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.
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The May issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Friday morning, features the articles: "Cash Big Topic on Q1 Earnings Calls: BlackRock, Schwab, BNY," which discusses the huge shift in assets from bank deposits to MMFs; "Federated Hermes Talks Record Assets, LGIPs, ETFs," which quotes from the company's Q1'23 earnings call; and, "ICI Myths on Money Funds vs. Bank Deposits, Fed RRP," which dispels some recent criticisms of MMFs. We also sent out our MFI XLS spreadsheet Friday a.m., and we've updated our Money Fund Wisdom database with 4/30/23 data. Our May Money Fund Portfolio Holdings are scheduled to ship on Tuesday, May 9, and our May Bond Fund Intelligence is scheduled to go out on Friday, May 12.
MFI's "Cash Big Topic on Q1 Earnings Calls: BlackRock, Schwab, BNY" article says, "Quarterly earnings reports from major financial companies are shedding more light upon the huge March shift in assets from bank deposits to money market mutual funds. BlackRock's Q1'23 earnings call included a number of comments on the cash super-spike. (See the transcript here.) CFO Martin Small comments, 'Negative revenue impacts were partially offset by the elimination of discretionary money market fund fee waivers and higher securities lending revenue. BlackRock's cash management platform saw $8 billion of net inflows in the quarter. Flows were driven by surging demand for our cash management solutions in March as clients diversified away from deposits and enhance cash yields.'"
The piece continues, "He explains, 'We're actively working with clients on their liquidity management strategies, providing technology, market and operational insights and, of course, delivering a full range of cash management capabilities.'"
Our BFS "profile" piece states, "Federated Hermes, the 6th largest manager of money funds, reported Q1’23 earnings and hosted its latest earnings conference call late last week. President & CEO J. Christopher Donahue comments in a press release, 'Federated Hermes' record assets under management were driven by money market asset increases accompanied by further increases across nearly all other long-term asset classes from the previous quarter, demonstrating once again the value of our diversified business mix. As interest rates continued their rise and as investors considered regional banking issues, many withdrew deposits from small and medium-sized banks and continued to embrace the benefits of money market funds -- high credit quality, short duration, diversification, transparency, daily liquidity and market yields. Federated Hermes had positive net flows into a range of our money market products -- from government to prime.'"
It continues, "The release says, 'Money market assets were a record $505.8 billion at March 31, 2023, up $85.2 billion or 20% from $420.6 billion at March 31, 2022 and up $29.0 billion or 6% from $476.8 billion at Dec. 31, 2022. Money market fund assets were $357.3 billion at March 31, 2023, up $77.8 billion or 28% from $279.5 billion at March 31, 2022 and up $21.4 billion or 6% from $335.9 billion at Dec. 31, 2022.... Revenue increased $57.4 million or 18% primarily due to a decrease in voluntary fee waivers related to certain money market funds in order for those funds to maintain positive or zero net yields (voluntary yield-related fee waivers) and an increase in revenue due to higher average money market assets [vs. a year ago].'"
Our "ICI Myths on Money Funds vs. Bank Deposits, Fed RRP" piece states, "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.... This narrative, though colorful and attention-grabbing, needs fact-checking.'"
MFI states "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.'"
MFI also includes the News brief, "Fed Hikes 10th Time to 5.00-5.25%." It tells us, "The release, 'Federal Reserve issues FOMC statement,' says, '[T]he Committee decided to raise the target range for the federal funds rate to 5 to 5-1/4 percent.' Our Crane 100 Money Fund Index (7-Day Yield) rose just 3 bps in April to 4.64%, but it should jump next week and push towards 5.0%."
Another News brief, "MMF Assets Break $5.7 Trillion," explains, "Crane Data's MFI XLS shows MMFs jumping another $56.8 billion in April to a record $5.685 trillion. Our MFI Daily shows assets jumping another $63.6 billion the first 3 days of March, breaking $5.7 trillion and rising to a record $5.729 trillion Wednesday."
A sidebar, "SEC: Private Funds $333 Bil.," states, "The SEC released its latest quarterly 'Private Funds Statistics' report late last month, which summarizes Form PF reporting and includes some data on 'Liquidity Funds,' or pools which are similar to but not money market funds. The publication shows overall Liquidity fund assets were higher in the latest reported quarter (Q3'22) at $333 billion (up from $328 billion in Q2'22 and up from $302 billion in Q3'21)."
Another sidebar, "FP Hits Brokerage Sweep" states, "Financial Planning magazine published a piece, 'The wealth management industry's $1T conflict of interest,' which explains, '[T]he brokerage industry's widespread and lucrative practice of cash sweeps has drawn extensive regulatory scrutiny and the ire of consumer advocates since it started around 2000. As long as the firms fully disclose the conflict of interest, though, there is nothing illegal about rolling up clients' uninvested cash into bank accounts that pay brokerage firms the vast majority of rising interest yields that feed the industry's bottom line more every time the Fed raises rates.'"
Our May MFI XLS, with April 30 data, shows total assets increased $56.5 billion to $5.685 trillion, after increasing $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 4.52%, and our Crane 100 Money Fund Index (the 100 largest taxable funds) was up 3 bps to 4.64% in April. On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA and the Crane 100 both were both higher at 4.81% and 4.75%, respectively. Charged Expenses averaged 0.38% and 0.27% for the Crane MFA and the Crane 100. (We'll revise expenses on Monday once we upload the SEC's Form N-MFP data for 4/30/23.) The average WAM (weighted average maturity) for the Crane MFA was 18 days (up 1 day from previous month) while the Crane 100 WAM was up 1 at 16 days. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
The April issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Monday morning, features the articles: "MMFs Break $5.6 Trillion on SVB, Deposit Super Surge," which discusses the huge inflows coming from uninsured deposits; "Northern's LaRocco, Fidelity's Pope on MMF Inflows at BFS," which quotes from our recent Bond Fund Symposium; and, "ICI Worldwide MMFs Jump in Q4, Led by US, Ireland, France," which covers recent data on 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 3/31/23 data. Our April Money Fund Portfolio Holdings are scheduled to ship on Wednesday, April 12, and our April Bond Fund Intelligence is scheduled to go out on Monday, April 17.
MFI's "MMFs Break $5.6 Trillion" article says, "Money fund assets, which had already been hitting record levels earlier this year, skyrocketed in March as the failure of Silicon Valley Bank raised concerns over uninsured bank deposits. Crane Data's MFI XLS shows money fund assets increasing by $345.1 billion to a record $5.613 trillion, their 3rd largest increase ever. (Only March and April 2020 show bigger gains, when MMFs jumped $688.1 billion and $471.2 billion, respectively.)
The piece continues, "Year-to-date through 3/31/23, money fund assets have increased by $444.5 billion, or 8.6%, and over 12 months assets have increased by $565.1 billion, or 11.2%. Our MFI Daily shows assets continuing to increase in April, rising by $28.2 billion to a record $5.638 trillion. (Note: MFI Daily's assets series differs slightly from our monthly MFI XLS series.)
Our BFS "profile" piece states, "Two and a half weeks ago, we hosted our latest Crane's Bond Fund Symposium in Boston. The only session focusing on cash, "Money Funds & Conservative Ultra‐Shorts," featured our Peter Crane along with Northern Trust Asset Management's Dan LaRocco and Fidelity's Kerry Pope. We excerpt from this segment below. (Thanks again to those who attended and supported BFS, and attendees and Crane Data subscribers may access the Powerpoints, recordings and conference materials at the bottom of our "Content" page or via our Bond Fund Symposium 2022 Download Center.)"
It continues, "Pope comments, 'We've certainly benefiting from all the turmoil within the banking sector. Each and every day you wake up, there's new money coming in, new accounts being opened. So we've got a lot of tailwinds right now. The good thing is that we're actually able to earn some money on it.... A few years ago in the zero-rate environment, we were having to waive fees all over the place. So now it's a good combination of being able to recognize the fees, plus the volume.'"
Our "ICI Worldwide" piece states, "The Investment Company Institute published, 'Worldwide Regulated Open-Fund Assets and Flows, Fourth Quarter 2022,' which shows that money fund assets globally jumped by $550.7 billion, or 6.6%, in Q4'22 to $8.856 trillion. The increases were led by sharp jumps in money funds in U.S., Ireland, France and Luxembourg. Meanwhile, only money funds in Brazil were lower. MMF assets worldwide increased by $22.4 billion, or 0.3%, in the 12 months through 12/31/22; money funds in the U.S. now represent 53.9% of worldwide assets."
MFI states" "ICI's release says, 'Worldwide regulated open-end fund assets increased 7.1% to $60.15 trillion at the end of the fourth quarter of 2022, excluding funds of funds.... The Investment Company Institute compiles worldwide regulated open-end fund statistics on behalf of the International Investment Funds Association (IIFA), the organization of national fund associations. The collection for the fourth quarter of 2022 contains statistics from 46 jurisdictions.'"
MFI also includes the News brief, "Fed Hikes to 4.75-5.0%; Yields 4.6%. A release, 'Federal Reserve issues FOMC statement,’ says, '[T]he Committee decided to raise the target range for the federal funds rate to 4-3/4 to 5%.' Our Crane 100 Money Fund Index (7-Day Yield) rose 24 bps to 4.61%."
Another News brief, "NY Fed on MMFs, Rates," tells us, "The post, 'Monetary Policy Transmission and the Size of the Money Market Fund Industry: An Update,' tells us, 'The size of the money market fund industry co-moves with the monetary policy cycle.'"
A sidebar, "Vanguard's Smith on MMFs," states, "Vanguard writes 'Tried and true money markets get boost with rising rates,' which summarizes, 'Nafis Smith, principal and head of Vanguard's taxable money markets, discusses money markets in a rising interest rate environment, the stress tests behind Vanguard's stability mandate, and how a low fee structure advantages money market portfolios.'"
Another sidebar, "Yellen Hits MMFs in Speech," states, "Treasury Secretary Janet Yellen said in a recent speech, 'As we strengthen the banking sector, we are also making progress on one of FSOC's top priorities: mitigating vulnerabilities in nonbank financial intermediation. Many of these nonbank institutions engage in liquidity and maturity transformation: they profit by issuing short-term obligations while investing in riskier and longer-term assets. But they are generally not regulated to account for spillovers to the rest of the financial system during times of ... stress.'"
Our March MFI XLS, with March 31 data, shows total assets increased $345.1 billion to $5.613 trillion, after increasing $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 and $74.3 billion in April. MMFs increased $24.1 billion last March.
Our broad Crane Money Fund Average 7-Day Yield was up 21 bps to 4.46%, and our Crane 100 Money Fund Index (the 100 largest taxable funds) was up 22 bps to 4.61% in March. On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA and the Crane 100 both were both higher at 4.76% and 4.72%, respectively. Charged Expenses averaged 0.38% and 0.27% 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 3/31/23.) The average WAM (weighted average maturity) for the Crane MFA was 17 days (unchanged from previous month) while the Crane 100 WAM was up 1 at 15 days. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
The March issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Tuesday morning, features the articles: "Treasury MMFs Brace for Debt Ceiling Faceoff, Supply Shock," which reviews the risk to Treasury funds; "BlackRock's Matt Clay on European MMF Landscape," which quotes from a recent ICD webinar; and, "Federated 10-K Sheds Light on Regulatory Environment," which excerpts from Federated Hermes' annual report. We also sent out our MFI XLS spreadsheet Tuesday a.m., and we've updated our Money Fund Wisdom database with 2/28/23 data. Our March Money Fund Portfolio Holdings are scheduled to ship on Thursday, March 9, and our March Bond Fund Intelligence is scheduled to go out on Tuesday, March 14.
MFI's "Treasury MMFs Brace" article says, "While record asset levels and yields moving towards 5.0% are the big stories for money funds so far in 2023, many have begun to focus on the looming Treasury debt ceiling battle. Fitch Ratings tells us in the release, 'U.S. Debt Ceiling Uncertainty a Risk for Treasury Money Market Funds,' 'A default by the U.S. Treasury could pose liquidity and headline risks and ratings pressure for U.S. Treasury-only money market funds (MMFs), but would not necessarily result in downgrades, with considerations including the size of any exposure to defaulted securities and alternative sources of fund liquidity.'"
The piece continues, "They explain, 'The U.S. government debt limit was reached on Jan. 19, 2023. However, the Treasury Department is using 'extraordinary measures' to avoid defaulting on obligations.... The Congressional Budget Office has calculated the x-date will fall sometime between July and September 2023, though it cautioned that extraordinary measures could be exhausted sooner, and the Treasury could run out of funds before July.'"
Our BlackRock "profile" piece states, "Online money market funds trading portals ICD recently hosted a webinar entitled, 'Economic Update: Cash Investment Forecast for the Year Ahead,' featuring BlackRock Cash Management Head of International Portfolio Management Matt Clay. Clay and ICD host Luke Newman discussed a number of issues involving short-term investment trends in U.S. dollar, euro and sterling currencies. Newman says, 'I'm going to start off with a brief intro in terms of `what ICD saw in 2022, in terms of flows into the money market funds.... I'll then pass it over to BlackRock, who will be providing an economic update, an outlook at the macro level, and then talking more specifically around cash and the impact of monetary policy in general on short-term investment trends.'"
It continues, "He explains, 'We wanted to share some of the trends that we saw at ICD last year. So, we start in 2022 with low interest rates in the three main currencies, having been in a low interest rate environment for some time. Over the course of a year, we started seeing these rates rise which generated significant interest in money market funds.... For the first half of the year, assets in these funds were averaging just over the $65 billion mark. As central banks started increasing rates, you can see that assets significantly increased, peaking near to $95 billion at the end of last year. That's close to a 50% increase when compared to the first half of the year. This graph doesn't show the start of this year, but the trend has continued. So, in summary, as interest rates rise, so has the interest in money market funds.'"
Our "Federated 10-K" piece states, "Federated Hermes filed its latest '10-K Annual Report' with the SEC recently, and the 109-page document contains a wealth of information on money market mutual funds. On 'Distribution Channels,' it says, 'Federated Hermes' distribution strategy is to provide investment management products and services to more than 11,000 institutions and intermediaries, including, among others, banks, broker/dealers, registered investment advisors, government entities, corporations, insurance companies, foundations and endowments.... [I]nvestment products ... are offered and distributed in three markets.... U.S. financial intermediary (63%); U.S. institutional (28%); and international (9%).'"
MFI states, "They write, 'Financial intermediaries use Federated Hermes' products to meet the needs of their customers, who are often retail investors.... As of Dec. 31, 2022, managed assets in the U.S. financial intermediary market included $317.9 billion in money market assets.... Federated Hermes offers and distributes its products and strategies to a wide variety of domestic institutional customers including, among others, government entities, not-for-profit entities, corporations, corporate and public pension funds, foundations, endowments and non-Federated Hermes investment companies or other funds. As of Dec. 31, 2022, managed assets in the U.S. institutional market included $144.0 billion in money market assets.... [M]anaged assets in the international market included ... $15.0 billion in money market assets.'"
MFI also includes the News brief, "MMF Assets Surge to Record $5.3T," which says, "Assets jumped $56.0 billion in February to a record $5.261 trillion, according to MFI XLS, and assets jumped another $17.3 billion the first 3 days in March to $5.270 trillion, according to MFI Daily. See our sidebar on page 7 for more."
Another News brief, "Yields Up Another Quarter in Feb.," tells us, "Money fund yields moved 24 bps higher on average last month in direct response to the Fed's 25 basis point hike on Feb. 1. Our Crane 100 Money Fund Index (7-Day Yield) rose 24 basis points to 4.39% in the month ended 2/28. Money fund yields have risen from 4.05% on 12/31/22. Yields should remain flat over the next 3 weeks, but they should jump again following the Fed's next meeting on March 22 (if they hike rates again as expected)."
A sidebar, "SEC: Private Liquidity Funds," states, "The SEC released its latest quarterly 'Private Funds Statistics' report recently, which summarizes Form PF reporting and includes some data on 'Liquidity Funds,' or pools which are similar to but not money market funds. The publication shows overall Liquidity fund assets were higher in the latest reported quarter (Q2'22) at $328 billion (up from $313 billion in Q1'22 and up from $319 billion in Q2'21)."
Our March MFI XLS, with February 28 data, shows total assets increased $56.0 billion to $5.261 trillion, after increasing $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 and $74.3 billion in April. MMFs increased $24.1 billion in March, but decreased $34.6 billion last February.
Our broad Crane Money Fund Average 7-Day Yield was up 23 bps to 4.25%, and our Crane 100 Money Fund Index (the 100 largest taxable funds) was up 24 bps to 4.39% in February. On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA and the Crane 100 both were both higher at 4.56% and 4.51%, respectively. Charged Expenses averaged 0.38% and 0.26% for the Crane MFA and the Crane 100. (We'll revise expenses on Wednesday once we upload the SEC's Form N-MFP data for 2/28/23.) The average WAM (weighted average maturity) for the Crane MFA was 17 days (unchanged from previous month) while the Crane 100 WAM remained the same at 14 days. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
The February issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Tuesday morning, features the articles: "Money Fund Yields Attracting More Attention in Early 2023," which reviews the most recent news on MMFs; "Federated Q4 Earnings on Record Assets, No Waivers," which reviews Federated's latest comments on MMFs; and, "Treasury's OFR Posts Annual Report: Money Funds, Risks," which excerpts from OFR's 2022 Annual Report. We also sent out our MFI XLS spreadsheet Tuesday a.m., and we've updated our Money Fund Wisdom database with 1/31/23 data. Our February Money Fund Portfolio Holdings are scheduled to ship on Thursday, Feb. 9, and our February Bond Fund Intelligence is scheduled to go out on Tuesday, Feb. 14.
MFI's "Money Fund Yields Attracting More Attention" article says, "The Wall Street Journal again mentions money market funds in, 'Jittery Investors Turn to Cash in Hunt for Yield.' They explain, 'The dash for cash on Wall Street is back on. Investors have added about $135 billion to global money-market funds over the past four weeks, according to EPFR data through Jan. 18. That is the best stretch since the four-week period ended May 2020, when those funds logged roughly $175 billion in net inflows.'"
The piece continues, "Increased cash allocations are the latest sign of caution among investors who are questioning whether the recent rebound in stocks and bonds will continue after last year's steep selloff. Many expect markets to remain volatile because Federal Reserve officials have repeatedly said they are committed to fighting inflation with higher interest rates. The flows are also an indication that investors are hungry for yield. They shunned cash for years when interest rates were low and returns on money-market funds were meager."
Our "Federated Q4 Earnings" piece states, "Federated Hermes released its Q4'22 earnings and hosted its quarterly earnings call late last week, which discussed record money fund assets and seasonal flows, the end of fee waivers and money funds vs. bank deposits. The earnings press release quotes President & CEO J. Christopher Donahue, 'Federated Hermes' record assets at year-end 2022 were driven by money market asset increases and investor interest in our flagship Total Return Bond Fund and related separate accounts.... In addition, investors valued our investment perspective as they sought haven from market volatility in a diverse range of Federated Hermes products -- from money market funds to low-duration fixed-income options to market neutral and bear market alternative strategies.'"
The release explains, "Federated Hermes' money market assets were a record $476.8 billion at Dec. 31, 2022, up $28.9 billion or 6% from $447.9 billion at Dec. 31, 2021 and up $35.5 billion or 8% from $441.3 billion at Sept. 30, 2022. Money market mutual fund assets were $335.9 billion at Dec. 31, 2022, up $23.1 billion or 7% from $312.8 billion at Dec. 31, 2021 and up $26.0 billion or 8% from $309.9 billion at Sept. 30, 2022. Federated Hermes’ money market separate account assets were $140.9 billion at Dec. 31, 2022, up $5.8 billion or 4% from $135.1 billion at Dec. 31, 2021 and up $9.5 billion or 7% from $131.4 billion at Sept. 30, 2022.'"
Our "Treasury's OFR" piece states, "The U.S. Treasury's Office of Financial Research published 'OFR 2022 Annual Report to Congress,’ which analyzes threats to the financial stability of the U.S. and contains a section discussing money market funds. Under 'Financial Markets and Liquidity, Short-term Funding,' they write, 'Funding markets are relatively stable, but market liquidity remains fragile. Market volatility and the impact of Federal Reserve interest rate increases are magnified in short-term markets. First, a protracted period of low interest rates and the Federal Reserve's quantitative easing facilitated risk taking. Second, investors may have taken market liquidity and low price volatility for granted and underestimated the speed and pace of interest rate increases. Third, the market remains vulnerable to liquidity and maturity transformation mismatches for banks and nonbanks.'"
MFI writes, "The OFR tells us, 'To broaden support for the floor of overnight rates, the Federal Reserve uses the Overnight Reverse Repo Facility (ON RRP) to support a floor on short-term rates by providing an alternative investment for nonbank financial institutions such as money market funds (MMFs) and government-sponsored enterprises (GSEs). The ON RRP level is very high at $2.4 trillion as of Sept. 30, 2022, an increase of $846.4 billion since the start of 2022.... Traditionally, ON RRP usage tends to spike around month- and quarter-end reporting dates when some banks shrink their balance sheets.... As a result, eligible money market participants invested substantially in the ON RRP, with prime and government MMFs accounting for up to 92% of the total lending to the ON RRP.'"
MFI also includes the News brief, "Money Fund Assets Hit Record Again." It says, "ICI's <b:>`_ latest weekly 'Money Market Fund Assets' report shows money fund assets bouncing back to record levels following two weeks of modest declines. Money funds saw their biggest weekly increase since April 29, 2020 during the first week of 2023, and they've risen by $237.1 billion (or 5.2%) over the past 13 weeks."
Another News brief, "Fed Hikes Rates 25 bps to 4.50-4.75%," tells us, "A release entitled, 'Federal Reserve issues FOMC statement' tells us, 'The Committee ... decided to raise the target range for the federal funds rate to 4-1/2 to 4-3/4 percent."
A sidebar, "SSGA's '23 Outlook, Reforms," states, "State Street Global Advisors published a 'Global Cash Outlook,' entitled, 'The Year Ahead -- Chaos or Calm?' Will Goldthwait writes, 'The overall theme of 2023 will be confusion. The current geopolitical macro-economic back drop could deliver such a broad array of outcomes that it's anyone's guess where we will be at the end of the year.'"
Another sidebar, "Schwab on Cash Sorting," quotes Schwab CFO Peter Crawford comments in the earnings release, 'Schwab's record financial performance in 2022 highlighted the resiliency of our diversified financial model. Sustained business momentum ... helped drive 12% growth in ... revenues. Net interest revenue reached $10.7 billion, an increase of 33% versus the prior year, as higher interest rates more than offset the impact of balance sheet contraction due to client cash sorting. Lower market valuations throughout the year pushed asset management and administration fees down slightly to $4.2 billion, or 1% year-over-year.'"
Our February MFI XLS, with January 31 data, shows total assets increased $22.5 billion to $5.191 trillion, after increasing $70.2 billion in December, $55.4 billion in November, $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 and $74.3 billion in April. MMFs increased $24.1 billion in March, but decreased $34.6 billion last February.
Our broad Crane Money Fund Average 7-Day Yield was up 15 bps to 4.02%, and our Crane 100 Money Fund Index (the 100 largest taxable funds) was up 10 bps to 4.15% in January. On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA and the Crane 100 both were both higher at 4.33% and 4.28%, respectively. Charged Expenses averaged 0.38% and 0.26% for the Crane MFA and the Crane 100. (We'll revise expenses on Wednesday once we upload the SEC's Form N-MFP data for 1/31/23.) The average WAM (weighted average maturity) for the Crane MFA was 17 days (up 1 day from previous month) while the Crane 100 WAM remained the same at 14 days. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)