MFI Custom Reports
Mutual fund trade association, the Investment Company Institute (ICI) recently posted a "Viewpoint" entitled, "Three Myths and Facts about Bank Deposits, Bank Lending, and Money Market Funds," which argues against the media's misperception that the shift from bank deposits to money market funds is harming the real economy by reducing lending. Chief Economist Sean Collins writes, "Following the difficulties at Silicon Valley Bank (SVB), Signature Bank, and Credit Suisse in early March 2023, a number of media reports cited analysts who suggested that money market funds (MMFs) are drawing deposits away from banks, adding to stresses at banks and preventing them from lending more to businesses and consumers. The reports claim that this process has been abetted by MMFs being able to invest at favorable rates with the Federal Reserve's (Fed's) reverse repo (RRP) facility, something the Fed created almost a decade ago to absorb excess cash in funding markets. Since May 2021, the facility has grown by about $2.2 trillion and MMFs are the biggest investors in the facility. This, it is suggested, is a concern the Fed could address by making the terms of the RRP facility less attractive to MMFs. This narrative, though colorful and attention-grabbing, needs fact-checking."
He cites "Myth #1: In March 2023, $422 billion flowed into government MMFs, which became 'dead money' in the Fed's RRP facility that banks could otherwise have lent to businesses and households." Collins responds with, "Fact #1: Government MMFs recycled over 70 percent of the $422 billion back into the banking system, either directly or indirectly. As assets in government MMFs climbed in March, those funds invested an additional $190.5 billion in debt issued by Federal Home Loan Banks, which in turn lent the proceeds to banks. Government MMFs also raised by $112.4 billion their investments in repo, providing additional funding to banks or their broker subsidiaries. Only $68.5 billion of the increase was invested in the Fed's RRP facility."
The update says, "Myth #2: Banks could lend a lot more to businesses and consumers if the Fed made terms of the RRP facility less attractive to MMFs." It continues, "Fact #2: Bank deposits, which have grown substantially since 2010, totaled about $18 trillion by February 2023 but bank loans totaled only a fraction of that. Because of banking regulations, banks often must hold deposits in US government securities or in their accounts with the Fed, preventing them from lending the deposits to businesses and consumers. Thus, an extra dollar of bank deposits will not necessarily result in more lending to the real economy."
Collins tells us, "Myth #3: MMFs increased their investments in the Fed's RRP facility over the past two years, drawing deposits from banks. Fact #3: Government MMFs did increase their investments in the Fed's RRP facility substantially over the past two years, but this was not because their assets grew. Instead, they exchanged one type of federal government liability (Treasury bills) for another (investments in the Federal Reserve's RRP facility), leaving their assets virtually unchanged."
He explains, "From March 31, 2021, to February 28, 2023 -- right before the difficulties at SVB surfaced publicly -- government MMFs' investments in the RRP facility rose by nearly $1.7 trillion.... However, their holdings of Treasury bills fell $1.4 trillion, in large measure because the US Treasury pared issuance of Treasury bills (which, given their short maturities, MMFs can hold) in favor of greater issuance of Treasury bonds (which, given their longer maturities, MMFs generally cannot hold). On balance, the assets of government MMFs were virtually unchanged over this period."
ICI's piece adds, "In light of the facts, the colorful narrative that MMFs are preventing increased lending to the real economy is strained at best and incorrect at worst. Sufficient financing to the real economy depends primarily on adroit monetary policy: sufficient financing will be forthcoming if the Fed can thread the needle of reducing inflation while avoiding a recession. Impugning MMFs as culpable in regional bank difficulties won't help thread that needle."
In other news, money fund yields were relatively flat again last week, unchanged after inching higher by just one basis point the week prior. They've now digested the Fed's March 22nd 25 basis point rate hike but should jump again after the Fed hikes rates on May 2 (if they hike as expected). Our Crane 100 Money Fund Index (7-Day Yield) was unchanged at 4.64% in the week ended Friday, 4/28. Yields are up from 4.61% on March 31, 4.39% on Feb. 28, 4.15% on Jan. 31 and 4.05% on 12/31/22. They've increased from 3.59% on Nov. 30, from 2.88% on Oct. 31 and from 2.66% on Sept. 30. Just a handful of the top-yielding money market funds yield above the 5.0% level, but more should move above this level after the next hike.
The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 687), shows a 7-day yield of 4.53%, unchanged in the week through Friday. Prime Inst MFs were unchanged at 4.74% in the latest week. Government Inst MFs rose by 1 bp to 4.64%. Treasury Inst MFs down 2 bps for the week at 4.50%. Treasury Retail MFs currently yield 4.29%, Government Retail MFs yield 4.33%, and Prime Retail MFs yield 4.58%, Tax-exempt MF 7-day yields were up 79 bps at 2.98%.
According to Monday's Money Fund Intelligence Daily, with data as of Friday (4/28), zero money funds (out of 816 total) yield under 2.0%; 61 funds yield between 2.00% and 2.99% with $20.4 billion, or 0.4%; 112 funds yield between 3.00% and 3.99% ($118.8 billion, or 2.1%), and 643 funds yield 4.0% or more ($5.528 trillion, or 97.5%). Eleven funds have now officially surpassed the 5.0% mark (though many are private and not listed in our "Highest-Yielding Funds" table above) but we expect a lot more to follow in coming weeks.
Our Brokerage Sweep Intelligence Index, an average of FDIC-insured cash options from major brokerages, was unchanged at 0.56% after increasing one basis point 2 weeks ago. The latest Brokerage Sweep Intelligence, with data as of April 28, shows that there were no changes over the past week. Just 3 of 11 major brokerages still offer rates of 0.01% for balances of $100K (and lower tiers). These include: E*Trade, Merrill Lynch and Morgan Stanley.
Finally, an article on the website, Cointelegraph, "Circle's Fed payment rail goal could be crushed by NY Fed's policy change," states, "The New York Federal Reserve has published new rules for counterparties looking to use its money market balancer, casting uncertainty over intentions by stablecoin issuer Circle to use the Fed's systems. In an April 25 statement, the New York Fed announced adjustments to its guidelines to determine which parties are eligible to participate in its reverse repurchase agreements (RRP)."
It states, "The updated guidelines could potentially hinder Circle's chances of gaining access to the Fed's reverse-repurchase program -- a process where the Fed sells securities to eligible counterparties with an agreement to repurchase them at the maturity date. According to the New York Fed, accessing such a system 'should be a natural extension of an existing business model, and the counterparty should not be organized for the purpose of accessing RPP operations.'" (For more, see our April 27 News, "Financial Planning Mag Criticizes Brokerage Sweeps; NYFed Tightens RRP.")
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MFI Custom Reports News
Sep 12
Crane Data's September Money Fund Portfolio Holdings, with data as of Aug. 31, 2023, show that Treasury holdings surged in August while Repo plunged. Money market securities held by Taxable U.S. money funds (tracked by Crane Data) increased by $106.7 billion to a record $5.919 trillion, after increasing $78.3 billion in July, $46.1 billion in June, $92.6 billion in May, $81.2 billion in April and $390.5 billion in March. Repo dropped but continues to lead as the largest portfolio segment, falling by nearly $100 billion. Treasuries jumped by over $160 billion but remained in the No. 2 spot. But the U.S. Treasury surpassed the Federal Reserve Bank of New York as the largest Issuer to MMFs, jumping to $1.586 trillion vs. the Fed RRP's $1.560 trillion (down $188.5 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 $96.8 billion (-3.1%) to $3.005 trillion, or 50.8% of holdings, in August, after decreasing $99.4 billion in July and $146.4 billion in June. Repo increased $111.8 billion in May and $33.1 billion in April. Treasury securities rose $163.3 billion (11.5%) to $1.586 trillion, or 26.8% of holdings, after increasing $185.5 billion in July and $355.7 billion in June. They decreased $116.9 billion in May and $32.3 billion in April. Government Agency Debt was up $16.4 billion, or 2.5%, to $683.7 billion, or 11.6% of holdings. Agencies decreased $66.5 billion in July and $119.3 billion in June, but increased $58.8 billion in May and $18.5 billion in April. Repo, Treasuries and Agency holdings now total $5.275 trillion, representing a massive 89.1% of all taxable holdings.
Money fund holdings of CP and CDs both increased in August. Commercial Paper (CP) increased $4.8 billion (1.7%) to $280.2 billion, or 4.7% of holdings. CP holdings increased $22.0 billion in July, decreased $2.3 billion in June and increased $6.5 billion in May. Certificates of Deposit (CDs) increased $14.4 billion (7.7%) to $202.5 billion, or 3.4% of taxable assets. CDs increased $7.2 billion in July, $7.9 billion in June and $2.1 billion in May. Other holdings, primarily Time Deposits, increased $4.3 billion (2.9%) to $151.2 billion, or 2.6% of holdings, after increasing $29.3 billion in July, decreasing $49.8 billion in June and increasing $30.4 billion in May. VRDNs rose to $10.3 billion, or 0.2% of assets. (Note: This total is VRDNs for taxable funds only. We will post our Tax Exempt MMF holdings separately Wednesday around noon.)
Prime money fund assets tracked by Crane Data rose to $1.239 trillion, or 20.9% of taxable money funds' $5.919 trillion total. Among Prime money funds, CDs represent 16.3% (up from 15.5% a month ago), while Commercial Paper accounted for 22.7% (unchanged from 22.7% in July). The CP totals are comprised of: Financial Company CP, which makes up 14.8% of total holdings, Asset-Backed CP, which accounts for 4.7%, and Non-Financial Company CP, which makes up 3.2%. Prime funds also hold 4.2% in US Govt Agency Debt, 7.3% in US Treasury Debt, 24.4% in US Treasury Repo, 0.6% in Other Instruments, 10.0% in Non-Negotiable Time Deposits, 5.2% in Other Repo, 7.3% in US Government Agency Repo and 0.6% in VRDNs.
Government money fund portfolios totaled $3.124 trillion (52.8% of all MMF assets), up from $3.059 trillion in July, while Treasury money fund assets totaled another $1.557 trillion (26.3%), up from $1.539 trillion the prior month. Government money fund portfolios were made up of 20.2% US Govt Agency Debt, 17.0% US Government Agency Repo, 19.4% US Treasury Debt, 43.3% in US Treasury Repo, 0.0% in Other Instruments. Treasury money funds were comprised of 57.2% US Treasury Debt and 42.8% in US Treasury Repo. Government and Treasury funds combined now total $4.680 trillion, or 79.1% of all taxable money fund assets.
European-affiliated holdings (including repo) increased by $28.4 billion in August to $680.3 billion; their share of holdings rose to 11.5% from last month's 11.2%. Eurozone-affiliated holdings increased to $456.6 billion from last month's $442.1 billion; they account for 7.7% of overall taxable money fund holdings. Asia & Pacific related holdings rose to $253.5 billion (4.3% of the total) from last month's $238.6 billion. Americas related holdings rose to $4.975 trillion from last month's $4.911 trillion, and now represent 84.1% of holdings.
The overall taxable fund Repo totals were made up of: US Treasury Repurchase Agreements (down $113.1 billion, or -4.7%, to $2.319 trillion, or 39.2% of assets); US Government Agency Repurchase Agreements (up $17.3 billion, or 2.9%, to $621.6 billion, or 10.5% of total holdings), and Other Repurchase Agreements (down $1.0 billion, or -1.6%, from last month to $65.1 billion, or 1.1% of holdings). The Commercial Paper totals were comprised of Financial Company Commercial Paper (up $4.7 billion to $183.3 billion, or 3.1% of assets), Asset Backed Commercial Paper (down $1.3 billion to $57.7 billion, or 1.0%), and Non-Financial Company Commercial Paper (up $1.4 billion to $39.1 billion, or 0.7%).
The 20 largest Issuers to taxable money market funds as of August 31, 2023, include: the US Treasury ($1.586T, 26.8%), the Federal Reserve Bank of New York ($1.560 trillion, or 26.4%), Federal Home Loan Bank ($560.9B, 9.5%), Fixed Income Clearing Corp ($358.3B, 6.1%), RBC ($135.4B, 2.3%), BNP Paribas ($110.5B, 1.9%), Citi ($105.0B, 1.8%), Federal Farm Credit Bank ($103.9B, 1.8%), Barclays PLC ($102.4B, 1.7%), JP Morgan ($91.8B, 1.6%), Bank of America ($86.9B, 1.5%), Goldman Sachs ($73.7B, 1.2%), Credit Agricole ($58.4B, 1.0%), Wells Fargo ($56.0B, 0.9%), Societe Generale ($54.7B, 0.9%), Mitsubishi UFJ Financial Group Inc ($53.0B, 0.9%), Sumitomo Mitsui Banking Corp ($47.7B, 0.8%), Mizuho Corporate Bank Ltd ($41.9B, 0.7%), ING Bank ($40.5B, 0.7%) and Bank of Montreal ($38.6B, 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: Federal Reserve Bank of New York ($1.560T, 51.9%), Fixed Income Clearing Corp ($358.3B, 11.9%), RBC ($114.1B, 3.8%), BNP Paribas ($96.7B, 3.2%), Citi ($92.6B, 3.1%), Barclays PLC ($86.1B, 2.9%), JP Morgan ($81.5B, 2.7%), Goldman Sachs ($73.4B, 2.4%), Bank of America ($62.8B, 2.1%), and Wells Fargo ($46.9B, 1.6%). The largest users of the $1.560 trillion in Fed RRP include: JPMorgan US Govt MM ($100.3B), Vanguard Federal Money Mkt Fund ($87.5B), Goldman Sachs FS Govt ($86.0B), Fidelity Govt Money Market ($74.0B), Fidelity Inv MM: Govt Port ($61.2B), Fidelity Govt Cash Reserves ($58.8B), Morgan Stanley Inst Liq Govt ($54.2B), BlackRock Lq T-Fund ($50.5B), BlackRock Lq FedFund ($50.3B) and Schwab Treasury Oblig MF ($49.4B).
The 10 largest issuers of "credit" -- CDs, CP and Other securities (including Time Deposits and Notes) combined -- include: Mizuho Corporate Bank Ltd ($28.7B, 5.0%), Bank of America ($24.0B, 4.2%), Credit Agricole ($22.9B, 4.0%), RBC ($21.2B, 3.7%), Toronto-Dominion Bank ($20.7B, 3.6%), Bank of Montreal ($19.5B, 3.4%), Mitsubishi UFJ Financial Group Inc ($19.3B, 3.4%), Svenska Handelsbanken ($17.9B, 3.1%), ING Bank ($17.3B, 3.0%) and Bank of Nova Scotia ($17.3B, 3.0%).
The 10 largest CD issuers include: Bank of America ($14.7B, 7.2%), Mitsubishi UFJ Trust and Banking Corporation ($12.9B, 6.4%), Sumitomo Mitsui Banking Corp ($12.3B, 6.1%), Credit Agricole ($12.1B, 6.0%), Mitsubishi UFJ Financial Group Inc ($11.8B, 5.8%), Toronto-Dominion Bank ($11.8B, 5.8%), Canadian Imperial Bank of Commerce ($10.6B, 5.2%), Mizuho Corporate Bank Ltd ($10.4B, 5.1%), Sumitomo Mitsui Trust Bank ($10.3B, 5.1%), and Wells Fargo ($9.1B, 4.5%).
The 10 largest CP issuers (we include affiliated ABCP programs) include: Bank of Montreal ($15.3B, 6.1%), RBC ($11.4B, 4.5%), Bank of Nova Scotia ($11.2B, 4.5%), Societe Generale ($11.0B, 4.4%), JP Morgan ($10.4B, 4.1%), Barclays PLC ($9.8B, 3.9%), UBS AG ($8.9B, 3.6%), Toronto-Dominion Bank ($8.5B, 3.4%), BPCE SA ($7.8B, 3.1%) and Mitsubishi UFJ Financial Group Inc ($7.4B, 3.0%).
The largest increases among Issuers include: US Treasury (up $163.3B to $1.586T), Fixed Income Clearing Corp (up $35.4B to $358.3B), Federal Home Loan Bank (up $16.1B to $560.9B), BNP Paribas (up $11.6B to $110.5B), Citi (up $11.2B to $105.0B), Wells Fargo (up $10.1B to $56.0B), Barclays PLC (up $9.4B to $102.4B), RBC (up $7.4B to $135.4B), Bank of America (up $6.0B to $86.9B) and Svenska Handelsbanken (up $4.5B to $17.9B).
The largest decreases among Issuers of money market securities (including Repo) in August were shown by: Federal Reserve Bank of New York (down $188.5B to $1.560T), JP Morgan (down $9.1B to $91.8B), Goldman Sachs (down $4.1B to $73.7B), Rabobank (down $2.4B to $6.7B), Australia & New Zealand Banking Group Ltd (down $1.6B to $13.6B), Swedbank AB (down $1.4B to $9.1B), Societe Generale (down $1.0B to $54.7B), Federal Home Loan Mortgage Corp (down $0.9B to $10.5B), Toronto-Dominion Bank (down $0.7B to $37.3B) and National Australia Bank Ltd (down $0.5B to $8.0B).
The United States remained the largest segment of country-affiliations; it represents 79.1% of holdings, or $4.683 trillion. Canada (4.9%, $291.0B) was in second place, while France (4.7%, $280.1B) was No. 3. Japan (3.9%, $230.5B) occupied fourth place. The United Kingdom (2.6%, $151.3B) remained in fifth place. Netherlands (1.2%, $68.9B) was in sixth place, followed by Germany (1.0%, $57.7B), Sweden (0.9%, $53.6B), Australia (0.5%, $28.1B), and Spain (0.3%, $18.8B). (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 August 31, 2023, Taxable money funds held 61.7% (down from 65.4%) of their assets in securities maturing Overnight, and another 9.2% maturing in 2-7 days (up from 7.4%). Thus, 70.8% in total matures in 1-7 days. Another 7.6% matures in 8-30 days, while 8.5% matures in 31-60 days. Note that over three-quarters, or 86.9% of securities, mature in 60 days or less, the dividing line for use of amortized cost accounting under SEC regulations. The next bucket, 61-90 days, holds 5.2% of taxable securities, while 4.8% matures in 91-180 days, and just 3.1% matures beyond 181 days. (Visit our Content center to download, or contact us to request our latest Portfolio Holdings reports.)
Aug 07
The August issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Monday morning, features the articles: "Money Fund Managers Comment on SEC Reforms," which reviews various articles on MMF Reforms; "SEC’s Money Fund Reforms: Swing Pricing Out, Liquidity In," which excerpts from the latest pending money fund rules; and, "European Commission Report on EU MMF Regs; LVNAVs OK," which reviews Europe's 5-year review of money fund rules. We also sent out our MFI XLS spreadsheet Monday a.m., and we've updated our Money Fund Wisdom database with 7/31/23 data. Our August Money Fund Portfolio Holdings are scheduled to ship on Wednesday, August 9, and our August Bond Fund Intelligence is scheduled to go out on Monday, August 14. (Note: Click here to see the replay of our recent Money Fund Wisdom Demo & Training, and register soon and make hotel reservations ASAP for our European Money Fund Symposium, which is Sept. 25-26, 2024 in Edinburgh.)
MFI's "MF Managers" article says, "In the 3 1/2 weeks since the SEC passed its latest 'Money Market Fund Reforms,' a number of money fund managers and others have published summaries and commentary. We quote from a number of these below, and we’ll continue to monitor the postings in coming days."
It explains, "The first, Allspring’s 'Amendments to Rules Governing Money Market Funds,' explains, 'On July 12, 2023, the Securities and Exchange Commission (SEC) approved amendments to Rule 2a-7 of the Investment Company Act of 1940, which governs money market funds (MMFs). The amendments are designed to improve the resilience and transparency of MMFs. The amended rule includes the following changes: Increased portfolio minimum liquidity requirements; Removal of temporary redemption gates and the link between portfolio liquidity and liquidity fees; New liquidity fee framework; Measures to address potential negative interest rate environment.'"
We write in our SEC Reforms recap, "We continue analyzing the SEC’s 424-page “Money Market Fund Reforms” final rules, and we continue to like what we see. (See the MMF Reforms press release and the Fact Sheet.) The rule’s summary explains, 'The Securities and Exchange Commission is adopting amendments to certain rules that govern money market funds under the Investment Company Act of 1940. These amendments are designed to improve the resilience and transparency of money market funds. The amendments will revise the primary rule that governs money market funds to remove the ability for a fund board to temporarily suspend redemptions if the fund’s liquidity falls below a threshold. In addition, the amendments will remove the tie between liquidity thresholds and the potential imposition of liquidity fees. The amendments will also require certain money market funds to implement a liquidity fee framework that will better allocate the costs of providing liquidity to redeeming investors. In addition, the Commission is increasing the daily liquid asset and weekly liquid asset minimum requirements to 25% and 50%, respectively.”
The rule continues, “The Commission also is amending certain reporting requirements on Form N-MFP and Form N-CR and making certain conforming changes to Form N-1A to reflect amendments to the regulatory framework for money market funds. In addition, the Commission is addressing how money market funds with stable net asset values may handle a negative interest rate environment, including by adopting amendments that will permit these funds to use share cancellation, subject to certain conditions…. In addition, the Commission is adopting amendments to Form PF concerning the information large liquidity fund advisers must report for the liquidity funds they advise.”
Our "European Commission" piece states, "The European Commission published 'Report from the Commission to the European Parliament and the Council' on the 'adequacy of Regulation (EU) 2017/1131 of the European Parliament and of the Council on money market funds from a prudential and economic point of view.' Its Intro says, 'Regulation (EU) 2017/1131 on money market funds (the MMF Regulation) was proposed in the aftermath of the global financial crisis, which exposed certain weaknesses of financial markets and their regulatory regimes around the globe. Since entering into application in January 2019, this Regulation has significantly strengthened the regulatory regime for MMFs in the EU, following recommendations by the Financial Stability Board (FSB), the International Organization of Securities Commissions (IOSCO) and the European Systemic Risk Board (ESRB)."
It adds, "The new regulatory framework was put to the test by the market stress related to the COVID-19 pandemic. The impact of this stress on MMFs differed across jurisdictions due to differences in the structures of MMF markets (e.g the predominant types of MMFs, investor profiles, and underlying investments) and residual differences in the regulatory framework for MMFs.”
MFI also includes the News brief, "Money Fund Yields Break 5.0%," which says, "Money fund yields rose over the past month, breaking the 5.0% level on average for the first time since August 2007. We expect them to keep rising in coming day and weeks following the July 26 25-basis point hike by the Federal Reserve. Our Crane 100 Money Fund Index (7-Day Yield) was up 14 bps to 5.08% in the month ended 7/31/23.'"
Another News brief, "Money Fund Assets Break $5.9 Trillon (Crane) or $5.5 Trillion (ICI)," tells readers, "Assets rose for the 10th month in a row, increasing $21.0 billion to a record $5.896 trillion in July, according to our MFI XLS. Our MFI Daily shows assets breaking $5.9 trillion as we move into August. The Investment Company Institute’s latest 'Money Market Fund Assets' series broke the $5.5 trillion level for the first time ever, and shows MMFs up almost $1.0 trillion, and over 20%, over the past year. Assets are up by $781 billion, or 16.5%, year-to-date in 2023. Over the past 52 weeks, money fund assets have risen $940 billion, or 20.5%, with Retail MMFs rising by $576 billion (39.1%) and Inst MMFs rising by $364 billion (11.7%)."
A third News brief, "MarketWatch Asks, 'Want 5% yields? After Fed hike, it may be time to ditch high-yield savings accounts for money-market funds.' The article says, 'People focused on saving cash are poised to get another boost from the Federal Reserve <b:>`_…. Even so, `rising interest rates have not been lifting all accounts equally. The Fed raised the benchmark rate by 25 basis points to 5.25%-5.50%, the highest rate in 22 years. It marks the 11th rate hike of the Fed’s last 12 meetings. Many high-yield savings accounts now have annual percentage yields of around 4%, up from an average of approximately 0.5% in March 2022, according to DepositAccounts.com <b:>`_…. `However, yields for many money-market mutual funds are now hovering at 5%, up from an average of 0.43% in March 2022, according to Crane Data.'"
A sidebar, "Earnings: Cash Sorting Slows," says, "A number of asset managers, brokerages and banks reported second-quarter in July, and the few glimpses of money fund and bank deposit trends so far show that the massive 'cash sorting' and shift into money funds from bank deposits continued but slowed in Q2. Charles Schwab CFO Peter Crawford states, “Net interest revenue declined 10% from the prior year to $2.3 billion as the incorporation of higher cost liabilities brought our net interest margin down by 32 basis points sequentially to 1.87%. While anticipated client cash realignment, along with net equity buying during June, pushed cash levels lower, we observed a continued and substantial deceleration in the daily pace of cash outflows versus prior months. The continuation of this trend through the end of the quarter further strengthens our conviction that this realignment activity will inflect before the end of 2023, unlocking growth in client cash held on the balance sheet."
Our August MFI XLS, with June 30 data, shows total assets increased $21.0 billion to a record $5.896 trillion, after increasing $20.3 billion in June, $152.7 billion in May, $56.5 billion in April, $345.1 billion in March, $56.0 billion in February, $22.5 billion in January, $70.2 billion in December and $55.4 billion in November. MMFs rose $42.2 billion in October, $1.7 billion in September, $2.3 billion in August and $26.0 billion in July.
Our broad Crane Money Fund Average 7-Day Yield was up 13 bps to 4.94%, and our Crane 100 Money Fund Index (the 100 largest taxable funds) was up 14 bps to 5.08% in July. On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA and the Crane 100 both were both higher at 5.21% and 5.13%, respectively. Charged Expenses averaged 0.38% and 0.26% for the Crane MFA and the Crane 100. (We'll revise expenses on Tuesday once we upload the SEC's Form N-MFP data for 7/31/23.) The average WAM (weighted average maturity) for the Crane MFA was 24 days (down 1 day from previous month) while the Crane 100 WAM was down 1 to 23 days. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
Jul 10
The July issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Monday morning, features the articles: "AFP's 2023 Liquidity Survey: Deposits Plunge, MMFs Jump," which discusses the annual survey of corporate treasurers; "Money Fund Symposium '23: Funds Party Like 1999," which quotes highlights from our recent big show in Atlanta; and, "ICI Worldwide: MFs Jump in Q1 Led by US, China, France," which reviews money fund markets outside the U.S. We also sent out our MFI XLS spreadsheet Monday a.m., and we've updated our Money Fund Wisdom database with 6/30/23 data. Our July Money Fund Portfolio Holdings are scheduled to ship on Wednesday, July 12, and our July Bond Fund Intelligence is scheduled to go out on Monday, July 17. (Reminder: Please join us on July 27 at 2pm Eastern for a "Money Fund Wisdom Demo & Training" session, where we'll review Crane Data's product suite and database query system with a focus on our MFI Daily asset series.)
MFI's "Liquidity Survey" article says, "The Association for Financial Professionals, a group representing corporate treasurers, published its '2023 AFP Liquidity Survey' last month. The cover letter explains, 'Invesco is very proud to partner once again with the Association for Financial Professionals (AFP) to sponsor the 2023 AFP Liquidity Survey Report, the 18th annual exploration of current and emerging corporate cash management trends.... [L]iquidity investors once again continued to face a remarkable -- and quickly changing -- investment landscape, from aggressive monetary tightening by central banks around the globe to sharply higher stock and bond market volatility to the collapse of several high-profile banks.'"
The introduction states, "This year's survey identifies a number of interesting, high-level themes: Corporate liquidity reserves remain near record highs, taking advantage of rapidly rising yields and principal safety in the uncertain market environment. Cash allocations have been shifting from bank deposits to money market funds in response to the 2023 banking crisis, [and] Caution remains a dominant theme, as companies continue to navigate inflationary pressures, slowing global economies and elevated uncertainties around macro risks."
We write in our MF Symposium recap, "Crane Data recently hosted its big Money Fund Symposium show in Atlanta, where over 530 money market professionals discussed rates, pending reforms, asset inflows and a number of other hot topics in cash. The opening session, 'Keynote: The Elevation of Money Funds II,' featured Invesco's Laurie Brignac and Tony Wong. Brignac comments, 'There was a difference in flows. When you started to see the Fed raise rates as quickly as they did, obviously, we know the storyline around bank deposits. But also, the volatility in the market spiked, and you also saw retail investors turn more risk-off. That's when you saw the retail flows. So, yeah, it has been a story of two sets of flows for different reasons.' (Note: Conference materials and recordings are available in our 'Money Fund Symposium 2023 Download Center.')"
It continues, "Asked about fears over bank deposits and money funds, Wong tells us, 'I think the fear factor was very high. From folks that were in money market liquidity products, we certainly had a number of calls. I personally went and had conversations with policymakers, regulators in this period.... We need a healthy and strong banking sector to impact credit creation and economic [growth].... I think it's manageable, but if we continue to see tightening by the Fed.... We all have years of experience and when you see tightening ... things usually break.... Something tells me maybe that's [SVB and Credit Suisse] not the final chapter of the movie. It's something we're watching carefully.'"
Our "Worldwide" piece states, "ICI's 'Worldwide Regulated Open-Fund Assets and Flows, First Quarter 2023' shows that money fund assets globally jumped by $610.0 billion, or 6.9%, in Q1'23 to $9.461 trillion. The jump was led by gains in the U.S., China, France and Luxembourg. Money funds in Ireland were lower. MMF assets worldwide increased by $825.6 billion, or 9.6%, in the 12 months through 3/31/22, and money funds in the U.S. now represent 55.4% of worldwide assets."
ICI's release says, "Worldwide regulated open-end fund assets increased 5.0% to $63.12 trillion at the end of the first quarter of 2023, excluding funds of funds. Worldwide net cash inflow to all funds was $706 billion in the first quarter, compared with $122 billion of net inflows in the fourth quarter of 2022. The Investment Company Institute compiles worldwide regulated open-end fund statistics on behalf of the International Investment Funds Association (IIFA), the organization of national fund associations. The collection for the first quarter of 2023 contains statistics from 46 jurisdictions.'"
MFI also includes the News brief, "SEC to Vote on MMF Reforms 7/12." It states, "The SEC meets on Money Market Fund Reforms, Wed., July 12 at 10am. Their notice says, 'The Commission will consider whether to adopt amendments to certain rules that govern money market funds and related form amendments.'"
Another News brief, "Assets & Yields Grind Higher in June," tells readers, "Assets rose $6.9 billion to (eke out) a record $5.861 trillion according to our MFI XLS. Over 12 months, assets have increased by $875.9 billion, or 17.6%. (ICI's latest weekly series shows MMF assets rebounding to a record $5.47 trillion following 3 weeks of declines.) Yields inched higher; our Crane 100 rose to 4.94%."
A third News brief, "MarketWatch on $6 Trillion Pile of Cash." says, "The article, 'Why this $6 trillion pile of cash isn't heading for stocks any time soon,' explains, 'Even with U.S. stocks in a new bull market, investors aren't showing many signs of backing away from money-market funds and other cash-like investments offering yields of about 5%, the highest in about 15 years. Money-market funds hit a record of $5.9 trillion in assets as of Tuesday [6/13], signaling a continuing drain out of bank deposits into higher-yielding 'cash-like' investments, according to Peter Crane.... He expects the tally soon to eclipse $6 trillion and then to stay elevated, even though money-market assets already grew almost 18% in May from a year ago. 'It's clear that bank deposits have sprung a leak,' Crane said.'"
A sidebar, "Fed Z1 Shows Household Jump," states, "The Federal Reserve's latest quarterly 'Z.1 Financial Accounts of the United States' statistical survey (a.k.a. 'Flow of Funds') for the First Quarter 2023, which includes 4 tables on money market mutual funds, shows that Total MMF Assets increased by $470 billion to $5.693 trillion in Q1'23. The Household Sector, by far the largest investor segment with $3.366 trillion, saw the biggest asset increase in Q1, 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), the Rest of World and the Mutual Fund categories in Q1 2023."
Our July MFI XLS, with June 30 data, shows total assets increased $6.9 billion to a (barely) record $5.861 trillion, after increasing $152.7 billion in May, $56.5 billion in April, $345.1 billion in March, $56.0 billion in February, $22.5 billion in January, $70.2 billion in December and $55.4 billion in November. MMFs rose $42.2 billion in October, $1.7 billion in September, $2.3 billion in August, $26.0 billion in July and $31.9 billion in June. They decreased $10.7 billion in May 2022.
Our broad Crane Money Fund Average 7-Day Yield was up 6 bps to 4.81%, and our Crane 100 Money Fund Index (the 100 largest taxable funds) was up 4 bps to 4.94% in June. On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA and the Crane 100 both were both higher at 5.10% and 5.02%, respectively. Charged Expenses averaged 0.38% and 0.26% for the Crane MFA and the Crane 100. (We'll revise expenses on Tuesday once we upload the SEC's Form N-MFP data for 6/30/23.) The average WAM (weighted average maturity) for the Crane MFA was 24 days (up 2 days from previous month) while the Crane 100 WAM was up 3 at 23 days. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
Jun 07
The June issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Wednesday morning, features the articles: "Money Fund Assets Break $5.8 Trillion; $6.0 Trillion or Bust," which discusses the continued growth of MMFs; "ICI 2023 Fact Book Shows Money Fund Trends in '22," which quotes from the Institute's annual statistics summary; and, "SEC Chair Gensler on Bears, Runs, Money Funds at ICI," which covers Gary Gensler's recent speech. We also will send out our MFI XLS spreadsheet Wednesday a.m., and we've updated our Money Fund Wisdom database with 5/31/23 data. Our June Money Fund Portfolio Holdings are scheduled to ship on Friday, June 9, and our June Bond Fund Intelligence is scheduled to go out on Wednesday, June 14.
MFI's "MMFs Break $5.8 Trillion" article says, "Money fund assets continue their rise to record levels; they broke the $5.8 trillion level in late May and ended the month at $5.845 trillion. Crane Data's `Money Fund Intelligence XLS shows assets increasing by $152.7 billion in May, following gains of $64.2 billion in April and $360.4 billion in March. YTD, MMFs have increased by $676.7 billion, or 13.1%, and they've jumped by $881.4 billion, or 17.8% over 12 months. Today's MFI Daily shows assets hitting a record $5.858 trillion, so we expect the $6.0 trillion barrier to fall within a month or two."
The piece continues, "Taxable Retail MMFs increased by $55.7 billion in May and have grown by $278.1 billion (17.0%) YTD. They've increased by a shocking $515.4 billion, or 36.9%, over 12 months. Inst MMFs increased $92.6 billion last month. They're up $400.0B (11.7%) YTD and $356.3B (10.3%) over one year. Tax Exempt MMFs were up $4.5 billion in May but down $1.5B YTD. Prime MMFs were up $49.7 billion, Govt MMFs were up $144.4 billion, and Treasury MMFs were down $9.4 billion in May."
Our Fact Book article states, "The Investment Company Institute released its '2023 Investment Company Fact Book' an annual compilation of statistics and commentary on the mutual fund space. Subtitled, 'A Review of Trends and Activities in the Investment Company Industry,' the latest edition tells us, 'With stock markets down across the globe in 2022 ... worldwide total net assets of equity funds ... decreased by 20% to $26.9 trillion at year-end 2022. Bond funds -- which invest primarily in fixed-income securities -- saw their total net assets decrease 16% over the same period.... In contrast, net assets of money market funds -- which are generally understood to be regulated funds that are restricted to holding short-term, high-quality debt instruments -- increased slightly.'"
It continues, "Discussing 'Worldwide' mutual funds (page 12), ICI writes, 'Worldwide net sales of money market funds totaled $171 billion in 2022, down from $673 billion in 2021.... The decline in worldwide demand for money market funds was largely driven by a decrease in net sales in the United States and the Asia-Pacific region. Investor demand for money market funds in the United States decreased from $424 billion in 2021 to $10 billion in 2022; and in the Asia-Pacific region, money market funds experienced net inflows of $132 billion in 2022, down from $254 billion in 2021.'"
Our "SEC Chair Gensler" piece states, "Securities & Exchange Commission Chair Gary Gensler spoke recently at the '2023 ICI Leadership Summit.' His talk, entitled, 'Bear in the Woods,' tells us, 'There is a saying when you're in the woods. 'You don't have to outrun the bear; you just have to outrun one of your fellow campers.' ... It also helps explain why savers might try to cash out of deposits before that proverbial bear catches them at the bank.... Runs, when otherwise uncorrelated actors suddenly become correlated, have brought down many a financial firm over time.'"
MFI states, "He explains, 'Registered investment funds have grown to more than $30 trillion, with more than 16,000 funds. More than half of American households and more than 120 million individual Americans own ... funds.... Money market funds came about in the early 1970s.'"
MFI also includes the News brief, "Money Fund Yields Rise to 4.90%; Sweeps Up to 0.46%." It states, "Money fund yields moved higher yet again over the past month as they digested the Federal Reserve's latest 25 basis point rate increase (on 5/2). Our Crane 100 Money Fund Index (7-Day Yield) was up 26 bps to 4.90% in May. Yields are up from 4.64% on April 30, 4.61% on 3/31, 4.05% on 12/31/22 and 2.66% on 9/30/22."
Another News brief, "Money Fund Revenue Hits Record $15.65 Billion (Annualized)," states, "According to our latest asset and charged expense numbers, we estimate that annualized revenue for money funds is at a record $15.646 billion pace (as of 5/31/23), up from $15.143 billion last month and up from $14.135B 3 months ago."
A sidebar, "More ICI Fact Book: Data," states, "On page 1, we review the ICI's '2023 Investment Company Fact Book.' But it also contains numerous 'Data Tables' involving 'Money Market Mutual Funds.' ICI lists annual statistics on shareholder accounts, the number of funds, net assets, net new cash flows, paid and reinvested dividends, composition of prime and government funds, and net assets of institutional investors by type of institution."
Another sidebar, "BlackRock's Fink on MMFs," states, "Last week, Deutsche Bank hosted its 13th annual 'Global Financial Services Conference,' which featured a discussion with BlackRock's Larry Fink. Fink comments, 'More fear means more savings in the short run.' Fink tells the DB event, 'Related to money markets, most of the money went into government funds, almost 95% went into government funds.... The big problem we had over that SVB weekend was, 'Should every corporation who had excess cash sitting in a bank, should they be sweeping it into the holding company every night?' By the way, some companies are now doing that. 'They're sweeping it in ... whether they're using the money market funds of a bank or they're outsourcing a lot more of that.'"
Our June MFI XLS, with May 31 data, shows total assets increased $152.7 billion to $5.845 trillion, after increasing $56.5 billion in April, $345.1 billion in March, $56.0 billion in February, $22.5 billion in January, $70.2 billion in December and $55.4 billion in November. MMFs rose $42.2 billion in October, $1.7 billion in September, $2.3 billion in August, $26.0 billion in July and $31.9 billion in June. They decreased $10.7 billion in May 2022.
Our broad Crane Money Fund Average 7-Day Yield was up 23 bps to 4.75%, and our Crane 100 Money Fund Index (the 100 largest taxable funds) was up 26 bps to 4.90% in May. On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA and the Crane 100 both were both higher at 5.05% and 4.99%, respectively. Charged Expenses averaged 0.38% and 0.27% for the Crane MFA and the Crane 100. (We'll revise expenses on Thursday once we upload the SEC's Form N-MFP data for 5/31/23.) The average WAM (weighted average maturity) for the Crane MFA was 22 days (up 4 days from previous month) while the Crane 100 WAM was up 4 at 20 days. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)