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Last week, Federated Investors' President & CEO Chris Donahue presented at RBC Capital's Markets 2019 Financial Institutions Conference, where he answered questions on money fund growth, the shift from deposits and whether money funds will reclaim their previous record level of $4 trillion. He commented, "Some of the factors are things that continue from last year. If you look at the overall rate picture, with rates of about 2.4-2.5 in a money market fund, you're getting about what you get in a 3-year Treasury. This is a good setup for the viability of the underlying decision to go into a money market fund if you happen to be in 'pause mode.' So now that assets in the industry have crossed $3 trillion, [it's] almost like the return to the thrilling days of yester-year."

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Crane Data's latest MFI International shows total assets in "offshore" money market mutual funds, U.S.-style funds domiciled in Ireland or Luxemburg and denominated in USD, Euro and GBP (sterling), flat year-to-date, though Euro MMFs are seeing declines. Through 3/13/19, overall MFII assets are down $20.3 billion to $825.6 billion. (They rose $15 billion in 2018.) Offshore USD money funds are down $8.3 billion YTD (they rose $29B last year). Euro funds are still feeling the pain of negative rates and pending European MMF reforms set to take final effect next week; they're down E10.5 billion YTD (following 2 flat years). GBP funds are up, however, by L1.9 billion. U.S. Dollar (USD) money funds (173) account for over half ($445.7 billion, or 53.7%) of this "European" money fund total, while Euro (EUR) money funds (95) total E88.5 billion (11.7%) and Pound Sterling (GBP) funds (102) total L211.3 billion (24.8%). We summarize our latest "offshore" money fund statistics and our Money Fund Intelligence International Portfolio Holdings (which went out to subscribers Thursday afternoon), and we also review a notice that Wells Fargo will convert its European MMF to a Govt CNAV, below.

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The March issue of our Bond Fund Intelligence, which will be sent out to subscribers Thursday morning, features the lead story, "Intermediate King of Bond Categories; Short Whiplash," which looks at the biggest segment of the bond fund marketplace, and the profile, "Calvert’s Khanduja: Socially Responsible Short Duration," our latest Portfolio Manager interview. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show lower bond fund yields and higher returns again in February. We excerpt from the new issue below. (Contact us if you'd like to see our Bond Fund Intelligence and BFI XLS spreadsheet, or our Bond Fund Portfolio Holdings data. Also, we're still taking registrations (and offering free tickets to select clients) for our 3rd annual Bond Fund Symposium, March 25-26, 2019 in Philadelphia. We hope to see you there!)

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An article entitled, "Why the Fed Should Create a Standing Repo Facility," written by economists at the Federal Reserve Bank of St. Louis, explains, "The Federal Open Market Committee (FOMC) is locking down its long-run monetary policy implementation framework. We know it will consist of a floor regime characterized by an ample supply of reserve balances. We argue below that the FOMC should include a standing repo facility as a part of this framework."

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Crane Data released its March Money Fund Portfolio Holdings Monday, and our most recent collection of taxable money market securities, with data as of Feb. 28, 2019, shows big increases in Treasury holdings and increases in CP and CDs. Money market securities held by Taxable U.S. money funds (tracked by Crane Data) increased by $89.8 billion to $3.225 trillion last month, after increasing by $4.2 billion in January, $98.0 billion in December, and $41.7 billion in November. Repo continued to be the largest portfolio segment -- it was flat but remained above the $1.0 trillion mark -- followed by Treasury securities, then Agencies. CP remained fourth ahead of CDs, Other/Time Deposits and VRDNs. Below, we review our latest Money Fund Portfolio Holdings statistics. (Visit our Content center to download the latest files, or contact us to see our latest Portfolio Holdings reports.)

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The Federal Reserve released its latest quarterly "Z.1 Financial Accounts of the United States" statistical survey (formerly the "Flow of Funds") late last week. Among the 4 tables it includes on money market mutual funds, the Fourth Quarter 2018 edition shows that Total MMF Assets increased by $216 billion to $3.083 trillion in Q4. The Household Sector, which saw asset jump in Q4, remained the largest investor segment with $1.731 trillion. The next largest segment, Nonfinancial Corporate Businesses also saw assets increase in the fourth quarter, as did Funding Corporations' (primarily securities lending reinvestment cash) holdings of money funds.

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Crane Data's latest Money Fund Market Share rankings show assets were higher again for the majority of U.S. money fund complexes in February. Money fund assets rose by $56.3 billion, or 1.7%, last month to $3.302 trillion, and assets have climbed by $129.3 billion, or 4.1%, over the past 3 months. They have increased by $275.1 billion, or 9.1%, over the past 12 months through Feb. 28, 2019. The biggest increases among the 25 largest managers last month were seen by JP Morgan, BlackRock, and Federated, which increased assets by $10.3 billion, $9.1B, and $8.3B, respectively. We review the latest market share totals below, and we also look at money fund yields in February.

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The March issue of our flagship Money Fund Intelligence newsletter, which was sent to subscribers Thursday morning, features the articles: "Bank Deposit Growth Slowest Since '95; MF Assets Stronger," which shows money funds growing faster than bank MMDAs; "PFM's Margolis & Rowe Discuss Cash Market, LGIPs," our profile of PFM Asset Management; and, "Last European Money Fund Conversions Imminent; Euro," which talks about the about the pending EU Reforms March 21 compliance deadline. We've also updated our Money Fund Wisdom database with Feb. 28 statistics, and sent out our MFI XLS spreadsheet Thursday a.m. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) 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 Thursday, March 14.

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Citi Research's latest "Short Duration Strategy" features an update entitled, "SIFMA/VRDNs – What will be the magnitude of the seasonal increase?" Authors Vikram Rai and Jack Muller tell us, "Tax-exempt MMFs witness outflows around tax season as investors tend to sell their near-cash alternatives in order to pay their tax bill. When tax-exempt MMFs witness redemptions, it causes a supply-demand imbalance in the short term tax-exempt space. This is because tax-exempt MMFs form a very large portion of the demand base (58%) for short term tax-exempt paper, and MMF outflows disturb the fragile supply-demand balance for this section of the market. As a result, SIFMA resets at a higher clearing rate to bring the market back into equilibrium."

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BNY Mellon Investment Management announced Monday that its money market funds will keep the Dreyfus name, but that it is "rebranding the Dreyfus retail business and long-term mutual funds in the U.S. to align with the BNY Mellon Investment Management brand, effective on or about June 3, as part of a larger global brand initiative," we learned from fund industry news source ignites. The release, entitled, "BNY Mellon Investment Management to Rebrand Dreyfus ... Money Market Funds to Retain Dreyfus Name," states, "This rebrand will more clearly reinforce for investors BNY Mellon Investment Management's reputation and position as one of the world's largest investment managers. To reflect the strong heritage of Dreyfus in cash management strategies, the Dreyfus brand will be retained on money market funds."

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J.P. Morgan Securities' latest "Short-Term Fixed Income" weekly features a "Low duration bond fund update," which briefly discusses developments and cash flows in the ultra-short bond fund marketplace. JPM writes, "In a volatile environment, bond funds focused on the front end of the curve have continued to attract cash. We estimate total AUM across short-term and ultrashort mutual funds and ETFs registered $680bn as of 1/31/19, up $49bn since the end of September and $99bn year over year." We quote from their latest, and we also excerpt from a WSJ article on "fin-tech" cash offerings below.

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Aberdeen Standard Investments is the most recent "offshore" manager to implement changes to its money funds to align with the March 21 compliance deadline for European Money Fund Reforms. A new prospectus, which changes the official fund names from "Aberdeen" to "Aberdeen Standard," states, "Aberdeen Standard Liquidity Fund (Lux) aims to provide investors with a broad range of diversified actively-managed Funds which, through their specific investment objectives and individual portfolios, offer investors the opportunity of exposure to selected short-term investment and money market strategies. The assets of the Funds are invested in accordance with the principle of risk diversification in Money Market Instruments." We review Aberdeen's changes, and also look at the pending merger of OppenheimerFunds into Invesco, below.

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