut rates, money-market-fund assets have continued to grow at a fast pace. They are now around $6.5 trillion, according to industry tracker Crane Data. While the S&P 500 is up 8% year to date, total money funds added more than $150 billion in assets through the first two months of 2024, or about $50 billion more than they did in the same period last year, according to Crane." (Note: We look forward to seeing you next week, March 25-26, at our upcoming Bond Fund Symposium in Philadelphia!)

The piece continues, "This year's rally ... has plenty of fans, but also many doubters. The fact that money has also continued to pour into their opposite, the ready cash, certainly suggests that not everyone is comfortable hopping onto the bandwagon. Yet glass-half-full types could argue that it strengthens the argument for why stocks and other risky assets have more room to run. They are probably both wrong. What seems like an obvious relationship -- investors choosing safety and stability over risk and reward -- isn't actually so straightforward."

They quote our Peter Crane, president of Crane Data, "The 'wall of cash' idea has been trotted out since we were at a trillion dollars in money funds back in the late '90s.... The fact is that cash mostly just competes with cash."

The article also says, "What is happening with money-market funds is more likely a reflection of choices about where to keep cash -- in a money fund, an account at a big bank, at a small bank, in the mattress -- rather than purely a debate about whether to invest it or not. Choosing a location for cash often has two key components: Where is it the safest, and where can it earn the highest yield? You might also call it 'fear' versus 'greed.'"

It tells us, "The banking crisis last year likely played a role in boosting allocations to money funds out of fear. Of the nearly $1.5 trillion of growth in money-fund assets since February 2022, just before 'liftoff' for interest rates, about $1.2 trillion of that has come since the end of February 2023, the eve of the collapse of Silicon Valley Bank, according to Crane. This also means that a lot of that cash isn't necessarily ticketed for possible investing. It is more likely things like companies' and households' extra liquidity that today they would just rather keep with a money-market fund than at a bank."

The Journal's Telis Demos writes, "Even if fear recedes, greed can work, too. For example, the average seven-day annualized yield on money funds is currently around 5%, versus less than 0.5% for accounts that sweep cash from brokerage accounts into banks, according to Crane's tracking."

He adds, "Some might expect that, if the Fed cuts interest rates this year, as widely expected, that will chase more cash out of money funds. But, contrary to necessarily losing their appeal, their ability to offer some duration -- the ability to lock in current rates even for a month -- can be a feature as a Fed pivot approaches. For a big investor sensitive to every tick of yield, that can take risk of a surprise cut in the short term off the table."

Finally, the brief states, "Bonds and other fixed-income securities can offer more duration or yield than money funds. Notably, though, companies with huge cash piles are still opting to be weighted toward money funds versus securities. At the end of last year, S&P 500 nonfinancial companies' cash investment portfolios hit a historical high of 57% allocated to cash and cash equivalents, according to JPMorgan Chase strategists. Money funds have a mind of their own. Stock investors might do better to look elsewhere for clues about the future direction of the market."

In other news, ICI released its latest monthly "Money Market Fund Holdings" summary, which reviews the aggregate daily and weekly liquid assets, regional exposure, and maturities (WAM and WAL) for Prime and Government money market funds. This release says, "The Investment Company Institute (ICI) reports that, as of the final Friday in February, prime money market funds held 39.4 percent of their portfolios in daily liquid assets and 58.3 percent in weekly liquid assets, while government money market funds held 78.1 percent of their portfolios in daily liquid assets and 87.3 percent in weekly liquid assets." Prime DLA was up from 39.1% in January, and Prime WLA was up from 57.9%. Govt MMFs' DLA was down from 78.7% and Govt WLA decreased from 87.9% the previous month.

ICI explains, "At the end of February, prime funds had a weighted average maturity (WAM) of 35 days and a weighted average life (WAL) of 52 days. Average WAMs and WALs are asset-weighted. Government money market funds had a WAM of 41 days and a WAL of 86 days." Prime WAMs were 2 days longer and WALs were 2 days longer from the previous month. Govt WAMs were 3 days longer and WALs were 3 days longer from January.

Regarding Holdings by Region of Issuer, the release tells us, "Prime money market funds’ holdings attributable to the Americas rose from $481.39 billion in January to $504.42 billion in February. Government money market funds' holdings attributable to the Americas rose from $4,406.65 billion in January to $4,434.18 billion in February."

The Prime Money Market Funds by Region of Issuer table shows Americas-related holdings at $504.4 billion, or 49.8%; Asia and Pacific at $173.4 billion, or 17.1%; Europe at $319.1 billion, or 31.5%; and, Other (including Supranational) at $16.9 billion, or 1.8%. The Government Money Market Funds by Region of Issuer table shows Americas at $4.434 trillion, or 89.5%; Asia and Pacific at $128.2 billion, or 2.6%; Europe at $358.9 billion, 7.2%, and Other (Including Supranational) at $30.9 billion, or 0.6%.

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 $1.242 trillion, while yields inched lower. Assets for EUR & GBP MMFs rose over the past month, while assets for USD MMFs fell. Last month, European MMF assets broke above last month's previous record high of $1.239 trillion. These U.S.-style money funds, domiciled in Ireland or Luxembourg and denominated in US Dollars, Pound Sterling and Euros, increased by $3.8 billion over the 30 days through 3/13. The totals are up $45.2 billion (3.8%) 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.)

Offshore US Dollar money funds decreased $13.0 billion over the last 30 days and are up $14.2 billion YTD to $663.7 billion; they increased $100.0 billion in 2023. Euro funds increased E10.9 billion over the past month. YTD, they're up E14.1 billion to E249.0 billion, for 2023, they increased by E54.5 billion. GBP money funds increased L4.0 billion over 30 days, and they're up L10.4 billion YTD at L245.8B, for 2023, they fell L28.1 billion. U.S. Dollar (USD) money funds (211) account for over half (53.4%) of the "European" money fund total, while Euro (EUR) money funds (117) make up 21.6% and Pound Sterling (GBP) funds (140) total 25.0%. We summarize our latest "offshore" money fund statistics and our Money Fund Intelligence International Portfolio Holdings (which went out to subscribers Thursday), below.

Offshore USD MMFs yield 5.25 (7-Day) on average (as of 3/13/24), down 2 bps from a month earlier. Yields averaged 4.20% on 12/30/22, 0.03% on 12/31/21, 0.05% on 12/31/20, 1.59% on 12/31/19 and 2.29% on 12/31/18. EUR MMFs finally left negative yield territory in the second half of 2022 but they should remain flat until the ECB moves rates again. They're yielding 3.86% on average, down 2 bps from a month ago and up from 1.48% on 12/30/22, -0.80% on 12/31/21, -0.71% at year-end 2020, -0.59% at year-end 2019 and -0.49% at year-end 2018. Meanwhile, GBP MMFs broke the 5.0% barrier 8 months ago and now yield 5.18%, down 3 bps from a month ago, and up from 3.17% on 12/30/22. Sterling yields were 0.01% on 12/31/21, 0.00% on 12/31/20, 0.64% on 12/31/19 and 0.64% on 12/31/18.

Crane's February MFI International Portfolio Holdings, with data as of 2/29/24, show that European-domiciled US Dollar MMFs, on average, consist of 25% in Commercial Paper (CP), 16% in Certificates of Deposit (CDs), 22% in Repo, 24% in Treasury securities, 12% in Other securities (primarily Time Deposits) and 1% in Government Agency securities. USD funds have on average 44.8% of their portfolios maturing Overnight, 6.0% maturing in 2-7 Days, 8.4% maturing in 8-30 Days, 11.2% maturing in 31-60 Days, 9.0% maturing in 61-90 Days, 13.0% maturing in 91-180 Days and 7.5% maturing beyond 181 Days. USD holdings are affiliated with the following countries: the US (39.9%), France (11.1%), Japan (8.9%), Canada (8.6%), Sweden (5.9%), the U.K. (5.4%), the Netherlands (3.7%), Australia (3.4%), Germany (2.7%), and Belgium (2.0%).

The 10 Largest Issuers to "offshore" USD money funds include: the US Treasury with $170.3 billion (24.0% of total assets), Fixed Income Clearing Corp with $36.9B (5.2%), Barclays PLC with $21.0B (3.0%), Credit Agricole with $17.8B (2.5%), Mizuho Corporate Bank Ltd with $17.3B (2.4%), BNP Paribas with $16.8B (2.4%), RBC with $16.7B (2.4%), Nordea Bank with $16.3B (2.3%), JP Morgan with $16.3B (2.3%) and Sumitomo Mitsui Banking Corp with $14.6B (2.1%).

Euro MMFs tracked by Crane Data contain, on average 41% in CP, 22% in CDs, 19% in Other (primarily Time Deposits), 16% in Repo, 1% in Treasuries and 1% in Agency securities. EUR funds have on average 40.0% of their portfolios maturing Overnight, 9.7% maturing in 2-7 Days, 14.1% maturing in 8-30 Days, 12.3% maturing in 31-60 Days, 7.4% maturing in 61-90 Days, 9.0% maturing in 91-180 Days and 7.4% maturing beyond 181 Days. EUR MMF holdings are affiliated with the following countries: France (31.0%), Japan (13.9%), the U.S. (10.2%), Canada (7.1%), the U.K. (6.7%), Germany (5.3%), Sweden (4.2%), Austria (4.1%), Belgium (3.9%) and the Netherlands (3.3%).

The 10 Largest Issuers to "offshore" EUR money funds include: Credit Agricole with E14.2B (6.7%), BNP Paribas with E12.7B (6.0%), Republic of France with E8.6B (4.1%), JP Morgan with E7.7B (3.7%), Mitsubishi UFJ Financial Group Inc with E7.5B (3.6%), Credit Mutuel with E7.4B (3.5%), Mizuho Corporate Bank Ltd with E7.4B (3.5%), Societe Generale with E6.3B (3.0%), Erste Group Bank AG with E6.3B (3.0%), and BPCE SA with E6.0B (2.9%).

The GBP funds tracked by MFI International contain, on average (as of 2/29/24): 39% in CDs, 18% in CP, 22% in Other (Time Deposits), 19% in Repo, 2% in Treasury and 0% in Agency. Sterling funds have on average 36.2% of their portfolios maturing Overnight, 8.8% maturing in 2-7 Days, 7.1% maturing in 8-30 Days, 13.4% maturing in 31-60 Days, 10.9% maturing in 61-90 Days, 17.1% maturing in 91-180 Days and 6.5% maturing beyond 181 Days. GBP MMF holdings are affiliated with the following countries: France (17.1%), Japan (15.7%), the U.K. (14.2%), Canada (13.4%), the U.S. (9.5%), Australia (8.2%), Sweden (4.2%), the Netherlands (3.7%), Singapore (2.8%) and Spain (2.1%).

The 10 Largest Issuers to "offshore" GBP money funds include: UK Treasury with L14.2B (6.3%), Toronto-Dominion Bank with L9.5B (4.2%), BNP Paribas with L9.5B (4.2%), Mizuho Corporate Bank Ltd with L8.9B (3.9%), Sumitomo Mitsui Banking Corp with L8.0B (3.5%), Mitsubishi UFJ Financial Group Inc with L7.9B (3.5%), Credit Agricole with L7.6B (3.4%), BPCE SA with L7.2B (3.2%), RBC with L7.1B (3.1%) and Sumitomo Mitsui Trust Bank with L6.9B (3.1%).

The March issue of our Bond Fund Intelligence, which will be sent to subscribers Wednesday morning, features the stories, "Corporate Bond Funds Get Hot, But Risks Are Rising," which follows the most recent news on investment grade funds and "EFAMA Says 2023 Big Year for Bond Funds, MMFs in Europe," which reviews recent monthly statistics on European bond funds. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund returns fell in February while yields increased. 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: Please join us for our upcoming Bond Fund Symposium, which is March 25-26 in Philadelphia!)

Our "Corporate Bond Funds Get Hot" piece states, "Corporate bonds account for just over 20% of the overall bond market vs. over a third for Treasury debt. In February, though, corporate debt was in the news with several articles published. Though they disagree on the segment's outlook, they do agree that it’s been a nice run so far. We quote from a couple below."

The piece continues, "Barron's 'Corporate Bond Funds Are Surging. What to Watch Out For' says, 'Investors are snapping up corporate bonds, enticed by higher yields and the hope that a soft economic landing means the Federal Reserve will cut interest rates. Those hopes may well be dashed. Beginning late last year, investors started to step further out on the yield curve and became more willing to take on credit risk, says Jack Fischer, senior research analyst at LSEG Lipper. As of Feb. 12, net flows into short-intermediate investment-grade debt mutual funds and exchange-traded funds this year were about $20 billion, compared with $50 billion in all of 2023.'"

Our "EFAMA" article states, "EFAMA, the European Fund and Asset Management Association, published, 'Bond funds, money market funds, and ETFs had a good year in 2023.' The summary says, 'In our latest Monthly Statistical Release, we show the following main developments in December 2023 for the European investment fund market. A first overview and analysis of the full year 2023 is also included.' Bernard Delbecque, Senior Director for Economics and Research at EFAMA, comments, 'In 2023, the high level of interest rates and the more gradual tightening stance spurred significant net inflows into money market funds and bond funds. Concurrently, net sales of actively managed equity funds experienced a lack of investor demand, whereas ETFs took the forefront in driving net sales within the equity fund landscape.'"

It states: "Thomas Tilley, Senior Economist at EFAMA, adds, 'Net sales of bond UCITS remained at a high level in December as some investors were already anticipating interest rate cuts in 2024.'"

Our first News brief, "Returns Down, Yields Inch Up in Feb.," says, "Bond fund returns declined after two months of positive returns while yields rose slightly last month. Our BFI Total Index lost 0.23% over 1-month but gained 5.45% over 12 months. The BFI 100 fell 0.51% in Feb. and rose 5.12% over 12 mos. Our BFI Conservative Ultra-Short Index was up 0.35% over 1-month and 5.58% for 1-year; Ultra-Shorts rose 0.35% and 5.93%. Short-Term fell 0.23% and rose 5.32%, and Intm-Term fell 0.90% in Feb. but rose 3.78% over 1-year. BFI’s Long-Term Index fell 1.12% but rose 4.05%. High Yield rose 0.40% in Feb. and 9.37% over 12 months."

A second News brief, "CityWire Asks, 'Are Bond Funds Back or Is It All Just Pimco Income?' The article tells us, 'Bonds are back baby, or so we've been told.... [But PIMCO's] total assets in US mutual funds and ETFs were $370.9bn at the end of January, still some way off their recent peak of $435.2bn in December 2021. Much of that decline was, of course, driven by the correction in fixed income markets over 2022, but outflows played their part too. Some of these flows have been recouped, with $8.4bn of net new money coming in over 2023, but even with that money the group is still nursing a $45bn outflow since the start of 2022.... It is also worth noting that Pimco -- despite the huge success of the Pimco Income fund... -- is still also some way off its all-time peak in mutual fund and ETFs assets; $622bn in April 2013.'"

Our next News brief, "Barron's Writes, 'These Muni Funds Sport Strikingly High Yields.' The article explains, 'Looking for tax-free returns and some of the fattest yields in the bond market? Consider funds that invest in the high-yield segment of the municipal bond market. According to BofA Securities, this is a great time to buy these bonds, which are issued by turnpike authorities, hospitals, and other state and local entities.' Jared Woodward, BofA's head of exchange-traded fund strategy, says, 'High-yield munis offer 8% to 9% yields on a tax-adjusted basis, near the highest levels since 2017, but with less default risk than high-yield corporate bonds.... You're getting more yield for less risk.' It continues, 'Woodward says that over the past year, high-yield muni ETFs suffered outflows while investors poured money into long-term Treasury bond ETFs. That may have been the wrong call.... BofA's three top-rated muni bond ETFs ... are the SPDR Nuveen Bloomberg High Yield Municipal Bond ETF (HYMB), VanEck High Yield Muni (HYD), and First Trust Municipal High Income (FMHI).'"

A BFI sidebar, "BlackRock's Rieder on BINC," says, "Barron's 'How to Earn High Income With Low Volatility in Bonds' tells us, 'Investors don’t tend to demand too much from their fixed-income portfolio. Give us a meaningful yield without too much volatility and we're happy. Recently, however, that has been too much to ask for -- not because of the yield, but because of the volatility. The MOVE Index, a measure of interest-rate volatility, has been running about twice as high over the past two years as it did during the previous two -- and at levels not seen since the 2008-09 financial crisis.'"

Finally, another sidebar, "Cash to Move to Bond ETFs?" comments, "We learned from ignites about a survey from ISS Market Intelligence titled, 'RIA Market Insights - Refining the Opportunity.' It states, 'The Retail Registered Investment Advisor (RIA) ... market has been around since the early 1990s, and it remains a source of innovation and growth in the financial advisor marketplace and a distribution opportunity for asset management firms.'"

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 Fourth Quarter 2023 edition shows that Total MMF Assets increased by $215 billion to $6.358 trillion in Q4'23. The Household Sector, by far the largest investor segment with $3.806 trillion, saw the biggest asset increase in Q4, 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 Q4 2023. (Note: There's still time to register for our Bond Fund Symposium, which is March 25-26 in Philadelphia. We hope to see you in Philly!)

Rest of World, Private Pension Funds, Exchange-traded funds, State & Local Governments and Life Insurance Companies categories saw small asset increases in Q4. The Nonfinancial Noncorporate Business category was the only one to stay unchanged and the Property-Casualty Insurance and State and local govt. retirement funds categories saw assets decreases last quarter. Over the past 12 months, the Household Sector, Other Financial Business, Nonfinancial Corporate Business, State & Local Governments, Private Pension Funds, and Exchange-traded funds categories showed the biggest asset increases, while Property-Casualty Insurance and State and local govt. retirement funds saw the biggest asset decreases.

The Fed's "Table L.206," "Money Market Mutual Fund Shares," shows that total assets increased by $215 billion, or 3.5%, in the fourth quarter to $6.358 trillion. The largest segment, the Household sector, totals $3.806 trillion, or 59.9% of assets. The Household Sector increased by $117 billion, or 3.2%, in the quarter. Over the past 12 months through December 31, 2023, Household assets were up $725 billion, or 23.5%.

Nonfinancial Corporate Businesses, the second-largest segment according to the Fed's data series, held $916 billion, or 14.4% of the total. Assets here increased by $34 billion in the quarter, or 3.9%, and they've increased by $176 billion, or 23.8%, over the past year. Other Financial Business was the third-largest investor segment with $584 billion, or 9.2% of money fund shares. This category jumped $34 billion, or 6.2%, in the latest quarter. Other Financial Business, which we believe includes Securities Lending, has increased by $179 billion, or 44.0%, over the previous 12 months.

The fourth-largest segment, Private Pension Funds held $240 billion (3.8%). Mutual Funds (a recent addition to the tables), was the 5th largest category with 3.7% of money fund assets ($235 billion); it was up by $18 billion (8.3%) for the quarter and up $8 billion, or 3.7% over the last 12 months. The Rest of World remained sixth place in market share among investor segments with 2.9%, or $183 billion, while Nonfinancial Noncorporate Business held $139 billion (2.2%), Life Insurance Companies held $83 billion (1.3%), State & Local Governments held $81 billion (1.3%), Exchange-traded Funds held $39 billion (0.6%), Property-Casualty Insurance held $33 billion (0.5%), and State & Local Govt Retirement held $19 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 $2.666 trillion, or 41.9% and "Debt Securities," or Credit Market Instruments, with $3.415 trillion, or 53.7% of the total. Debt securities includes: Open market paper ($302 billion, or 4.7%; we assume this is CP), Treasury securities ($2.270 trillion, or 35.7%), Agency and GSE-backed securities ($708 billion, or 11.1%), Municipal securities ($130 billion, or 2.0%) and Corporate and foreign bonds ($6 billion, or 0.1%).

Another large MMF position in the Fed's series includes `Time and savings deposits ($289 billion, or 4.5%). Money funds also hold minor positions in Miscellaneous assets ($-18 billion, or -0.3%) and Foreign deposits ($5 billion, 0.1%). Note: The Fed also lists "Variable Annuity Money Funds," which currently total $46 billion.

During Q4, Debt Securities were up $534 billion. This subtotal included: Open Market Paper (up $9 billion), Treasury Securities (up $502 billion), Agency- and GSE-backed Securities (up $18 billion), Corporate and Foreign Bonds (down $3 billion) and Municipal Securities (up $8 billion). In the fourth quarter of 2023, Security Repurchase Agreements were down $283 billion, Foreign Deposits were down $6 billion, Time and Savings Deposits were down by $4 billion, and Miscellaneous Assets were down $27 billion.

Over the 12 months through 12/31/23, Debt Securities were up $1.393 trillion, which included Open Market Paper (up $48B), Treasury Securities (up $1.206T), Agencies (up $128B), Municipal Securities (up $12B), and Corporate and Foreign Bonds (down $1B). Foreign Deposits (up $4 billion), Time and Savings Deposits were up $99B, Securities repurchase agreements were down $311 billion and Miscellaneous Assets were down $51B.

The L.121 table shows `Stable NAV money market funds with $5,725 billion, or 90.0% of the total (up $226.9 or 4.1% in Q4 and up $1.136 trillion or 24.7% over 1-year), and Floating NAV money market funds with $633 billion, or 10.0% (down $12.3B or -1.9% in Q4 and down $1B or -0.2% over 1-year). Government money market funds total $4.920 trillion, or 77.4% (up $159.1B or 3.3% in Q4 and up $856B or 21.1% over 1-year), Prime money market funds total $1.306 trillion, or 20.5% (up $47.7B or 3.8% in Q4 and up $266B or 25.6% over 1-year) and Tax-exempt money market funds $131B, or 2.1% (up $7.8B or 6.3% in Q4 and up $12B or 10.3% last year).

The Federal Reserve made changes to the Z.1 tables 2 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 March Money Fund Portfolio Holdings, with data as of Feb. 29, 2024, show that Repo holdings plummeted while Treasuries and Time Deposits jumped. Money market securities held by Taxable U.S. money funds (tracked by Crane Data) increased by $66.9 billion to $6.365 trillion, after increasing $86.6 in January, $51.1 billion in December and $244.0 billion in November. Assets decreased $57.9 billion in October, but increased $56.1 in September, $106.7 billion in August and $78.3 billion in July. Repo continued its steep slide, dropping $137.6 billion, after a brief rebound two months ago, falling to the No. 2 spot among portfolio segments. Treasuries increased by $206.2 billion, becoming the largest portfolio segment over Repo. The U.S. Treasury surpassed the Federal Reserve Bank of New York as the largest Issuer to MMFs six months ago. In February, U.S. Treasury holdings jumped to $2.559 trillion vs. the Fed RRP's $464.6 billion (down $118.0 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.

Among taxable money funds, Repurchase Agreements (repo) decreased $137.6 billion (-5.5%) to $2.346 trillion, or 36.9% of holdings, in February, after decreasing $163.2 billion in January and increasing $74.8 billion in December. Repo fell $20.3 billion in November, $329.2 billion in October and $84.0 billion in September. Treasury securities rose $206.2 billion (8.8%) to $2.559 trillion, or 40.2% of holdings, after increasing $104.7 billion in January, $69.6 billion in December, $250.1 billion in November, $178.1 billion in October and $164.9 billion in September. Government Agency Debt was down $6.7 billion, or -0.9%, to $731.4 billion, or 11.5% of holdings. Agencies increased $43.9 billion in January, decreased $21.8 billion in December, increased $4.4 billion in November and $36.1 billion in October, but they decreased $8.3 billion in September. Repo, Treasuries and Agency holdings now total $5.636 trillion, representing a massive 88.5% of all taxable holdings.

Money fund holdings of CDs and Time Deposits increased in February while CP fell. Commercial Paper (CP) decreased $2.1 billion (-0.7%) to $307.9 billion, or 4.8% of holdings. CP holdings increased $18.6 billion in January and decreased $14.8 billion in December. But CP increased $5.5 billion in November, $17.6 billion in October and $3.0 billion in September. Certificates of Deposit (CDs) increased $0.8 billion (0.4%) to $236.1 billion, or 3.7% of taxable assets. CDs increased $19.5 billion in January and decreased $5.4 billion in December. But CDs increased $6.9 billion in November, $11.2 billion in October and $0.5 billion in September. Other holdings, primarily Time Deposits, increased $5.7 billion (3.4%) to $173.1 billion, or 2.7% of holdings, after increasing $63.4 billion in January, decreasing $52.1 billion in December and $3.1 billion in November. VRDNs rose to $11.8 billion, or 0.2% of assets. (Note: This total is VRDNs for taxable funds only. We will post our Tax Exempt MMF holdings separately Tuesday around noon.)

Prime money fund assets tracked by Crane Data rose to $1.383 trillion, or 21.7% of taxable money funds' $6.365 trillion total. Among Prime money funds, CDs represent 17.1% (down from 17.4% a month ago), while Commercial Paper accounted for 22.2% (down from 23.0% in January). The CP totals are comprised of: Financial Company CP, which makes up 14.3% of total holdings, Asset-Backed CP, which accounts for 5.5%, and Non-Financial Company CP, which makes up 2.4%. Prime funds also hold 3.4% in US Govt Agency Debt, 16.1% in US Treasury Debt, 14.9% in US Treasury Repo, 0.3% in Other Instruments, 10.5% in Non-Negotiable Time Deposits, 5.4% in Other Repo, 7.9% in US Government Agency Repo and 0.6% in VRDNs.

Government money fund portfolios totaled $3.266 trillion (51.3% of all MMF assets), up from $3.260 trillion in January, while Treasury money fund assets totaled another $1.716 trillion (27.0%), up from $1.689 trillion the prior month. Government money fund portfolios were made up of 21.0% US Govt Agency Debt, 18.7% US Government Agency Repo, 33.1% US Treasury Debt, 27.1% in US Treasury Repo, 0.0% in Other Instruments. Treasury money funds were comprised of 73.2% US Treasury Debt and 26.8% in US Treasury Repo. Government and Treasury funds combined now total $4.982 trillion, or 78.3% of all taxable money fund assets.

European-affiliated holdings (including repo) decreased by $3.2 billion in February to $789.9 billion; their share of holdings fell to 12.5% from last month's 12.6%. Eurozone-affiliated holdings decreased to $498.3 billion from last month's $511.4 billion; they account for 7.9% of overall taxable money fund holdings. Asia & Pacific related holdings fell to $304.5 billion (4.8% of the total) from last month's $305.0 billion. Americas related holdings rose to $5.263 trillion from last month's $5.191 trillion, and now represent 83.6% of holdings.

The overall taxable fund Repo totals were made up of: US Treasury Repurchase Agreements (down $76.9 billion, or -4.7%, to $1.551 trillion, or 24.4% of assets); US Government Agency Repurchase Agreements (down $60.4 billion, or -7.7%, to $720.4 billion, or 11.3% of total holdings), and Other Repurchase Agreements (down $0.2 billion, or -0.3%, from last month to $74.8 billion, or 1.2% of holdings). The Commercial Paper totals were comprised of Financial Company Commercial Paper (down $0.8 billion to $197.8 billion, or 3.1% of assets), Asset Backed Commercial Paper (up $1.3 billion to $76.3 billion, or 1.2%), and Non-Financial Company Commercial Paper (down $2.6 billion to $33.9 billion, or 0.5%).

The 20 largest Issuers to taxable money market funds as of Jan. 31, 2024, include: the US Treasury ($2.559T, 40.2%), Federal Home Loan Bank ($603.1B, 9.5%), Fixed Income Clearing Corp ($482.5B, 7.6%), the Federal Reserve Bank of New York ($464.6B, or 7.3%), RBC ($191.6B, 3.0%), JP Morgan ($155.4B, 2.4%), Citi ($143.1B, 2.2%), BNP Paribas ($130.8B, 2.1%), Barclays PLC ($126.5B, 2.0%), Federal Farm Credit Bank ($121.0B, 1.9%), Bank of America ($112.4B, 1.8%), Goldman Sachs ($104.2B, 1.6%), Mitsubishi UFJ Financial Group Inc ($68.6B, 1.1%), Credit Agricole ($66.9B, 1.1%), Wells Fargo ($63.1B, 1.0%), Sumitomo Mitsui Banking Corp ($61.4B, 1.0%), Mizuho Corporate Bank Ltd ($51.6B, 0.8%), Canadian Imperial Bank of Commerce ($46.5B, 0.7%), Toronto-Dominion Bank ($45.4B, 0.7%) and Societe Generale ($44.6B, 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 ($482.2B, 20.6%), Federal Reserve Bank of New York ($464.6B, 19.8%), RBC ($161.8B, 6.9%), JP Morgan ($143.4B, 6.1%), Citi ($129.5B, 5.5%), BNP Paribas ($118.9B, 5.1%), Goldman Sachs ($103.8B, 4.4%), Barclays ($101.1B, 4.3%), Bank of America ($92.9B, 4.0%) and Wells Fargo ($52.3B, 2.2%). The largest users of the $464.6 billion in Fed RRP include: Vanguard Federal Money Mkt Fund ($54.9B), Fidelity Cash Central Fund ($34.6B), Fidelity Govt Money Market ($26.5B), Fidelity Inv MM: Govt Port ($24.3B), Schwab Treasury Oblig MF ($23.6B), Fidelity Sec Lending Cash Central Fund ($21.2B), Fidelity Inv MM: Treas Port ($19.1B), Federated Hermes Govt Oblig ($18.5B), Vanguard Cash Reserves Federal MM ($17.1B) and Schwab Value Adv MF ($14.0B).

The 10 largest issuers of "credit" -- CDs, CP and Other securities (including Time Deposits and Notes) combined -- include: Mizuho Corporate Bank Ltd ($36.8B, 5.7%), RBC ($29.8B, 4.6%), Credit Agricole ($27.9B, 4.3%), Barclays PLC ($25.4B, 3.9%), Mitsubishi UFJ Financial Group Inc ($25.0B, 3.9%), Australia & New Zealand Banking Group Ltd ($23.8B, 3.7%), Toronto-Dominion Bank ($22.7B, 3.5%), DNB ASA ($21.2B, 3.3%), Sumitomo Mitsui Trust Bank ($20.0B, 3.1%), and Bank of America ($19.5B, 3.0%).

The 10 largest CD issuers include: Mizuho Corporate Bank Ltd ($19.6B, 8.3%), Credit Agricole ($17.2B, 7.3%), Mitsubishi UFJ Financial Group Inc ($14.9B, 6.3%), Bank of America ($14.3B, 6.0%), Sumitomo Mitsui Trust Bank ($12.4B, 5.2%), Toronto-Dominion Bank ($12.1B, 5.1%), Wells Fargo ($10.8B, 4.6%), Sumitomo Mitsui Banking Corp ($10.7B, 4.6%), Mitsubishi UFJ Trust and Banking Corporation ($9.4B, 4.0%) and Bank of Nova Scotia ($9.1B, 3.9%).

The 10 largest CP issuers (we include affiliated ABCP programs) include: RBC ($18.4B, 6.8%), Barclays PLC ($13.2B, 4.9%), Bank of Montreal ($12.0B, 4.4%), JP Morgan ($11.9B, 4.4%), BPCE SA ($11.8B, 4.4%), Toronto-Dominion Bank ($10.4B, 3.8%), Mitsubishi UFJ Financial Group Inc ($10.2B, 3.8%), DNB ASA ($8.3B, 3.1%), National Bank of Canada ($8.1B, 3.0%) and Australia & New Zealand Banking Group Ltd ($8.1B, 3.0%).

The largest increases among Issuers include: US Treasury (up $201.9B to $2.559T), RBC (up $19.8B to $191.6B), Nordea Bank (up $9.7B to $17.3B), Fixed Income Clearing Corp (up $7.5B to $482.5B), HSBC (up $6.1B to $36.2B), Rabobank (up $4.3B to $13.6B), Toronto-Dominion Bank (up $3.5B to $45.4B), Norinchukin Bank (up $3.2B to $7.8B), Federal Home Loan Bank (up $3.1B to $603.1B) and Citi (up $2.8B to $143.1B).

The largest decreases among Issuers of money market securities (including Repo) in February were shown by: Federal Reserve Bank of New York (down $118.0B to $464.6B), Deutsche Bank AG (down $11.8B to $22.0B), BNP Paribas (down $7.9B to $130.8B), DNB ASA (down $4.1B to $21.2B), Nomura (down $4.0B to $29.0B), Goldman Sachs (down $3.7B to $104.2B), JP Morgan (down $3.1B to $155.4B), Sumitomo Mitsui Banking Corp (down $2.7B to $61.4B), Mitsubishi UFJ Trust and Banking Corporation (down $2.6B to $13.1B) and Bank of Nova Scotia (down $2.0B to $28.7B).

The United States remained the largest segment of country-affiliations; it represents 76.9% of holdings, or $4.897 trillion. Canada (5.7%, $365.7B) was in second place, while France (4.7%, $297.2B) was No. 3. Japan (4.4%, $277.5B) occupied fourth place. The United Kingdom (3.2%, $202.2B) remained in fifth place. Netherlands (1.2%, $73.3B) was in sixth place, followed by Sweden (0.9%, $58.3B), Germany (0.9%, $56.2B), Australia (0.8%, $49.7B), and Norway (0.3%, $21.6B). (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 Feb. 29, 2024, Taxable money funds held 44.5% (down from 48.9%) of their assets in securities maturing Overnight, and another 12.0% maturing in 2-7 days (up from 8.9%). Thus, 56.5% in total matures in 1-7 days. Another 10.8% matures in 8-30 days, while 11.3% matures in 31-60 days. Note that over three-quarters, or 78.6% 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 7.0% of taxable securities, while 9.1% matures in 91-180 days, and just 5.3% matures beyond 181 days. (Visit our Content center to download, or contact us to request our latest Portfolio Holdings reports.)

Crane Data's latest monthly Money Fund Portfolio Holdings statistics will be sent out Monday, and we'll be writing our regular monthly update on the new February 29 data for Tuesday'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 Friday. (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 Feb. 29, includes holdings information from 969 money funds (up 1 from last month), representing record assets of $6.546 trillion (up from $6.479 trillion). Prime MMFs now total $1.397 trillion, or 21.3% of the total. We review the new N-MFP data, and we also look at our revised MMF expense data, which shows charged expenses flat and money fund revenues seeing another jump in February. (Note: Please join us for our upcoming Bond Fund Symposium, which is March 25-26 in Philadelphia. We hope to see you in Philly!)

Our latest Form N-MFP Summary for All Funds (taxable and tax-exempt) shows Treasuries overtaking Repo as the largest type of portfolio holding in money market funds. Treasury holdings total $2.578 trillion (up from $2.377 billion), or 39.4% of all holdings, while Repurchase Agreement (Repo) holdings in money market funds now total $2.366 trillion (down from $2.497 trillion), or 36.1% of all assets. Government Agency securities total $743.5 billion (down from $750.2 billion), or 11.4%. Holdings of Treasuries, Government agencies and Repo (almost all of which is backed by Treasuries and agencies) combined total $5.687 trillion, or a massive 86.9% of all holdings.

Commercial paper (CP) totals $318.4 billion (down from $320.1 billion), or 4.9% of all holdings, and the Other category (primarily Time Deposits) totals $178.7 billion (up from $174.4 billion), or 2.7%. Certificates of Deposit (CDs) total $236.2 billion (up from $235.4 billion), 3.6%, and VRDNs account for $125.4 billion (down from $125.5 billion last month), or 1.9% of money fund securities.

Broken out into the SEC's more detailed categories, the CP totals were comprised of: $198.7 billion, or 3.0%, in Financial Company Commercial Paper; $76.6 billion or 1.2%, in Asset Backed Commercial Paper; and, $43.0 billion, or 0.7%, in Non-Financial Company Commercial Paper. The Repo totals were made up of: U.S. Treasury Repo ($1.574 trillion, or 24.0%), U.S. Govt Agency Repo ($711.0B, or 10.9%) and Other Repo ($80.4B, or 1.2%).

The N-MFP Holdings summary for the Prime Money Market Funds shows: CP holdings of $311.1 billion (down from $312.7 billion), or 22.3%; Repo holdings of $393.7 billion (down from $416.5 billion), or 28.2%; Treasury holdings of $227.4 billion (up from $177.9 billion), or 16.3%; CD holdings of $236.2 billion (up from $235.4 billion), or 16.9%; Other (primarily Time Deposits) holdings of $170.7 billion (up from $162.9 billion), or 12.2%; Government Agency holdings of $48.1 billion (up from $47.6 billion), or 3.4% and VRDN holdings of $9.6 billion (up from $8.9 billion), or 0.7%.

The SEC's more detailed categories show CP in Prime MMFs made up of: $198.7 billion (down from $199.2 billion), or 14.2%, in Financial Company Commercial Paper; $76.6 billion (up from $75.3 billion), or 5.5%, in Asset Backed Commercial Paper; and $35.8 billion (down from $38.2 billion), or 2.6%, in Non-Financial Company Commercial Paper. The Repo totals include: U.S. Treasury Repo ($209.3 billion, or 15.0%), U.S. Govt Agency Repo ($109.9 billion, or 7.9%), and Other Repo ($74.6 billion, or 5.3%).

In related news, money fund charged expense ratios (Exp%) were flat in February. Our Crane 100 Money Fund Index and Crane Money Fund Average were 0.26% and 0.37%, respectively, as of Feb. 29, 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 Friday morning, so we revised our monthly MFI XLS spreadsheet and historical craneindexes.xlsx averages file to reflect the latest expenses, gross yields, portfolio composition and maturity breakout, then.) Visit our "Content" page for the latest files.

Our Crane 100 Money Fund Index, a simple average of the 100 largest taxable money funds, shows an average charged expense ratio of 0.26%, unchanged from last month's level (but 18 bps higher than 12/31/21's 0.08%). The average is now back around the level (0.27%) it was on Dec. 31, 2019, so we estimate that funds are charging normal expenses (though they are waiving a minimal amount of fees for competitive purposes). The Crane Money Fund Average, a simple average of all taxable MMFs, showed a charged expense ratio of 0.37% as of Feb. 29, 2024, unchanged from the month prior and slightly below the 0.40% at year-end 2019.

Prime Inst MFs expense ratios (annualized) average 0.28% (down 1 bp from last month), Government Inst MFs expenses average 0.26% (down 1 bp from last month), Treasury Inst MFs expenses average 0.29% (unchanged from last month). Treasury Retail MFs expenses currently sit at 0.52%, (unchanged from last month), Government Retail MFs expenses yield 0.55% (up 1 bp from last month). Prime Retail MF expenses averaged 0.48% (unchanged from last month). Tax-exempt expenses were also unchanged at 0.40% on average.

Gross 7-day yields were lower during the month ended Feb. 29, 2024. The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 758), shows a 7-day gross yield of 5.40%, down 2 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 down 2 bps, ending the month at 5.41%.

According to our revised MFI XLS and Crane Index numbers, we now estimate that annualized revenue for all money funds is $17.070 billion (as of 2/29/24), a new all-time high. Our estimated annualized revenue totals increased from the previous record of $16.855B last month and $16.573B two months ago. Revenue levels are more than five 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 money funds continue to see inflows to start the new year.

Crane Data's latest monthly Money Fund Market Share rankings show assets increased again among most of the largest U.S. money fund complexes in February, after jumping in January. Money market fund assets rose by $50.0 billion, or 0.8%, last month to a record $6.458 trillion. Total MMF assets have increased by $171.1 billion, or 2.7%, over the past 3 months, and they've increased by $1.191 trillion, or 22.6%, over the past 12 months. The largest increases among the 25 largest managers last month were seen by Schwab, Vanguard, JPMorgan, SSGA and Federated Hermes, which grew assets by $12.2 billion, $9.8B, $8.8B, $8.6B and $8.4B, respectively. Declines in February were seen by American Funds and First American, which decreased by $9.8 billion and $7.4B, respectively. Our domestic U.S. "Family" rankings are available in our MFI XLS product, our global rankings are available in our MFI International product. The combined "Family & Global Rankings" are available to Money Fund Wisdom subscribers. We review the latest market share totals, and look at money fund yields, which were flat to slightly lower in February.

Over the past year through Feb. 29, 2024, Fidelity (up $255.5B, or 24.6%), JPMorgan (up $222.1B, or 50.1%), Schwab (up $174.9B, or 53.1%), SSGA (up $116.0B, or 88.9%) and Vanguard (up $101.6B, or 21.1%) were the `largest gainers. Fidelity, Schwab, SSGA, Vanguard and Federated Hermes had the largest asset increases over the past 3 months, rising by $54.7B, $35.8B, $33.8B, $30.9B and $26.2B, respectively. The largest declines over 12 months were seen by: Invesco (down $24.7B), Western (down $6.8B), American Funds (down $5.4B), and Goldman Sachs (down $2.3B). The largest declines over 3 months included: Goldman Sachs (down $33.5B), Invesco (down $12.8B) and Allspring (down $10.2B).

Our latest domestic U.S. Money Fund Family Rankings show that Fidelity Investments remains the largest money fund manager with $1.293 trillion, or 20.0% of all assets. Fidelity was up $3.7B in February, up $54.7 billion over 3 mos., and up $255.5B over 12 months. JPMorgan ranked second with $665.2 billion, or 10.3% market share (up $8.8B, up $7.2B and up $222.1B for the past 1-month, 3-mos. and 12-mos., respectively). Vanguard ranked in third place with $582.1 billion, or 9.0% of assets (up $9.8B, up $30.9B and up $101.6B). BlackRock ranked fourth with $510.5 billion, or 7.9% market share (up $660M, up $9.7B and up $49.4B), while Schwab was the fifth largest MMF manager with $504.4 billion, or 7.8% of assets (up $12.2B, up $35.8B and up $174.9B for the past 1-month, 3-mos. and 12-mos.).

Federated Hermes was in sixth place with $452.3 billion, or 7.0% (up $8.4B, up $26.2B and up $87.1B), while Goldman Sachs was in seventh place with $390.7 billion, or 6.0% of assets (up $8.1B, down $33.5B and down $2.3B). Dreyfus ($283.0B, or 4.4%) was in eighth place (up $6.3B, up $21.8B and up $8.2B), followed by SSGA ($246.6B, or 3.8%; up $8.6B, up $33.8B and up $116.0B). Morgan Stanley was in 10th place ($246.3B, or 3.8%; up $8.2B, down $5.9B and up $21.3B).

The 11th through 20th-largest U.S. money fund managers (in order) include: Allspring (formerly Wells Fargo) ($194.6B, or 3.0%), American Funds ($164.6B, or 2.5%), Northern ($163.0B, or 2.5%), First American ($140.9B, or 2.2%), Invesco ($134.5B, or 2.1%), UBS ($105.6B, or 1.6%), T. Rowe Price ($48.9B, or 0.8%), HSBC ($46.4B, or 0.7%), DWS ($45.4B, or 0.7%) and Western ($31.0B, or 0.5%). Crane Data currently tracks 61 U.S. MMF managers, up 1 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, Vanguard moves down to the No. 4 spot and Goldman Sachs moves up to No. 5. Schwab moves down 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 and SSGA moves down to the No. 10 spot<b:>`_. 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 ($1.306 trillion), JP Morgan ($910.2B), BlackRock ($753.5B), Vanguard ($582.1B) and Goldman Sachs ($536.7B). Schwab ($504.4B) was in sixth, Federated Hermes ($463.8B) was seventh, followed by Morgan Stanley ($332.6B), Dreyfus/BNY Mellon ($306.8B) and SSGA ($292.2B), 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 March issue of our Money Fund Intelligence and MFI XLS, with data as of 2/29/24, shows that yields were flat to down slightly in February across the Crane Money Fund Indexes. The Crane Money Fund Average, which includes all taxable funds covered by Crane Data (currently 758), was 5.04% (down 2 bps) for the 7-Day Yield (annualized, net) Average, the 30-Day Yield was down 2 bps at 5.04%. The MFA's Gross 7-Day Yield was at 5.41% (down 2 bps), and the Gross 30-Day Yield also was down 2 bps at 5.41%. (Gross yields will be revised Monday at noon, though, once we download the SEC's Form N-MFP data for 2/29/24.)

Our Crane 100 Money Fund Index shows an average 7-Day (Net) Yield of 5.15% (down 2 bps) and an average 30-Day Yield at 5.15% (down 2 bps). The Crane 100 shows a Gross 7-Day Yield of 5.41% (down 2 bps), and a Gross 30-Day Yield of 5.41% (down 2 bps). Our Prime Institutional MF Index (7-day) yielded 5.22% (down 3 bps) as of Feb. 29. The Crane Govt Inst Index was at 5.11% (down 1 bp) and the Treasury Inst Index was at 5.09% (down 1 bp). Thus, the spread between Prime funds and Treasury funds is 13 basis points, and the spread between Prime funds and Govt funds is 11 basis points. The Crane Prime Retail Index yielded 5.05% (down 3 bps), while the Govt Retail Index was 4.83% (down 2 bps), the Treasury Retail Index was 4.85% (down 1 bp from the month prior). The Crane Tax Exempt MF Index yielded 2.93% (down 92 bps) as of February.

Gross 7-Day Yields for these indexes to end February were: Prime Inst 5.51% (down 3 bps), Govt Inst 5.37% (down 2 bps), Treasury Inst 5.37% (down 1 bp), Prime Retail 5.53% (down 3 bps), Govt Retail 5.37% (down 2 bps) and Treasury Retail 5.37% (down 1 bp). The Crane Tax Exempt Index fell to 3.32% (down 92 bps). The Crane 100 MF Index returned on average 0.41% over 1-month, 1.29% over 3-months, 0.84% YTD, 5.08% over the past 1-year, 2.37% over 3-years (annualized), 1.84% over 5-years, and 1.22% over 10-years.

The total number of funds, including taxable and tax-exempt, was up 1 in February at 879. There are currently 758 taxable funds, up 3 from the previous month, and 121 tax-exempt money funds (down 2 from last month). (Contact us if you'd like to see our latest MFI XLS, Crane Indexes or Market Share report.)

The March issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Thursday morning, features the articles: "WisdomTree, XD Attempt Digital, Blockchain MMFs," which covers new money funds using blockchain technology; "FSB Reviews Global Money Fund Reforms; FHI's 10-K," which quotes from the regulatory discussion outside the U.S.; and, "Examining the Shift in Fed Repo to T-Bills, Other Repo," which reviews the dramatic shift in MMF portfolios. We also sent out our MFI XLS spreadsheet Thursday a.m., and we've updated our Money Fund Wisdom database with 2/29/24 data. Our March Money Fund Portfolio Holdings are scheduled to ship on Monday, March 11, and our March Bond Fund Intelligence is scheduled to go out on Thursday, March 14. (Note: Register ASAP for our Bond Fund Symposium, which is March 25-26 in Philadelphia. We hope to see you in Philly!)

MFI's "WisdomTree, XD" article says, "A pair of money market mutual fund attempting to use blockchain technology have launched recently. WisdomTree Government Money Market Digital Fund and XD Treasury Money Market Fund join Franklin OnChain US Govt Money Fund, which launched in 2019, in what appear to be experiments attempting to take advantage of the buzz surrounding digital assets and currencies."

"WisdomTree says on its website, "Why WTGXX? Provide investors a high level of current income consistent with the preservation of capital and liquidity and the maintenance of a stable net asset value through investments in short-term government securities. It has a 0.25% expense ratio and only a $1 minimum to invest. Shares will be secondarily recorded using on-chain recordkeeping on the Stellar or Ethereum blockchain. The Fund will not directly or indirectly invest in any assets that rely on blockchain technology, such as cryptocurrencies. The Fund uses blockchain technology to maintain a secondary record of its shares. The Fund will be available exclusively through the WisdomTree Prime financial app."

We write in our FSB Reviews article, "A press release titled, 'FSB review finds uneven implementation of money market fund reforms,' tells us, 'The Financial Stability Board (FSB) ... published its 'Thematic Review on Money Market Fund (MMF) Reforms.' The review takes stock of the measures adopted or planned by FSB member jurisdictions in response to the 2021 FSB report, Policy Proposals to Enhance MMF Resilience. The review does not assess the effectiveness of those policy measures in addressing risks to financial stability, as this will be the focus of separate follow-up work by the FSB in 2026.'"

It tells us, "Their release claims, 'The main MMF vulnerability identified by jurisdictions is the mismatch between the liquidity of fund asset holdings and the redemption terms offered to investors, which makes MMFs susceptible to runs from sudden and disruptive redemptions. To address vulnerabilities, the 2021 FSB report provided a menu of policy options including: imposing on redeeming investors the cost of their redemptions; enhancing the ability to absorb credit losses; addressing regulatory thresholds that may give rise to cliff effects; and reducing liquidity transformation.'"

Our "Examining the Shift" piece states, "Looking back over the past 12 months, the shift in money market fund holdings from Fed repo into T-bills has been massive. On Jan. 31, 2023, taxable money funds held $1.974 trillion in repo with the Fed, which rose to over $2.211 trillion in March 2023, but has since declined to $582.6 billion on 1/31/24. Treasury holdings rose from $1.051 trillion a year earlier to $2.357 trillion over this time."

It continues, "The Wall Street Journal writes that, 'Treasury Markets Are Losing Their Shock Absorber.' They explain, 'Participation is dwindling in a Federal Reserve program that has helped the U. S. government limit its borrowing costs, a development that many investors say presages higher interest rates and larger swings in the $26 trillion Treasury market. The overnight reverse repurchase facility, known on Wall Street as reverse repo, enables large financial firms such as money-market funds to briefly swap extra cash for high-quality securities on the central bank's balance sheet and pocket some interest. The Fed program has been used heavily in recent years, at one point hitting $2.5 trillion of daily balances, but that number has shrunk steadily and recently fell below $500 billion.'"

MFI also includes the News brief, "MMF Assets Hit Record $6.459 Tril." It states, "Money market mutual fund assets rose another $50.0 billion in February to a record $​6.​471 trillion. Over the past 12 months, money funds have risen a massive $​1.203 trillion, or 22.​8%, with Retail MMFs rising by $​568.2 billion (32.5%) and Inst MMFs rising by $​628.5 billion (18.58%). ICI's separate (and smaller) weekly series shows assets rising $49.9 billion last week to a record $6.059 trillion."

Another News brief, "JPM Looks at Corporate Cash, MMFs," quotes J.P. Morgan's latest 'Short- Term Market Outlook and Strategy,' which features a brief titled, 'Corporates are keeping more cash in their portfolios.' It says, "JPM's update shows the cash investment portfolios of the `5 largest tech companies -- AAPL, META, AMZN, MSFT and GOOG -- with $80.6 billion in money market funds."

A third News brief, "Feb. Portfolio Holdings: Plunge in Repo, Jump in Treasury. Our latest Money Fund Portfolio Holdings statistics show that Repo holdings plummeted while Treasuries, Time Deposits and Agencies jumped. Repo continued its steep slide, dropping $163.2 billion, after a brief rebound the month prior; it remains the largest portfolio segment. Treasuries increased by $104.7 billion, still ranking in the No. 2 spot, but barely. Agencies were the third largest segment, CP remained fourth, ahead of CDs, Other/Time Deposits and VRDNs."

A sidebar, "Bloomberg on Wall of Cash," says, "Bloomberg writes, '`A $6 Trillion Wall of Cash Is Holding Firm as Fed Delays Cuts.' It says, 'Investors are plowing billions into money-market funds by the day .... For an asset class that many market prognosticators all but left for dead to start the year, there’s still plenty of life left in cash. Investors have added $128 billion to US money-market funds since the start of the year, ICI data show.... It's a stark contrast to just a couple of months ago, when one of the hottest questions on Wall Street was where investors would redeploy all their cash holdings once the Federal Reserve started cutting rates.'"

Our March MFI XLS, with February 29 data, shows total assets increased $50.0 billion to a record $6.459 trillion, after increasing $87.0 billion in January, $24.5 billion in December and $219.8 billion in November. Assets decreased $39.3 billion in October, but increased $77.8 billion in September, $104.2 billion in August, $21.0 billion in July, $20.3 billion in June, $152.7 billion in May, $56.5 billion in April and $345.1 billion in March."

Our broad Crane Money Fund Average 7-Day Yield was down 2 bps to 5.04%, and our Crane 100 Money Fund Index (the 100 largest taxable funds) was down 2 bps to 5.15% in February. On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA and the Crane 100 both averaged 5.41%. Charged Expenses averaged 0.37% and 0.26% for the Crane MFA and the Crane 100. (We'll revise expenses on Friday once we upload the SEC's Form N-MFP data for 2/29/24.) The average WAM (weighted average maturity) for the Crane MFA was 38 days (unchanged from previous month) and the Crane 100 WAM was up 1 bp at 39 days. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)

The Banker recently published a story titled, "Uninsured deposits could pose a threat to financial stability," which is subtitled, "Nearly a year on from SVB's demise, regulators are still asking whether deposit insurance schemes are fit for purpose." It states, "The failure of Silicon Valley Bank in March 2023 has been described as a textbook case of a bank run. While bank runs have always been a feature of banking history, SVB's case brought into focus how highly concentrated business models and overreliance on uninsured deposits in banking can pose risks to financial stability. Both of these issues represented key vulnerabilities at SVB. Of the bank's total deposits, 93.8 percent were uninsured, according to S&P Global Market Intelligence data as of year-end 2022. It mostly served clients in the tech sector. While SVB was an outlier in terms of its business strategy, to what extent could similar vulnerabilities affect other banks in the future?"

The piece quotes Gerald Epstein, professor of economics at the University of Massachusetts Amherst, "There is [an ongoing] discussion in the US about how to manage the huge pools of cash that technology firms hold in reserve. It's a really fragile part of the international financial system because this cash can just run on a moment's notice. Beyond what's covered by deposit insurance, who should be responsible for maintaining the security of this?" It tells us, "A 2023 Moody's report looked at the total cash held by 962 US non-financial public companies and found that, of the sectors examined, tech accounted for the highest amount with 34 percent, followed by healthcare and pharmaceuticals with 9 percent, and services with 8 percent."

The Banker says, "As low interest rates propelled growth at venture capital and technology firms, SVB expanded as well. Between 2019 and 2021, the bank tripled in size as it benefited from rapid deposit inflows, according to a 2023 note from the US Federal Reserve. SVB was reliant on huge amounts of deposits from a very tight-knit community. 'This is an industry based on social connections and herd behaviour. It seems [venture capitalists] got their money out first and then told their portfolio companies to get out [of SVB],' says Hilary J. Allen, professor of law at the American University Washington College of Law."

It explains, "Following SVB's demise, some institutions have begun to look at deposit insurance more closely. The growth of uninsured deposits has increased the exposure of the banking system to bank runs, admitted the FDIC in a 2023 report. At its peak in 2021, the proportion of uninsured deposits in the banking system was 46.6 percent, higher than at any time since 1949. 'Large concentrations of uninsured deposits, or other short-term demandable liabilities, increase the potential for bank runs and can threaten financial stability,' reads the report."

It adds, "Moreover, there is evidence that uninsured depositors have become de facto insured, generating moral hazard. Over the past 15 years, uninsured depositors have experienced losses in only 6 percent of US bank failures, resulting in at least $45bn in additional resolution expenses, according to a paper by Michael Ohlrogge, associate professor at NYU School of Law. This has turned deposit guarantee schemes on their head, as they were conceived as protection for consumers and households, rather than large companies or investors. In 2023, the FDIC and Federal Reserve exceptionally extended protection to uninsured depositors at SVB as the bank saw remarkable deposit outflows."

In other news, an old SEC filing for Hewitt Series Trust tells us, "[T]he Hewitt Series Trust ... and its sole series, the Hewitt Money Market Fund ... will be rebranded. On that date, all references in the prospectus and Statement of Additional Information to 'Hewitt Series Trust' as the name of the Trust will be replaced with 'Alight Series Trust' or 'Alight Series Trust (formerly known as Hewitt Series Trust)', and all references in the prospectus and Statement of Additional Information to 'Hewitt Money Market Fund' will be replaced with 'Alight Money Market Fund' or 'Alight Money Market Fund (formerly known as Hewitt Money Market Fund)'. There are no other changes to the Trust or the Fund."

Another filing for Federated Hermes New York Municipal Cash Trust says, "On February 15, 2024, the Board of Trustees of Federated Hermes Money Market Obligations Trust approved amending the principal investment strategies of Federated Hermes New York Municipal Cash Trust ... to permit the Fund to regularly invest in securities subject to the federal alternative minimum tax (AMT), rather than invest in such securities on an exception basis. This change is effective on May 6, 2024. As a result of the change, interest from the Fund's investments and the Fund's distributions to shareholders may be subject to AMT. Additionally, the Fund may have enhanced liquidity and diversification as a result of an expanded universe of investment opportunities."

Finally, the Public Funds Investment Institute says, "Illinois LGIP Could Open a Pool for Non-Profits." The brief explains, "The Illinois Treasurer is seeking authority to create a local government investment pool for non-profit organizations. Senate Bill 3157 (and an identical bill in the House) would authorize a Non-Profit Investment Pool to operate in a manner similar to the Illinois Public Treasurer's Pool (Illinois Funds), the $19 billion state-sponsored LGIP."

It tells us, "A background memo in support of the legislation notes that the proposed fund would be 'identical' to the Illinois Funds pool which operates like a Securities and Exchange Commission Rule 2a-7 money fund, although it is not registered as a mutual fund under Federal securities laws. According to the memo the pool would 'fill a gap for medium sized non-profit organizations and would provide an investment option for hundreds of Illinois organizations.'" (Note: Crane Data's Peter Crane will be presenting at next week's Government Investment Officer's Association (GIOA) conference in Las Vegas. We hope to see you there!)

J.P. Morgan's latest "Short-Term Market Outlook and Strategy" features a brief titled, "Corporates are keeping more cash in their portfolios." They write, "Based on balance sheet data from S&P 500 non-financial companies, we estimate corporate cash investment portfolios registered $2.3tn as of 4Q23. This is a year-over-year increase of $125bn, though still below the peak of $2.4-2.5tn observed shortly after the March Covid crisis. Even with lower portfolio balances relative to the Covid-era, it is notable that the amount of cash and cash equivalents held as a percentage of aggregate cash portfolios stood at 57% at YE23, surpassing the prior peak in 2020 when there was a dash for cash.... We are clearly not in any sort of crisis right now, which only underscores corporates' preference for cash in the current interest rate environment. As the $1tn rise in MMF AUMs last year demonstrated, market participants have a strong desire to park cash in MMFs."

The piece says, "Meanwhile, the amount allocated to investment securities declined to ~43%. Interestingly, the split between short-term and long-term securities continues to hover around 50/50, though there was a slight uptick to long-term investments in the latter part of 2023.... In combination with the increase in exposure to cash and cash equivalents, this might suggest corporates are barbelling their cash investment portfolios, as they try to capture high yields at the very short end of the money markets while also trying to lock in yields further out the curve before the Fed cuts."

JPM explains, "As far as where corporates allocate their cash, a more granular look at the cash investment portfolios of five of the largest tech corporations* (representing ~23% of corporate cash) shows that their greatest exposure is to corporate debt securities, followed closely by U.S. government and agency securities, and then MMFs.... However, among these three asset classes, only MMFs showed an increase in balances year-over-year, reinforcing the notion that corporates are shifting towards cash and cash equivalents and away from securities."

A table in JPM's update shows the cash investment portfolios of the 5 largest tech companies -- AAPL, META, AMZN, MSFT and GOOG -- with $80.6 billion in Money market funds, $69.6B in "Cash", $135.9B in U.S. government and agency securities, $17.6B in Non-U.S. government securities, $7.3B in Time deposits and CDs, $5.9B in Commercial paper, $146.9B in Corporate debt securities, $42.4B in Mortgage-backed and asset-backed securities, $1.8B in Other debt securities and $22.6B in Equity investments for a total of $530.1B.

In other news, Federated Hermes published, "Markets heed data, not Fed Speak" in their latest monthly commentary. They write, "Robust GDP and employment figures, sticky wage, consumer and producer inflation, and respectable manufacturing and housing numbers did what the policymakers could not. In late December, futures contracts predicted upward of seven quarter-point cuts in 2024. Following the bump in month-over-month core PCE in January, they have priced in essentially three--in line with Fed projections. That's why we -- and really everyone -- anticipates no rate action at the mid-March or early May policy-setting meetings and expect the first ease to come in June or July."

Federated continues, "[T]he shift in sentiment, along with the pause itself, has benefited cash managers and investors. Across the liquidity industry, elevated yields and extended average maturities have created better relative value in our humble opinion. This means the street can worry about something else, and the Fed's balance sheet and Reverse Repo Facility fit that bill. The latter is actually a good sign. The sharp reduction in its use does not mean the supply of collateral or repo is too low, but that it is coming from traditional dealers instead of the Fed. Once above $2 trillion, the Fed is accepting around $570 billion recently, and we think it will hover even lower than that for the near future."

They comment, "The pace and ramifications of quantitative easing also should not spark concern. It's been so long since it’s been a focus, my guess is more than a few have forgotten the exact numbers ($95 billion in government securities, split between $60 billion in Treasuries and $35 billion in agency mortgage back securities) rolling off each month. The balance sheet had ballooned to $8.9 trillion but sits at around $7.6 trillion now. The point of contention is that it will shrink too far, lowering reserves and reducing market liquidity. In the back of the policymakers' collective mind is to avoid a spike in overnight rates like what occurred in September 2019. This should not happen."

On pending "Money market rules," Federated reminds us, "The next compliance implementation stage of the SEC's 2023 money market regulations arrives on April 2. With this date comes an increase in requirements for liquid assets among other less-monumental changes. Money funds will have to maintain at least 25% in daily liquid assets (previously 10%) and at least 50% in weekly liquid assets (previously 30%). Tax-exempt money funds are not subject to the daily requirement. We, and likely any firm in the liquidity business, have been stress-testing funds to prepare and are quite satisfied with the results that sufficient liquidity will be maintained in even the worst-case scenarios. Of note is that the recent flattening of the short end of the money market yield curves likely means this shift won't be very punitive on prime money fund yields. That's because the difference between yields on weekly securities and those on the longer end of the liquidity yield curve has diminished."

Finally, they state, "It's Monetary March Madness as most of the world's central banks will hold policy-setting meetings in the coming weeks. That includes the Bank of England, Bank of Japan, European Central Bank, Bank of Canada and, of course, the Fed. None have changed rates this year and are unlikely to this month. With the exception of Japan, officials are mimicking the Fed in delighting that inflation has fallen while acknowledging it must decline further before cutting rates. For some, the bigger news is the announcement the U.K. will issue banknotes featuring the image of King Charles III in June."

A press release titled, "XD Fund Advisor Introduces XD Treasury Money Market Fund, Seeking to Deliver Capital Preservation and Income Opportunities," explains, "XD Fund Advisor, an emerging mutual fund management start-up established in 2023, proudly announces the launch of the XD Treasury Money Market Fund. This innovative fund brings two distinctive share classes to investors: Institutional Class (IXDXX) and Investor Class (VXDXX)." (For more on Digital or Blockchain MMFs, see our Feb. 26 News, "WisdomTree Launches Digital Govt MMF; Tradias Tokenizes First Euro MF.)

It continues, "The XD Treasury Money Market Fund is strategically crafted to align with the objectives of investors seeking income consistent with capital preservation and liquidity. Operating as a "Government Money Market Fund" under Rule 2a-7 of the Investment Company Act of 1940, the Fund allocates at least 99.5% of its total assets to U.S. government securities, fully collateralized repurchase agreements, cash, and/or other money market mutual funds operating as Government Money Market Funds."

The release says, "Led by Chief Portfolio Manager Scott Riecke, the Fund is committed to risk management, ensuring adherence to requirements related to maturity, credit quality, and portfolio liquidity. For additional information about the XD Treasury Money Market Fund, please refer to the prospectus dated February 9, 2024, which can be found at or by calling (833) 993-9200."

It adds, "XD Fund Advisor LLC is a Securities and Exchange Commission registered investment advisor, and a Delaware limited liability company that was founded on June 20, 2023. The firm is located in Windsor Locks, Connecticut. XD is a wholly-owned subsidiary of NetXD Inc., a financial-technology company." (See the fund's N1-A registration here.)

In other news, Bloomberg writes on Euro money funds in, "BNP Clients Are Piling ESG Billions Into Money Market Funds." It states, "BNP Paribas Asset Management says ESG clients have been piling into money market funds, drawn by the allure of stable returns in cash-like instruments. There's 'lots of cash' to move around and clients are reacting to 'the volatility of the market in general,' said Thibault Malin, an investment specialist at the fund management arm of Europe's biggest bank. The development coincides with an historic retreat from the more traditional ESG fund market, which has been plagued by lackluster returns."

The article tells us, "Combined with the uncertain outlook for global interest rates, ESG investors have been allocating an ever larger chunk of their money to low-volatility, highly liquid funds. At BNPP AM, assets in money market funds climbed 33% last year to just over €105 billion ($114 billion), with a further €5 billion of inflows in January, Malin said. The vast majority of that was new money going into 12 open-ended funds registered as Article 8, which means they promote environmental, social and governance goals under EU rules."

Bloomberg writes, "BNPP AM's top-performing money market funds currently yield close to 3.8%, according to data compiled by Bloomberg. The current yield on Germany's 10-year bond is about 2.5%. The growing popularity of money funds among sustainable investors feeds into an ongoing debate around what can rightly be called ESG. Morningstar Inc, for example, doesn't include money funds in its ESG analysis. The market researcher says the inclusion of such products in its data would 'distort' the picture because of their cash-like nature."

They say, "For its money funds, BNPP AM says it invests mostly in short-term debt issued by financial institutions with high ESG scores that are included in an ESG index. Among issuers whose securities are held in the asset manager's funds are Barclays Plc, Credit Agricole SA, Sumitomo Mitsui Banking Corp., ING Groep NV and Standard Chartered Plc. Malin said that the average ESG score of the portfolio needs to be above that of its investment universe."

The article adds, "Globally, assets in money funds with an ESG label climbed 11% last year to $1.4 trillion, according to figures compiled by the Association for Financial Markets in Europe. The increase helped erase losses of as much as 32% in other ESG fund strategies and boosted the overall market by 8.7%, the data show. And while Morningstar data show that the global ESG market suffered its first outflows in the fourth quarter of last year, led by a US exodus, the picture looks different when money funds are included."

Finally, it says, "'Investors are more comfortable with having more cash and particularly with cash that pays much more today than what it used to,' says Malin. However, the ESG commercial paper market remains dwarfed by other instruments carrying the label, and that represents 'a big constraint' for how big the ESG money market can grow, he said. 'Clear guidance' on issuance is lacking, according to a January paper co-authored by Citigroup Inc. and the law firm Mayer Brown. As a result, 95% comes from companies that already have ESG-labeled debt. Still, offerings are likely to increase as 'ESG factors are becoming more important in investors' decision-making processes,' according to the paper."

Money market mutual fund assets leapt $49.9 billion to a record $6.059 trillion after inching lower the previous two weeks, according to ICI's latest weekly "Money Market Fund Assets" report. After their phenomenal $1.15 trillion increase in 2023, MMF assets are up by another $172 billion, or 3.6%, year-to-date in 2024 (through 2/28/24), with Institutional MMFs up $93 billion, or 3.0% and Retail MMFs up $79 billion, or 4.7%. Over the past 52 weeks, money funds have risen a massive $1.165 trillion, or 23.8%, with Retail MMFs rising by $556 billion (30.7%) and Inst MMFs rising by $609 billion (19.8%). (Note: Register soon for our Bond Fund Symposium, March 25-26 in Philadelphia. We hope to see you in Philly!)

The weekly release says, "Total money market fund assets increased by $49.86 billion to $6.06 trillion for the week ended Wednesday, February 28, the Investment Company Institute reported. Among taxable money market funds, government funds increased by $45.73 billion and prime funds increased by $5.50 billion. Tax-exempt money market funds decreased by $1.37 billion." ICI's stats show Institutional MMFs rising $46.9 billion and Retail MMFs rising $3.0 billion in the latest week. Total Government MMF assets, including Treasury funds, were $4.918 trillion (81.2% of all money funds), while Total Prime MMFs were $1.021 trillion (16.9%). Tax Exempt MMFs totaled $119.2 billion (2.0%).

ICI explains, "Assets of retail money market funds increased by $2.97 billion to $2.37 trillion. Among retail funds, government money market fund assets increased by $2.00 billion to $1.53 trillion, prime money market fund assets increased by $1.88 billion to $729.22 billion, and tax-exempt fund assets decreased by $908 million to $108.24 billion." Retail assets account for over a third of total assets, or 39.1%, and Government Retail assets make up 64.7% of all Retail MMFs.

They add, "Assets of institutional money market funds increased by $46.88 billion to $3.69 trillion. Among institutional funds, government money market fund assets increased by $43.73 billion to $3.39 trillion, prime money market fund assets increased by $3.61 billion to $291.76 billion, and tax-exempt fund assets decreased by $459 million to $10.99 billion." Institutional assets accounted for 60.9% of all MMF assets, with Government Institutional assets making up 91.8% of all Institutional MMF totals.

According to Crane Data's separate Money Fund Intelligence Daily series, money fund assets have risen by $77.1 billion in February to a record $6.471 trillion. Assets rose $93.9 billion in January, $32.7 billion in December and $226.4 billion in November. MMF totals fell by $31.9 billion in October. They rose $93.9 billion in September, $98.3 billion in August and $34.7 billion in July. Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data, so they're over $400 billion lower than Crane's asset series.

In other news, Financial Planning writes "Morgan Stanley wealth head sets eyes on trillions sitting in money markets," It explains, "Morgan Stanley sees huge piles of wealth sitting in money markets and high-yield savings accounts and wants to have a big part in managing it when falling interest rates undermine the appeal of those investments. Money markets and high-yield accounts are just two sources Morgan Stanley is looking to as it pursues its twin goals of eventually having $10 trillion under management and a pre-tax profit margin of 30% from managing clients' wealth and assets, according to Jed Finn, the recently appointed head of the firm's wealth management business."

Finn comments, "We know that our clients are holding cash balances outside of Morgan Stanley, sitting in savings accounts, sitting in money market funds, getting a really nice yield while they're waiting for a catalyst."

The article continues, "More than $6 trillion dollars are now estimated to be in cash proxies like money markets, which typically pay slightly higher rates than savings accounts. Getting even a piece of that total would push Morgan Stanley toward its goal of having $10 trillion under management, up from roughly $6.6 trillion today. 'I think everybody knows the story pretty well,' Finn said. 'The highest yielding cash environment in 15 years has attracted clients' excess cash.'"

Financial Planning writes, "But Tim Welsh, the CEO of the industry consulting firm Nexus Strategy, questioned whether the small predicted decrease in interest rates would be enough to encourage clients to move their cash off the sidelines. He noted that one of the reasons investors are attracted to money markets is their tendency to be far more stable than stocks or other investment assets. 'Of course, cash used to be trash,' Welsh said. 'But now that anybody can get a nice 4% or 5% yield, it's going to take some very drastic moves to get someone to reallocate those assets.'"

They quote, "Peter Crane, the president of Crane Data and the publisher of the Money Fund Intelligence newsletter, said the main reason investors have been moving cash into money market funds hasn't been fears of stock market instability. Rather, it's because the yields on regular bank accounts have been hovering around 1%. 'It didn't come from the stock markets, so what makes Wall Street think it's going to go back into the stock market?' said Crane, whose firm tracks money markets. 'Historically,' he added, 'cash competes with cash.'"

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