MFI Daily Data

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Northern Institutional Funds filed to liquidate its $1.7 billion Northern Prime Obligations Portfolio earlier this week, we learned from Bloomberg. The filing says, "The Board of Trustees (the 'Board') of Northern Institutional Funds (the 'Trust') has determined, after consideration of a number of factors, that it is in the best interests of the Prime Obligations Portfolio (the 'Portfolio') and its shareholders that the Portfolio be liquidated and terminated on or about July 10, 2020 (the 'Liquidation Date') pursuant to a plan of liquidation approved by the Board. The Liquidation Date may be changed at the discretion of the Trust's officers. The pending liquidation of the Portfolio may be terminated and/or abandoned at any time before the Liquidation Date by action of the Board of the Trust. As of the date of this supplement, Williams Capital Shares of the Portfolio have not commenced operations and are not offered for purchase." (The fund's assets are down from $3.8 billion on Feb. 28, 2020.)

The Bloomberg piece, "Northern Trust to Shutter Money-Market Fund After Redemptions," tells us, "Northern Trust Corp. is shutting down a money-market mutual fund after volatility in March spurred redemptions that sent it below a regulatory threshold for maintaining liquidity. The $1.7 billion Northern Institutional Prime Obligations Portfolio will stop accepting new investments next month and start selling its holdings under a liquidation plan set for July 10, according to a filing."

Reuters, in a March 23 article,"Fed's Money Market Move Lifts Northern Trust Fund Above Key Threshhold," wrote, "Liquidity at a $2.2 billion prime money-market fund run by Northern Trust Corp fell below the key 30% U.S. regulatory threshold twice last week, but rebounded above that level after the U.S. Federal Reserve shored up the industry. As the coronavirus roils the global economy and squeezes Wall Street for cash, money-market reforms put in place after the 2007-2009 financial crisis are weathering a major test."

They explained, "Several institutional prime funds, whose investors include large corporations, were at risk of falling below the 30% threshold before the Fed took extraordinary steps reminiscent of the last financial crisis to backstop the money-market industry." The Northern Prime Obligations Portfolio disclosed that its weekly liquidity level fell to 27% of assets twice last week, according to the fund's website -- reducing its buffer for quickly converting assets into cash to meet investors' redemptions. However, Chicago-based Northern Trust, a bank and wealth manager, said on Monday the latest weekly liquidity level for the fund was nearly 41%."

In other news, The Federal Reserve Bank of New York published an update on the "The Primary Dealer Credit Facility" via its Liberty Street Economics blog. They write, "On March 17, 2020, the Federal Reserve announced that it would re-establish the Primary Dealer Credit Facility (PDCF) to allow primary dealers to support smooth market functioning and facilitate the availability of credit to businesses and households. The PDCF started offering overnight and term funding with maturities of up to ninety days on March 20. It will be in place for at least six months and may be extended as conditions warrant. In this post, we provide an overview of the PDCF and its usage to date."

The NY Fed writes, "Lending rose quickly after the PDCF's launch, and the weekly average of outstanding loans peaked at over $35 billion for the week ending April 15.... Outstanding loans remained in the $30-35 billion range for a few weeks, before decreasing recently, as market conditions improved. The vast majority of value-weighted PDCF loans have a maturity longer than overnight.... The bulk of the assets financed in the PDCF to date have been corporate and municipal debt, as well as asset-backed securities and commercial paper. These are asset classes that were experiencing considerable volatility and pressure in early March. Market conditions have improved markedly since the introduction of a variety of Fed interventions, including the PDCF."

They explain, "The Federal Reserve initially established the PDCF in March of 2008, following severe strains in the tri-party repo market, associated in part with Bear Stearns' troubles.... Following its inception in March 2008, usage of the original PDCF increased to approximately $40 billion, before decreasing to zero by mid-2008.... This $40 billion level is roughly comparable to the peak usage of today's PDCF. Usage of the original PDCF increased to over $140 billion in September 2008, following the bankruptcy of Lehman Brothers. This peak is much higher than the current use of today's PDCF. However, the range of collateral eligible for the PDCF post-Lehman was much broader than the range of eligible collateral at the PDCF today, making comparisons difficult."

The piece adds, "The PDCF is one of many facilities introduced by the Federal Reserve to support the U.S. economy in the face of the coronavirus pandemic. The PDCF helps primary dealers support smooth market functioning and facilitate the availability of credit to businesses and households in their capacity as market makers for corporate, consumer, and municipal obligations." For more, see these previous Liberty Street Economics blogs: "The Money Market Mutual Fund Liquidity Facility" and "The Commercial Paper Funding Facility."

Finally, 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 May 15) includes Holdings information from 80 money funds (up two from two weeks ago), which represent $2.664 trillion (up from $2.568 trillion) of the $5.123 trillion (52.0%) in total money fund assets tracked by Crane Data. (Note that our Weekly MFPH are e-mail only and aren't available on the website. For our latest monthly Holdings, see our May 12 News, "May MF Portfolio Holdings: Treasuries Skyrocket, Repo Plunges in April.)

Our latest Weekly MFPH Composition summary again shows Government assets dominating the holdings list with Treasury totaling $1.344 trillion (up from $1.209 trillion two weeks ago), or 50.4%, Repurchase Agreements (Repo) totaling $635.7 billion (down from $706.4 billion two weeks ago), or 23.9% and Government Agency securities totaling $470.7 billion (up from $470.4 billion), or 17.7%. Certificates of Deposit (CDs) totaled $70.7 billion (up from $48.7 billion), or 2.7% and Commercial Paper (CP) totaled $59.2 billion (up from $58.7 billion), or 2.2%. A total of $46.9 billion or 1.8%, was listed in the Other category (primarily Time Deposits), and VRDNs accounted for $37.6 billion, or 1.4%.

The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $1.344 trillion (50.4% of total holdings), Federal Home Loan Bank with $289.3B (10.9%), Fixed Income Clearing Co with $99.9B (3.7%), Federal Farm Credit Bank with $69.9B (2.6%), BNP Paribas with $69.5B (2.6%), Federal National Mortgage Association with $57.5B (2.2%), Federal Home Loan Mortgage Corp with $51.3B (1.9%), JP Morgan with $49.5B (1.9%), RBC with $46.8B (1.8%) and Mitsubishi UFJ Financial Group Inc with $30.0B (1.1%).

The Ten Largest Funds tracked in our latest Weekly include: JP Morgan US Govt ($228.4B), Goldman Sachs FS Govt ($217.0B), Fidelity Inv MM: Govt Port ($194.3B), BlackRock Lq FedFund ($175.5B), JPMorgan 100% US Treas MMkt ($142.3B), Wells Fargo Govt MM ($138.6B), Goldman Sachs FS Treas Instruments ($133.3B), Morgan Stanley Inst Liq Govt ($109.3B), State Street Inst US Govt ($105.4B) and BlackRock Lq T-Fund ($86.4B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary, or our Bond Fund Portfolio Holdings data series.)

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MFI Daily Data News

Nov 06
 

The November issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Friday morning, features the articles: "Callahan, Cunningham on Future of Money Funds," which highlights comments from our recent Money Fund Symposium Online; "ICI's Stevens Tells Symposium: MMFs Didn't Drive Crisis," which quotes from Paul Schott Stevens' MFS keynote speech; and, "Corporates Discuss Liquidity, Prime During AFP Virtual," which covers a cash investment session from the recent AFP 2020 Virtual Experience. We've also updated our Money Fund Wisdom database with October 31 statistics, and sent out our MFI XLS spreadsheet Friday a.m. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our November Money Fund Portfolio Holdings are scheduled to ship on Tuesday, November 10, and our November Bond Fund Intelligence is scheduled to go out Monday, November 16.

MFI's lead article says, "Our latest webinar included a session on 'The Future of Money Funds & Cash,' which featured our Peter Crane moderating a panel with Tom Callahan of BlackRock and Debbie Cunningham of Federated Hermes. The three discussed the money fund business overall, prime exits, ESG, portals, technology and potential regulatory changes."

On future reforms, Callahan comments, "Broadly, we think that there needs to be a reform of the commercial paper market and secondary trading, because secondary market liquidity really doesn't exist when you need it in the CP market. Whatever happens to prime funds ... if the CP market isn't fixed in the next crisis, the Fed is going to be right back in bailing the CP market out.... We think there needs to be changing around how banks are able to intermediate and how CP sits on bank balance sheets to make the most logical intermediary more available in these markets when they're needed."

Our latest "Profile" reads, "We recently hosted "Crane's Money Fund Symposium Online," which began with the keynote speech, 'Covid's Impact on Money Markets,' from Investment Company Institute President & CEO Paul Schott Stevens. He tells us, 'Thank you, Pete, for that introduction and for the opportunity to join you.... This conference, virtual though it is, is just another example of the invaluable service that Crane Data and you Pete personally provide to the fund industry and to cash managers everywhere.... I thank you most sincerely for your contributions and for your friendship."

He explains, "As you've alluded to, this conference is one of my last public events as President and CEO of ICI. In January, I announced my retirement effective at year end.... It's been 16 1/2 years in this role. Earlier this month, the institute's board unanimously elected a new president and CEO Eric Pan, who will take the reins on Nov. 9th.... I'm pleased to be leaving ICI in such capable hands."

Stevens says, "I spent nearly half of my working life at ICI. Before I leave, I have one last assignment directing the completion of a comprehensive report on the market turmoil triggered by the Covid-19 pandemic and the economic restrictions that governments imposed in response. We are focusing especially on the experiences of regulated funds in that episode. We are currently publishing that report as a series of research papers, and the next paper we publish will look at money market funds, which landed back in the headlines in March because institutional prime funds had outflows, and because the Federal Reserve created a Money Market Mutual Fund Liquidity Facility to add liquidity to the markets and restore the flow of credit to the economy. (Note: ICI released its "Report of the Covid-​19 Market Impact Working Group: Experiences of US Money Market Funds During the COVID-​19 Crisis" yesterday.)

The "Corporates" article tells readers, "The Association for Financial Professionals' held its 'AFP2020 Virtual Experience' (see our Oct. 8 Link of the Day, 'AFP2020 to Feature ICD, More Cash') over the last two weeks in October. While it didn't hold a candle to the live event, there were a handful of interesting sessions discussing cash investments, including one entitled, 'Aligning Investment Strategy with Your Company's Operations.' This panel, led by Sebastian Ramos of ICD, featured Kim Kelly-Lippert of American Honda, Ryan Seghesio of California ISO and Tom Wolfe of MGM Resorts."

Kelly-Lippert says, "Pre-covid, we were big proponents of the prime funds.... In addition to the prime funds, we utilize government money market funds, bank deposits, euro time deposits, and then for some additional yield pickup we occasionally took advantage of a very selective [group of] asset-backed securities. But the majority of our liquidity was available overnight. We redeem the funds out of our money market funds for our daily obligations."

The latest MFI also includes the News piece titled, "Federated's Donahue Asked About Regs," which says, "During their Q3 earnings call, he comments, 'I believe that the thing that’s being talked about the most is the restriction on that 30% [liquidity] trigger.... It caused more problems than it solved. And there are a lot of ways around that. If the SEC wants to keep the trigger, fine. You just don't have to do the things that wave a red flag in front of the marketplace. Ameliorating the impact of that 30% is the number one thing that's being discussed. [M]oney market funds came through this situation much like they did before, with a lot of resilience. Therefore there is no need to further diminish prime funds.... We just don't think that it makes a lot of sense to eliminate the spear point of the short term markets at this time. So what will happen with regulation? I cannot predict, but I can assure you that we will be in there defending the beauty and efficacy of prime money market funds.'"

A second news brief entitled, "SEC Statistics: Assets, Yields Down Again; Prime Drops Below $1 Trillion," tells us, "The Securities and Exchange Commission's latest 'Money Market Fund Statistics' summary shows that total money fund assets fell $117.8 billion in September to $4.863 trillion, the 4th decrease in a row but just the 5th over the past 25 months. The SEC shows Prime MMFs dropped by $145.6 billion in September to $992.8 billion (reflecting the reclassification of Vanguard Prime MMF), while Govt & Treasury funds rose $35.3 billion to $3.749 trillion. Tax Exempt funds decreased $7.5 billion to $121.1 billion. Yields were mixed in September with Prime and Govt & Treasury yields falling while Tax Exempt yields increased."

Our November MFI XLS, with October 31 data, shows total assets dropped by $46.8 billion in October to $4.748 trillion, after decreasing $121.2 billion in September $42.3 billion in August, $44.2 billion in July and $113.0 billion in June. Assets increased $31.6 billion in May, $417.9 billion in April and $688.1 billion in March. Our broad Crane Money Fund Average 7-Day Yield fell to 0.02% during the month, our Crane 100 Money Fund Index (the 100 largest taxable funds) sits at 0.03%.

On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA was unchanged at 0.19% while the Crane 100 was also 0.19%. Charged Expenses averaged 0.16% for both the Crane MFA and Crane 100. (We'll revise expenses on Monday once we upload the SEC's Form N-MFP data for 10/31.) The average WAM (weighted average maturity) for the Crane MFA and Crane 100 was 41 (up one day) and 45 days (up a day) respectively. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)

Oct 27
 

This month, BFI profiles Yoana Koleva, Managing Director at Lord Abbett and Portfolio Manager of Lord Abbett Ultra Short Fund. The Jersey City-based manager runs the largest Ultra-Short Bond Fund and second largest Short-Term Bond Fund and ranks 12th overall in our bond fund family rankings. Koleva discusses the firm's history, the fund's strategies and a number of other topics in the ultra-short space. Our Q&A follows. (Note: The following is reprinted from the October issue of our Bond Fund Intelligence, which was published on Oct. 15. Contact us at info@cranedata.com to request the full issue or to subscribe. Also, please join us for Crane's Money Fund Symposium Online, which will be held Tuesday, October 27 from 1-4pm ET.)

BFI: Give us a little history. Koleva: Lord Abbett was actually founded back in 1929, so we've been around for a very long time. Within the short duration space, we also have a very long history and a pretty significant presence. Our Short Duration Income Fund was launched in early 2008. We invest in short-term, credit-oriented securities and the goal is to generate strong, consistent returns with low volatility. We have a multi-sector approach where we invest in investment grade, high yield corporate securities, CMBS and ABS, and the way we add value is through sector rotation and security selection. Currently, the short duration strategy has over $60 billion in assets.

Given our experience and our success in short duration, in 2016 we decided to launch our Ultra Short Bond product. If you recall, 2016 was the year when we had a major change in the regulatory landscape driven by the Money Market Reform. We believe that created an opportunity for a new product. You saw significant outflows from the Prime money market space as gates and floating NAVs were introduced. Prime money markets dropped by nearly $1 trillion driven by investor outflows and fund conversions into government money market funds. For the investor that focuses on principal preservation and return above Treasuries there were really very limited opportunities. We saw that market dynamic and identified it as an opportunity for the ultra short space. We currently manage over $20 billion in assets in the space, so it's been a huge success.

In terms of my background, I have been with Lord Abbett since 2011. I initially started as a credit research analyst focusing on financials. I was an analyst for about four years, and in 2015, I moved over to the portfolio management team as our AUM was growing and our portfolio management team was expanding. I was part of the Ultra Short strategy launch in 2016, and in 2018 I assumed the role of lead portfolio manager. Prior to joining Lord Abbett, I was actually on the sell side. I was at Morgan Stanley and was a bank analyst there.

If you look at the performance, especially of Short Duration, it has been very strong over the past 10 years. We haven't had a negative return year in the last decade and have consistently delivered positive returns. We believe that there is an anomaly in short duration credit – short duration securities are overlooked by investors and over time they generate better risk-adjusted returns. The average duration of the short duration portfolio is two years and as such you have a lot of visibility in what the credit profile for a company might look like over the next two years. And given also the short duration of these assets, you have limited volatility. A two-year bond isn't going to exhibit the same type of volatility that you might see with a 10-year or a 30-year bond. So, our view is that the front end of the curve has been in a way neglected by investors, and on a risk-adjusted basis that's actually where you get superior returns.

BFI: Tell us about the team. Koleva: We have 65 investment professionals within taxable fixed income and we all work together and collaborate to identify investment opportunities. We have a team-based approach, there is no star portfolio manager that makes one or two key decisions. It's all about each team identifying market inefficiencies and opportunities within their space. There are three parts to the team: you have the portfolio management team, the credit research analyst team, and the trading team. Within portfolio management, we are all divided based on our areas of expertise. I am part of the corporate portfolio management team. We have an ABS team, a CMBS team, a rates team, and a leveraged credit team, and we are tasked with identifying opportunities within our area of expertise.

The second leg to the stool, so to speak, is the credit research analyst team. We have over 20 analysts covering all the major sectors. We have a centralized approach to credit research. Each analyst is a sector expert and covers all the credits that would be in their sector across the credit spectrum. For example, an energy analyst would cover all companies, ranging from single-A, at the higher end of the quality spectrum, all the way to triple-Cs. That gives them a very holistic view of their space, which is very helpful, especially with crossover credits, such as rising stars or fallen angels.

The third leg of the stool is the trading team. The traders work very closely with the portfolio managers and credit analysts. They know what the portfolio management team and the credit analysts views are, and they help us identify opportunities that we can invest in.

BFI: What are your major priorities? Koleva: With Ultra Short, the goal of the strategy is to generate excess return over Treasuries while maintaining at the same time limited downside volatility. The ultra short strategy is managed by the same team that manages the rest of the credit focused funds. Thus, we can leverage the expertise that we have across the team. Currently, we believe corporate credit provides an attractive opportunity and we have a rigorous process to identify the securities that can generate superior risk adjusted returns.

BFI: How is the fund positioned? Koleva: For Ultra Short specifically, the asset classes that we invest in are: commercial paper, asset-backed securities and fixed and floating rate corporate notes. To take a step back, when you think about what the key risks for strategies like ultra short are, I would bucket them into three categories: liquidity risk, credit risk and interest rate risk. The different sectors that we invest in are designed to address those risks.

If you think about liquidity risk, the way we address this is by investing in commercial paper. The commercial paper provides a natural liquidity for the fund, as it is staggered and is very short term. The commercial paper part of the portfolio ranges at about 20 to 30% of the fund. There’s a natural liquidity that comes from that commercial paper maturing.

The second risk we talk about is credit risk. The way we mitigate that is by investing in very high-quality assets. Think about our ABS book, it's triple-A. The corporate bonds are investment grade with a big focus on single-A rated securities. The overall average rating of the fund is A-plus. We're talking about very high-quality assets.

The third component to risk is interest rate risk. The way we protect against interest rate risk is by investing in floating rate products. So, depending on our view of whether we are in a rising or lower rate environment, we can dial up and down our exposure to floating rate notes. Those are the main asset classes that we invest in.

Where our expertise and value comes in is identifying relative value across the different asset classes to determine where the best opportunities are, and doing the sector rotation that I talked about. We could be overweight any of the four asset classes we invest in, depending on what our view of relative value is within that sector. Our ability to identify inefficiencies and relative value across the different sectors is one of the main ways we add value.

BFI: Talk about your investors. Koleva: It's blend of both retail and institutional. We have had a very strong history and a very strong presence within the retail space. So, I would say we are more retail-oriented. But we have seen strong growth within the institutional space as well, especially over the past couple of years, within the short duration and ultra short strategies.

BFI: What's your outlook? Koleva: We are constructive on the short credit space. We expect rates to stay at near zero for an extended period. In that type of environment, if you are interested in earning excess yield over Treasuries and you are concerned about principal protection at the same time, you don't have many choices. Money markets are yielding near zero. At the same time, the absolute level of yield is very low. If inflation picks up, taking duration risk puts you in a vulnerable position. So I think the ultra short and short duration funds are very well positioned. Also, I think the ultra short space is a good alternative if you want to preserve optionality in case we have another bout of volatility similar to what we had in March. If you have a more defensive view, and you’re waiting for a better opportunity to enter the market, having exposure to ultra short near term is a good alternative.

Oct 15
 

The October issue of our Bond Fund Intelligence, which was sent to subscribers Thursday morning, features the lead story, "Worldwide Bond Funds Jump $820B in Q2'20 to $11.6 Trillion," which discusses the latest jump in bond fund assets globally, and "Lord Abbett Rules in Short-Term Bond Kingdom," which interviews Portfolio Manager and MD Yoana Koleva. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund yields were higher and returns were lower in September. 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.)

Our Worldwide piece reads, "Bond fund assets worldwide skyrocketed by $816.9 billion in Q2'20 to $11.6 trillion, driven higher by increases in the U.S., Luxembourg and Ireland. Brazil was the only major country showing a decrease in the latest quarter. We review the ICI's 'Worldwide Open-End Fund Assets and Flows, Second Quarter 2020' release and statistics below."

ICI says, "Worldwide regulated open-end fund assets increased 12.4% to $53.87 trillion at the end of the second quarter of 2020.... The Investment Company Institute compiles worldwide regulated open-end fund statistics on behalf of the International Investment Funds Association (IIFA).... On a US dollar-denominated basis ... bond fund assets rose by 7.5% to $11.63 trillion in the second quarter. Balanced/mixed fund assets increased by 10.7% to $6.48 trillion.... Money market fund assets rose by 6.1% to $8.16 trillion."

Our latest Fund Profile says, "This month, BFI profiles Yoana Koleva, Managing Director at Lord Abbett and Portfolio Manager of Lord Abbett Ultra Short Fund. The Jersey City-based manager runs the largest Ultra-Short Bond Fund and second largest Short-Term Bond Fund and ranks 12th overall in our bond fund family rankings. Koleva discusses the firm's history, the fund's strategies and a number of other topics in the ultra-short space. Our Q&A follows."

BFI says, "Give us a little history." Koleva responds, "Lord Abbett was actually founded back in 1929, so we've been around for a very long time. Within the short duration space, we also have a very long history and a pretty significant presence. Our Short Duration Income Fund was launched in early 2008. We invest in short-term, credit-oriented securities and the goal is to generate strong, consistent returns with low volatility. We have a multi-sector approach where we invest in investment grade, high yield corporate securities, CMBS and ABS, and the way we add value is through sector rotation and security selection. Currently, the short duration strategy has over $60 billion in assets."

She continues, "Given our experience and our success in short duration, in 2016 we decided to launch our Ultra Short Bond product. If you recall, 2016 was the year when we had a major change in the regulatory landscape driven by the Money Market Reform. We believe that created an opportunity for a new product. You saw significant outflows from the Prime money market space as gates and floating NAVs were introduced. Prime money markets dropped by nearly $1 trillion driven by investor outflows and fund conversions into government money market funds. For the investor that focuses on principal preservation and return above Treasuries there were really very limited opportunities. We saw that market dynamic and identified it as an opportunity for the ultra short space. We currently manage over $20 billion in assets in the space, so it's been a huge success."

Our Bond Fund News includes the brief, "Yields Up, Returns Dip in September," which explains, "Bond fund yields inched higher while returns were mostly lower last month. Our BFI Total Index returned -0.12% over 1-month and 3.83% over 12 months. The BFI 100 fell 0.10% in Sept. but rose 4.80% over 1 year. Our BFI Conservative Ultra-Short Index returned 0.05% over 1-mo and 1.75% over 1-yr; Ultra-Shorts averaged 0.10% in Sept. and 1.78% over 12 mos. Short-Term returned -0.02% and 3.33%, and Intm-Term fell 0.04% last month and 6.14% over 1-year. BFI's Long-Term Index fell by 0.17% in Sept. but rose 7.94% for 1-year. Our High Yield Index fell 0.57% last month and is up just 1.54% over 1-year."

In another News brief, we quote the Economic Times', "Bonds Suck in $26B, Pricing in US Democrats Win," which says, "Bond funds have seen the second-largest weekly inflows ever of $25.9 billion, BofA said on Friday, as the market continues to price in a Democrats victory.... Riskier high yield bond funds attracted $5 billion in the week to Oct. 7, the highest in 11 weeks, while government bond funds sucked in $3.8 billion, the largest inflows in 14 weeks."

A third News update tells readers, "The SEC Published, 'U.S. Credit Markets: Interconnectedness and the Effects of the COVID-19 Economic Shock' (and hosted a Roundtable Oct. 14). It says, 'Though many observers have been concerned about the ability of bond funds to access liquidity to meet redemption requests during periods of market stress, these concerns did not materialize during the market turmoil in March. Commission staff estimate that bond mutual funds experienced $255 billion of net outflows during March 2020, with another $21 billion in outflows from bond ETFs.' ICI also published, 'The Impact of COVID-​19 on Economies and Financial Markets.'"

BFI also features a sidebar entitled, "Barron's on Best Bond Funds." Their article, 'The Best Bond Funds for Uncertain Times.' explains, 'The drastic changes in the fixed-income market in recent months -- largely driven by the Federal Reserve's signaling that interest rates will stay near zero until 2023 ... -- necessitates a reassessment of bond portfolios.... With CDs and money markets paying nothing, income investors tend to gravitate toward short- or ultrashort-term bond funds. But many of these have taken on credit risk to bolster their yields, so they took bigger losses at the height of the crisis than most investors would expect from their 'safe' investment bucket, says Morningstar analyst Garrett Heine.'"

Finally, a brief entitled, "BF Inflows Slow, Then Jump," explains, "Bond funds continue to see strong inflows and asset gains, but they paused briefly in late September. ICI's 'Combined Estimated Long-Term Fund Flows and ETF Net Issuance,' says, 'Bond funds had estimated inflows of $25.02 billion for the week, compared to estimated inflows of $4.40 billion during the previous week [and $5.04B the prior week]. Taxable bond funds saw estimated inflows of $22.54 billion, and municipal bond funds had estimated inflows of $2.48 billion.' Over the past 5 weeks, bond funds and bond ETFs have seen inflows of $63.3 billion.'"

Oct 13
 

Crane Data released its October Money Fund Portfolio Holdings Friday, and our most recent collection, with data as of September 30, 2020, shows a decrease in every category except VRDNs last month. Money market securities held by Taxable U.S. money funds (tracked by Crane Data) decreased by $94.3 billion to $4.772 trillion last month, after decreasing $12.7 billion in August, $83.1 billion in July and $159.1 billion in June. Money market securities increased $31.6 billion in May, and a staggering $529.4 billion in April and $725.6 billion in March. Treasury securities remained the largest portfolio segment, followed by Repo, 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.)

Among taxable money funds, Treasury securities decreased by $6.3 billion (-0.25%) to $2.461 trillion, or 51.6% of holdings, after increasing $3.1 billion in August, decreasing $79.9 billion in July and increasing $60.8 billion in June. Repurchase Agreements (repo) decreased by $6.7 billion (-64%) to $1.041 trillion, or 21.8% of holdings, after increasing $60.8 billion in August, increasing $40.0 billion in July, and decreasing $124.3 billion in June. Government Agency Debt decreased by $28.1 billion (-3.5%) to $768.4 billion, or 16.1% of holdings, after decreasing $37.6 billion in August, $45.1 billion in July and $65.2 billion in June. Repo, Treasuries and Agencies totaled $4.271 trillion, representing a massive 89.5% of all taxable holdings.

Money funds' holdings of CP, CDs and Other (mainly Time Deposits) fell in September, breaking below the $500 billion level for the first time since December 2018, while VDRNs saw assets increase. Commercial Paper (CP) decreased $11.6 billion (-4.8%) to $231.9 billion, or 4.9% of holdings, after decreasing $32.5 billion in August, $10.7 billion in July and $6.5 billion in June. Certificates of Deposit (CDs) fell by $20.8 billion (-11.8%) to $156.1 billion, or 3.3% of taxable assets, after decreasing $19.0 billion in August, $12.3 billion in July and $9.1 billion in June. Other holdings, primarily Time Deposits, decreased $21.0 billion (-18.2%) to $94.6 billion, or 2.0% of holdings, after increasing $15.3 billion in August, $22.3 billion in July and decreasing by $13.7 billion in June. VRDNs increased to $94.6 billion, or 0.4% of assets, from $19.1 billion the previous month. (Note: This total is VRDNs for taxable funds only. We will publish Tax Exempt MMF holdings separately late Tuesday.)

Prime money fund assets tracked by Crane Data dropped $149.0 billion to $987.0 billion, or 20.7% of taxable money funds' $4.772 trillion total. Among Prime money funds, CDs represent 15.8% (up from 15.6% a month ago), while Commercial Paper accounted for 23.5% (up from 21.4%). The CP totals are comprised of: Financial Company CP, which makes up 14.3% of total holdings, Asset-Backed CP, which accounts for 5.3%, and Non-Financial Company CP, which makes up 3.9%. Prime funds also hold 6.4% in US Govt Agency Debt, 27.5% in US Treasury Debt, 5.0% in US Treasury Repo, 0.6% in Other Instruments, 5.6% in Non-Negotiable Time Deposits, 4.9% in Other Repo, 6.4% in US Government Agency Repo and 1.0% in VRDNs.

Government money fund portfolios totaled $2.616 trillion (54.8% of all MMF assets), up $111.0 billion from $2.505 trillion in August, while Treasury money fund assets totaled another $1.170 trillion (24.5%), down from $1.226 trillion the prior month. Government money fund portfolios were made up of 27.0% US Govt Agency Debt, 11.7% US Government Agency Repo, 46.1% US Treasury debt, 14.9% in US Treasury Repo, 0.2% in VRDNs and 0.1% in Investment Company . Treasury money funds were comprised of 84.1% US Treasury Debt and 15.8% in US Treasury Repo. Government and Treasury funds combined now total $3.786 trillion, or 79.3% of all taxable money fund assets.

European-affiliated holdings (including repo) decreased by $33.5 billion in September to $626.4 billion; their share of holdings fell to 13.1% from last month's 13.6%. Eurozone-affiliated holdings fell to $430.0 billion from last month's $456.7 billion; they account for 9.0% of overall taxable money fund holdings. Asia & Pacific related holdings decreased $21.1 billion to $227.0 billion (4.8% of the total). Americas related holdings fell $37.0 billion to $3.915 trillion and now represent 82.0% of holdings.

The overall taxable fund Repo totals were made up of: US Treasury Repurchase Agreements (up $29.9 billion, or 5.0%, to $623.4 billion, or 13.1% of assets); US Government Agency Repurchase Agreements (down $22,9 billion, or -5.8%, to $369.4 billion, or 7.7% of total holdings), and Other Repurchase Agreements (down $13.7 billion, or -22.2%, from last month to $48.0 billion, or 1.0% of holdings). The Commercial Paper totals were comprised of Financial Company Commercial Paper (down $2.0 billion to $141.5 billion, or 3.0% of assets), Asset Backed Commercial Paper (down $3.2 billion to $52.3 billion, or 1.1%), and Non-Financial Company Commercial Paper (down $6.4 billion to $38.2 billion, or 0.8%).

The 20 largest Issuers to taxable money market funds as of Sept. 30, 2020, include: the US Treasury ($2,477.9 billion, or 51.9%), Federal Home Loan Bank ($460.7B, 9.7%), Fixed Income Clearing Co ($144.9B, 3.0%), BNP Paribas ($132.9B, 2.8%), Federal National Mortgage Association ($113.7B, 2.4%), Federal Farm Credit Bank ($98.3B, 2.1%), RBC ($96.7B, 2.0%), JP Morgan ($92.7B, 1.9%), Federal Home Loan Mortgage Co ($74.7B, 1.6%), Barclays ($64.0B, 1.3%), Mitsubishi UFJ Financial Group Inc ($62.3B, 1.3%), Credit Agricole ($50.5B, 1.1%), Citi ($47.9B, 1.0%), Sumitomo Mitsui Banking Co ($47.0B, 1.0%), Societe Generale ($42.3B, 0.9%), Toronto-Dominion Bank ($39.5B, 0.8%), Bank of Montreal ($37.5B, 0.8%), Bank of America ($37.5B, 0.8%), HSBC ($31.9B, 0.7%) and Canadian Imperial Bank of Commerce ($28.5B, 0.6%).

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 Co ($144.8B, 13.9%), BNP Paribas ($120.8B, 11.6%), JP Morgan ($83.1B, 8.0%), RBC ($78.8B, 7.6%), Barclays ($46.6B, 4.5%), Credit Agricole ($42.6B, 4.1%), Mitsubishi UFJ Financial Group ($42.4B, 4.1%), Citi ($39.4B, 3.8%), Bank of America ($35.5B, 3.4%) and Societe Generale ($32.9B, 3.2%).

The 10 largest issuers of "credit" -- CDs, CP and Other securities (including Time Deposits and Notes) combined -- include: Toronto-Dominion Bank ($23.7B, 5.6%), Mitsubishi UFJ Financial Group ($19.9B, 4.7%), RBC ($17.9B, 4.2%), Barclays ($17.4B, 4.1%), Mizuho Corporate Bank Ltd ($17.3B, 4.1%), Sumitomo Mitsui Trust Bank ($16.3B, 3.9%), Credit Suisse ($12.2B, 2.9%), Canadian Imperial Bank of Commerce ($12.0B, 2.8%) and BNP Paribas ($12.0B, 2.8%).

The 10 largest CD issuers include: Sumitomo Mitsui Banking Co ($14.2B, 9.1%), Mitsubishi UFJ Financial Group Inc ($14.1B, 9.0%), Sumitomo Mitsui Trust Bank ($10.2B, 6.6%), Bank of Montreal ($10.2B, 6.5%), Mizuho Corporate Bank Ltd ($9.5B, 6.1%), Canadian Imperial Bank of Commerce ($7.7B, 4.9%), Toronto-Dominion Bank ($7.2B, 4.6%), Credit Suisse ($7.1B, 4.5%), Svenska Handelsbanken ($5.9B, 3.7%) and Credit Mutuel ($5.2B, 3.3%).

The 10 largest CP issuers (we include affiliated ABCP programs) include: Toronto-Dominion Bank ($16.2B, 8.0%), RBC ($10.3B, 5.1%), JP Morgan ($9.6B, 4.8%), Societe Generale ($8.3B, 4.1%), Citi ($7.6B, 3.8%), BNP Paribas ($7.5B, 3.7%), BPCE SA ($7.0B, 3.5%), NRW.Bank ($6.6B, 3.3%), Sumitomo Mitsui Trust Bank ($6.1B, 3.0%) and Toyota ($5.3B, 2.6%).

The largest increases among Issuers include: Fixed Income Clearing Corp (up $31.7B to $144.9B), US Treasury (up $10.4B to $2,477.9B), Barclays PLC (up $4.3B to $64.0B), BNP Paribas (up $3.7B to $132.9B), HSBC (up $3.4B to $31.9B), ABN Amro Bank (up $2.9B to $17.4B), Deutsche Bank AG (up $1.7B to $19.0B), JP Morgan (up $1.5B to $92.7B), Rabobank (up $1.4B to $9.8B) and Natixis (up $1.0B to $25.5B).

The largest decreases among Issuers of money market securities (including Repo) in September were shown by: the Federal Home Loan Bank (down $30.7B to $460.7B), Credit Agricole (down $22.5B to $50.5B), Federal Home Loan Mortgage Corp (down $9.6B to $74.7B), Mizuho Corporate Bank Ltd (down $8.2B to $26.7B), DNB ASA (down $7.9B to $8.1B), Bank of Nova Scotia (down $6.4B to $20.2B), Citi (down $5.9B to $47.9B), RBC (down $5.8B to $96.7B), Mitsubishi UFJ Financial Group Inc (down $5.6B to $62.3B) and Canadian Imperial Bank of Commerce (down $4.2B to $28.5B).

The United States remained the largest segment of country-affiliations; it represents 77.1% of holdings, or $3.679 trillion. France (5.8%, $276.0B) was number two, and Canada (4.9%, $235.3B) was third. Japan (4.5%, $216.3B) occupied fourth place. The United Kingdom (2.6%, $125.5B) remained in fifth place. The Netherlands (1.3%, $59.7B) was in sixth place, followed by Germany (1.2%, $58.1B), Sweden (0.7%, $31.1B), Switzerland (0.6%, $30.0B) and Australia (0.6%, $26.2B). (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 September 30, 2020, Taxable money funds held 35.7% (down from 36.0%) of their assets in securities maturing Overnight, and another 9.5% maturing in 2-7 days (up from 6.9% last month). Thus, 45.2% in total matures in 1-7 days. Another 14.3% matures in 8-30 days, while 13.0% matures in 31-60 days. Note that close to three-quarters, or 72.5% of securities, mature in 60 days or less (down slightly from last month), the dividing line for use of amortized cost accounting under SEC regulations. The next bucket, 61-90 days, holds 9.6% of taxable securities, while 15.8% matures in 91-180 days, and just 2.2% matures beyond 181 days.