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The New York Times writes "Money Market Funds and C.​D.​s Show Signs of Life." The article explains, "Benign neglect has been a rational approach to managing cash since the financial crisis. It made little sense to apply any elbow grease searching for yields when options ranged from earning nothing to earning next to nothing. But with last month'​s rise in the Federal Reserve'​s target interest rate and the expectation that there could be three rate increases this year, money market mutual funds are showing signs of life. "We are heading to 1 percent yields, and the bleeding edge of cash could touch 2 percent in 2017," said Peter G. Crane, the publisher of Money Fund Intelligence. Modest, you say? Well, modest gains may be especially appealing given recent bond losses. In the fourth quarter, core bond funds, the go-​to diversification tool for most investors, fell 3 percent, as rising yields pushed down bond prices. If you'​re inclined to seek out even more stability in a money market mutual fund now that yields are resuscitating, make sure you understand recent changes in the rules that govern how some funds operate." It adds, "Shareholders may find these fees and gates quite unappealing; the fund industry certainly does. It is afraid that the changes will scare off investors. That'​s why most fund companies and brokerages have switched their default money market fund for retail clients from a prime fund to a government fund. Government funds invest in extremely liquid government debt, adding safety and liquidity, and these funds don'​t have redemption fees or gates. But government money market funds have a downside: lower yields. The largest retail money market fund, now called Fidelity Government Cash Reserves (​it was a prime money market fund known as Fidelity Cash Reserves until the company changed the fund'​s mandate), yielded just 0.​13 percent in early January."

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The January issue of Crane Data'​s Bond Fund Intelligence, which was sent out to subscribers Monday, features the lead story, "BFI Turns 2; Top Stories & Funds in '​16; Outlook for '​17," which reviews the top stories and funds of 2016, and it features the profile, "Invesco'​s Tony Wong Talks Credit, Bond Fund Lineup," an interview with Invesco Fixed Income'​s Head of Global Credit Research & Liquidity. Also, we recap the latest Bond Fund News, including yield increases in December and a rebound in flows in late December and January. BFI also includes our Crane BFI Indexes, which showed increases in December. We excerpt from the latest BFI below. (​Watch for more excerpts from our Invesco profile later this month on www.​cranedata.​com, and contact us if you'​d like to see a copy of our latest Bond Fund Intelligence and BFI XLS.)

Our lead Bond Fund Intelligence story says, "Bond Fund Intelligence officially launched two years ago, and our monthly newsletter on bond mutual funds continues to expand its coverage and content While our initial focus was, and continues to be, on ultra-​short and short-​term bond funds, we'​ve expanded our news and performance tracking to include the entire spectrum of fixed-​income funds. Below, we review BFI'​s mission, the major events and top-​performers of the past year, and the outlook for 2017."

It continues, "BFI'​s mission is to bring affordable and comprehensive news and statistics coverage to the bond fund investment community. In our first issue, we began tracking about 200 bond funds, but by December 2015 we were tracking 359 funds, totaling $​1.​663 trillion in assets -- about half the market. Over the past year, we'​ve grown our collection to 489 funds and $​2.​096 trillion in assets. We'​ll continue to gradually add funds, refine and expand our collection of data points, and move towards launching a database and daily product in the coming year. We'​ll also launch our first Crane'​s Bond Fund Symposium, March 23-​24, 2017, in Boston."

BFI'​s Invesco Profile says, "This month, Bond Fund Intelligence interviews Tony Wong, Invesco'​s Head of Global Credit Research & Liquidity. Invesco manages over $​201.​7 billion in bond fund assets and another $​78.​3 billion in money markets. We ask Wong about the manager'​s latest challenges and strategies, and he explains why recent concerns over the bond market are overstated. Our Q&​A follows."

The profile asks about Invesco'​s history, and Wong responds, "We'​ve been in the U.​S. bond mutual fund business since the '​70'​s and liquidity since the '​80'​s. As a global fixed income house, we have a broad range of asset class solutions and capabilities for both institutional and retail markets.... Personally I'​ve been with the firm for 20 years now. I started as a research analyst ... and eventually moved into my current role of overseeing our global credit research platform as well as business oversight of our global liquidity franchise."

A Bond Fund News brief entitled, "Bond Fund Returns Rebound in December; Yields Rise on Fed Hike," explains, "Returns rose across most of the Crane BFI Indexes. Our BFI Total Index averaged a 1-​month return of 0.​51% and gained 3.​71% in 2016. The BFI 100 had a return of 0.​50% in Dec. and rose 4.​55% for the year. The BFI Conservative Ultra-​Short Index returned 0.​07% and was up 1.​09% in '​16; the BFI Ultra-​Short Index had a 1-​month return of 0.​14% and 1.​37% for the year. Our BFI Short-​Term Index returned 1.​80% and 2.​41% for the month and year. The BFI High Yield Index increased 1.​56% in Dec. and is up 12.​19% in 2016. (​See p. 8+ or BFI XLS for more return data.)"

Another brief, entitled, "WSJ on Active vs. Passive & Fee Cuts," explains, "`​The Wall Street Journal writes, "Investors Leave Active Funds Despite Fee Cuts." It says, "Those stock and bond pickers that cut mutual-​fund fees most aggressively in 2016 are the ones that continue to lose clients to lower-​cost rivals. The average asset-​weighted fee for actively managed stock mutual funds fell by 4.​8% in 2016 ... according to Morningstar. Meanwhile the average asset-​weighted fee for actively managed bond funds fell more than 6%."

Yet another brief comments, "Bank of America Merrill Lynch Strategist Hans Mikkelsen writes, "The return of bond inflows. Last week (​ending on January 4th) saw the first inflow to rate-​sensitive fixed-​income funds and ETFs since the US election. Flows follow returns, and the jump higher in interest rates following the elections in November has generated seven consecutive weeks of outflow from fixed income.... Similarly, the decline in interest rates from the peak reached in mid-​December has allowed for inflows to return this past week."

A sidebar entitled, "World Bond Funds Up in Q3," tells us, "The U.​S., by far the world'​s largest bond fund market, and the others in the five largest markets -- Luxembourg, Brazil, Germany and Ireland -- all showed gains in the latest quarter (​Q3'​16) according to the Investment Company Institute'​s "Worldwide Open-​End Fund Assets and Flows, Third Quarter 2016." ICI'​s report shows worldwide bond fund assets increased $​402.​7 billion, or 4.​6%, to $​9.​210 trillion in the third quarter. Bond funds represent 22.​5% of the $​40.​85 trillion in worldwide mutual fund assets. Globally, bond funds posted inflow of $​281 billion in Q3 of 2016, after inflows of $​147B in Q2 and $​80 billion in Q1'​16."

It adds, "According to Crane Data'​s analysis of ICI data, the U.​S. had $​4.​166 trillion in bond fund assets as of Sept. 30, 2016, representing 45.​2% of the worldwide market. US bond fund assets were up $​134.​5.​7 billion in the quarter, or 3.​3%. Luxembourg remained the second largest bond fund market with $​1.​262 trillion, or 13.​7%, after a $​63.​1 billion, or 5.​3% jump. Brazil remained in third place with $​598.​8 billion, or 6.​5% of worldwide bond fund assets. Germany ranked fourth with $​562.​8 billion, or 5.​7%. Ireland remained in 5th place with $​458.​3 billion, or 5.​0%. (​Luxembourg and Ireland are the most popular domiciles for funds marketed across Europe.)"

Finally, Bond Fund Intelligence features the "Top Performers for 2016," stating, "The table below lists the No.-​1 performing bond funds based on total return for through 12/​31/​16 in each of our 7 bond fund categories. Federated Ultra Short Bond Inst (​FULIX) was the top-​performing fund in our Conservative Ultra-​Short category, Fidelity New Markets Income Fund (​FNMIX) won in the Global category, AllianceBernstein High Income A (​AGDAX) returned the most in our High Yield category, PIMCO Income Inst (​PIMIX) was No. 1 among IntmTerm BFs, PIMCO Long-​Term Credit Inst (​PTCIX) was No. 1 among Long Term Bond Funds, Oppenheimer Ro High Yield Muni A (​ORNAX) was No. 1 among Muni Bond Funds, Eaton Vance Short Dur Strategic Inc I (​ESIIX) was No. 1 among Short Term BFs, and BBH Limited Duration I (​BBBIX) placed first among Ultra-​Short Bond Funds. Congratulations to the winners! Note that we continue to tweak our collections and categorizations, so watch for more changes in 2017."

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