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Money Fund Wisdom News

Sep 08
 

The September issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Thursday morning, features the articles: "Short & Shorter: Record Low WAMs, Record High Repo," which discusses how short maturities have gotten; "EFAMA Fact Book Reviews European Money Funds in '21," which reviews statistics on European MMFs; and, "Lobbying Steps Up as SEC Prepares Final MMF Rules," which quotes from a recent ignites piece. We also sent out our MFI XLS spreadsheet earlier, and we've updated our database with 8/31/22 data. Our September Money Fund Portfolio Holdings are scheduled to ship on Monday, Sept. 12, and our September Bond Fund Intelligence is scheduled to go out on Thursday, Sept. 15. (Note: Our MFI, MFI XLS and Crane Index products are all available to subscribers via our Content center.)

MFI's "Short & Shorter" article says, "Weighted average maturities, or WAMs, of money market funds just keep getting shorter. The average WAM for Taxable money funds fell by 3 days to 18 days, down from 36 days at the start of the year and the lowest level ever. The maximum WAM for money funds was originally 120 days until the early 1990s, when it was reduced to 90 days. Then, it was cut to 60 days with the 2014 MMF Reforms. (The WAM measures how long, on average, portfolios turn over and reflect Fed rate hikes or cuts.)"

It continues, "WALs, or weighted average life, are also hitting record lows. Our Crane Money Fund Average for WALs sank to 61 days from 64 days in August, the lowest level since reporting began on this data point in 2014. (The SEC added a mandate that WAL, which doesn't include maturity adjustments for floating rate securities, be a maximum of 120 days.)"

Our "EFAMA Fact Book" piece explains, "A press release entitled, 'EFAMA publishes 2022 Industry Fact Book,' tells us, 'The European Fund and Asset Management Association (EFAMA) has released its 2022 Industry Fact Book. The 2022 Fact Book provides an in-depth analysis of trends in the European fund industry, with an emphasis on what happened in 2021. It also includes an extensive overview of the regulatory developments across 28 European countries and a wealth of data.' (`Note: EFAMA's Federico Cupelli will speak at our upcoming European Money Fund Symposium, which is Sept. 27-28 in Paris, France. We hope to see you there!)"

It also says, "EFAMA Director General Tanguy van de Werve comments, 'Beyond providing in-depth analysis of recent trends in the European investment fund industry, this year's ... Fact Book analyses several issues highly relevant for our industry, including ... some proposals to amend the money market funds regulation.'"

Our "SEC" piece states, "Last week, mutual fund news source ignites brought pending Money Fund Reforms back into the headlines with the piece, 'Shops Step Up Pressure on SEC to Revamp Money Fund Rules.' They explain, 'Industry firms and their trade groups appear to be making a last-ditch effort to convince the Securities and Exchange Commission to change several key parts of its money market fund rule proposal. The agency seeks to put out the final rule in October, according to its regulatory agenda. But some large money fund sponsors have argued that if the proposed rule is adopted in its current form, it would kill institutional prime funds and hurt government money funds.'"

MFI writes, "The ignites update tells us, 'The proposal was first floated in December and comments on it were due in April. On Aug. 10, nearly 30 industry executives met remotely with Securities and Exchange Commission officials about the proposed rule, disclosures show. The shops represented at that meeting included the largest managers of money funds: Fidelity, BlackRock, Vanguard, JPMorgan, Federated Hermes, Schwab and T. Rowe Price. The firms are members of the asset management group of the Securities Industry and Financial Markets Association, which organized the meeting.... The SEC's disclosure about the meeting states only that the money fund rule proposal was discussed, but does not provide details.'"

MFI also includes the News brief, "Money Fund Yield Average Hits 2.0%. Our Crane 100 Money Fund Index (​7-​Day Yield) rose 41 basis points in August to 2.​00%, its highest level since June 2019. Our broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (​currently 740), rose to 1.​84% last month."

Another News brief, "Big Rates Hikes to Continue, Stick Around, Says Powell in Jackson Hole," explains, "Federal Reserve Board Chair Jerome Powell spoke on 'Monetary Policy and Price Stability’ recently in Jackson Hole, Wyoming, and indicated that interest rate hikes will keep coming until inflation is back at 2%. He says, 'The Federal Open Market Committee's (FOMC) overarching focus right now is to bring inflation back down to our 2 percent goal.'"

A third News brief, "MMF Assets Flat, But Prime Grows," says, "Money fund assets inched higher in August, rising $2.3 billion to $5.044 trillon, according to Crane Data. Prime MMFs increased by $44.7 billion to $950.3 billion. ICI's weekly 'Money Market Mutual Fund' assets series shows money fund assets inching lower in the latest week, the 4th decline in the past 5 weeks."

Also, a sidebar, "SEC on MMFs & Treasuries," states, "The Securities & Exchange Commission's Division of Investment Management Analytics Office published, 'Money Market Funds in the Treasury Market,' which reviews Government money market fund investments in Treasuries and repos over the past decade. The authors write, 'This study analyzes portfolio holdings data filed by money market funds (MMFs) on Form N-MFP to gain insights about these funds' activity in the Treasury market. Since March 2020 the MMF industry, including both government and prime MMFs, increased investments in Treasury securities and Treasury repurchase agreements supporting Treasury auctions and repo market functioning. MMFs are also the main investors in the Federal Reserve's reverse repo facility supporting monetary policy implementation.'"

Our September MFI XLS, with August 31 data, shows total assets increased $2.3 billion to $5.044 trillion, after increasing $26.0 billion in July and $31.9 billion in June, but decreasing $10.7 billion in May and $74.3 billion in April. MMFs increased $24.1 billion in March, decreased $34.6 billion in February and decreased $128.1 billion in January. Assets increased $104.6 billion in December, $49.7 billion in November and $20.5 billion October. Our broad Crane Money Fund Average 7-Day Yield was up 41 bps to 1.84%, and our Crane 100 Money Fund Index (the 100 largest taxable funds) was up 38 bps to 2.00% in August.

On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA and the Crane 100 both were both higher at 2.25% and 2.29%, respectively. Charged Expenses averaged 0.41% and 0.29% for the Crane MFA and the Crane 100. (We'll revise expenses on Friday once we upload the SEC's Form N-MFP data for 8/31/22.) The average WAM (weighted average maturity) for the Crane MFA was a record low 19 days (down 3 days from previous month) while the Crane 100 WAM decreased 4 days to 19 days. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)

Aug 22
 

This month, MFI interviews David R. Jones, President & CEO of CastleOak Securities. CastleOak Securities is a minority-owned dealer and one of the first firms to offer both an online money market trading portal and a D&I share class in the money fund space. We discuss the latest in diversity, corporate investing and cash below in our Q&A. (Note: The following is reprinted from the August issue of Money Fund Intelligence, which was published on Aug. 5. Contact us at info@cranedata.com to request the full issue or to subscribe, and let us know too if you'd like to see our latest list of ESG, Social and D&I share class money market funds.)

MFI: Give us some history. Jones: I founded the firm back in 2006, and we've grown CastleOak to be one of the largest diverse investment banks on Wall Street. We've got six offices around the country and are headquartered in New York. We’ve grown the firm from four individuals ... and now we've got over 55 employees. We focus on the capital markets for our clients, and that includes primary issuance, both in debt and equity, and also the secondary trading that goes along with that. On the fixed income side, back in 2010 when I brought Dan Davis and his team on, that's when we got into the Treasury, Agency and Money Market space. We've got a very strong presence on the secondary side in the front end of the curve.

In 2011, we got into the portal business by starting a partnership with State Street, where we launched our Money Fund Access program, giving our broker clients access to over 20 different money market fund families through our dedicated portal. Over the years, we've had assets grow to over $16 billion on that portal. Last year, we hired in two more seasoned professionals to augment our existing Money Fund Solutions team, so now we feel like we have a lot of depth and experience on the bench.

Also, just recently we launched our designated share classes, in partnership with Morgan Stanley. We've got two funds with them, Morgan Stanley Institutional Liquidity Government and MSILF ESG Prime. So, we've got a great combination of products for our clients who are managing their cash, whether they want to buy direct, whether they want to use managers to invest in funds, or whether they want to go direct to designated share class.

Our clients are the bluest of blue-chip corporate issuers, institutional investors, and government entities. We have the largest money management clients, which are the most sophisticated investors -- the BlackRocks, the Wellingtons of the world -- all the way down to billion-dollar asset managers like Pugh Asset Management and Garcia Hamilton.

MFI: Talk about D&I investing today. Jones: D&I [diversity & inclusion] investing has been around for a while. It started with folks understanding that doing business with diverse suppliers was a good idea when their employees or their customers were diverse. Later on, it transferred into supplier diversity -- buying widgets from minority-owned companies and things like that. Now it's across the board in professional services like banking and legal services.

Unfortunately, this momentum has come about because of many, many tragic events like the death of George Floyd. But the spotlight is there now. I don't want to say it's not always been at the C-suite level, but now it is clearly a C-suite conversation for corporations. In most major corporations, it is permeating throughout the firm. [They're looking at] what people are doing, what corporations are doing, not only internally -- are they hiring a diverse workforce? -- but also in terms of who folks are doing business with. They're concerned about doing business and doing good at the same time. They're looking beneath the surface for substance as well, which benefits firms like ours.

MFI: Did D&I start with governments? Jones: It starts at the top and [yes], the governments and municipalities ... it evolved on that side earlier. But now you're seeing that there are more diverse people at the upper echelons of corporate America. So that is resonating with them and you're starting to see that push. Senior executives are spotlighting or highlighting the need for diversity. There's still a long way to go, there's no doubt about that. But I think it is getting to where corporate America is following suit and allowing diverse managers and diverse broker dealers the opportunity to participate. When you see corporations like Verizon, AT&T, Apple and those caliber companies including diverse firms in their syndicates or in the funds that they're investing in, others look at this and realize that they should be doing the same thing. So, it's snowballing.

We are benefiting from that. We are well positioned. We have a very good coverage plan throughout our organization, public and private. It's always been in our DNA. We're not relying on others to do our calling; we're doing our calling ourselves. When people know you're out there, you've been consistent about the quality of the firm and its people, and clients know who they're doing business with ... it helps.

MFI: Are these deals exclusive? Jones: The strength of our firm has been based on the relationships we've developed. We're not out there just saying, 'Hey, just do business with us because we're a minority-owned firm.' We develop relationships. I would say that the deals we have are somewhat unique. We don't have an exclusive agreement with Morgan Stanley, but we're the only minority firm they're working with in the share class space. I think there are others out there who have multiple relationships. We also have a strong relationship with State Street on the portal side. These are world class firms that could do business with anyone, but they have partnered with us.

I don't think the larger firms are just like, 'Come one, come all and we'll do a partnership.' You've got to court some corporate clients. Especially in the money fund space, gathering assets is key. I think a lot of the larger fund managers are looking at this as a way they can increase assets under management, saying, 'If folks are putting money in these designated share classes, we should look into that.' In our world, we're doing the same thing. That's the name of our game. We're trying to increase the assets, not only in our portal but also in our share class.

There are some funds out there that are sort of stand-alone -- that's all they do in the space. We do feel we're differentiated in that we have experts across the curve in the fixed-income space. This is just one quiver in our arsenal, so we can meet a client's needs wherever they may be. But in particular on the short end, we feel that we are experts there. These are just a couple of the products, the fund portal and the share class, that we can offer to our clients. If they want to go direct, we can help them in managing their short-term liquidity needs.

MFI: What's your biggest priority? Jones: We think we've had a successful launch to our designated share classes with Morgan Stanley. But we just added a charitable donation component to them, because we see that there are some clients that would like to be able to have their assets generate fees to go to a charity. We're working diligently and just announced that we're going to be donating part of our revenue to the United Negro College Fund (UNCF). We feel that their mission aligns with ours. We do see that this is getting traction, that the charitable component is important to a lot of our clients.

But the transparency of exactly what's going to these charities needs to be in the spotlight as well. There are plenty of firms that have funds that have announced things like that, but when you look through the lens and try to find out how much is actually being donated, you really can't find that out. We've announced that we're going to donate 2 basis points of the assets invested directly in our share class to charity. We can help our clients track their ESG-related spending in a clear and straightforward way.

MFI: What are customers saying? Jones: Let me say, they are happy they're getting some income on their cash, that's for sure. There have been a lot of headwinds of late.... It's really hard to get people focused. As you talk about money market reform, people want to keep their ear to what's going on, but nobody really knows exactly what's happening.... I think as we look at, 'What are their priorities?' Capital preservation is key. Liquidity is key, and yield is up there. Now that they're getting more yield, they're getting more interested in what's going on in the marketplace and in where they can put their money for more yield.... So, we're optimistic going into the second half of the year, with full fees being paid, yields rising, etc. We're optimistic about our asset growth.

MFI: What about revenue sharing? Jones: This is a low margin business, so when you start talking about third-party distributors and platforms, the fees start getting chopped up pretty quickly. But I do think that you get the assets on the portal [almost any way you can]. Our model is not about saying 'Let's go to zero and see what we can do.' We want to be fair as we gather assets.... We're not willing to disrupt the marketplace in terms of how business is done. I'm not shy to say, and our clients appreciate, that this is a for-profit business. We've got to be competitive. But it's hard to do business and do good with our charitable component if we're waiving fees.

MFI: Any other thoughts? Jones: The first half of the year was challenging. [In] our portal and money fund business, revenue was down because we had compressed fees. Now we're back to the full fee levels. We're very optimistic as people look at where they can get yield in the short end that our corporate clients will be back in money funds. I do think that there's still money on the sidelines and people are looking for that yield.... We're optimistic that we can move the needle there.

We're also coming from a lower base. You've got $5 trillion in money funds, and less than 1% of those funds are invested in D&I share class funds. Our funds in particular -- we're like $1.3 billion or so in the designated share class -- we feel there's a good opportunity for us to grow our assets.

Aug 10
 

Crane Data's August Money Fund Portfolio Holdings, with data as of July 31, 2022, show Repo (led by Fed repo) jumping yet again while Treasuries continued a deep 6-month slide. Money market securities held by Taxable U.S. money funds (tracked by Crane Data) increased by $116.1 billion to $4.939 trillion in July, after decreasing $2.6 billion in June, $58.4 billion in May and $55.2 billion in April. Repo remained the largest portfolio segment, while Treasuries remained in the No. 2 spot. The Federal Reserve Bank of New York, which surpassed the U.S. Treasury as the largest "Issuer" two months ago, is now borrowing almost $2.1 trillion from money market funds (the total broke above $2.0 trillion last month). 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) increased $88.7 billion (3.5%) to $2.619 trillion, or 53.0% of holdings, in July, after increasing $128.6 billion in June and $52.5 billion in May. Repo decreased $9.9 billion in April but increased $100.9 billion in March. Treasury securities fell $33.2 billion (-2.3%) to $1.421 trillion, or 28.8% of holdings, after decreasing $72.5 billion in June, $145.4 billion in May, $78.6 billion in April and $79.2 billion in March. Government Agency Debt was up $24.5 billion, or 6.0%, to $430.8 billion, or 8.7% of holdings, after decreasing $14.6 billion in June, increasing $35.1 billion in May, and decreasing $1.0 billion in April. Repo, Treasuries and Agency holdings now total $4.471 trillion, representing a massive 90.5% of all taxable holdings.

Money fund holdings of CP, CDs and Other (mainly Time Deposits) holdings all rose in July. Commercial Paper (CP) increased $15.3 billion (7.2%) to $227.9 billion, or 4.6% of holdings, after decreasing $17.3 billion in June, increasing $5.8 billion in May and decreasing $0.1 billion in April. Certificates of Deposit (CDs) increased $3.6 billion (3.0%) to $122.0 billion, or 2.5% of taxable assets, after decreasing $1.0 billion in June, but increasing $3.4 billion in May and $7.3 billion in April. Other holdings, primarily Time Deposits, increased $17.3 billion (19.0%) to $108.7 billion, or 2.2% of holdings, after decreasing $21.1 billion in June and $4.7 billion in May, but increasing $28.2 billion in April. VRDNs fell to $9.9 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 jumped to $902 billion, or 18.3% of taxable money funds' $4.939 trillion total. Among Prime money funds, CDs represent 13.5% (down from 14.8% a month ago), while Commercial Paper accounted for 25.4% (down from 26.6% in June). The CP totals are comprised of: Financial Company CP, which makes up 17.0% of total holdings, Asset-Backed CP, which accounts for 3.2%, and Non-Financial Company CP, which makes up 5.2%. Prime funds also hold 6.6% in US Govt Agency Debt, 6.0% in US Treasury Debt, 28.9% in US Treasury Repo, 0.3% in Other Instruments, 9.8% in Non-Negotiable Time Deposits, 5.1% in Other Repo, 2.1% in US Government Agency Repo and 0.6% in VRDNs.

Government money fund portfolios totaled $2.781 trillion (56.3% of all MMF assets), up from $2.779 trillion in June, while Treasury money fund assets totaled another $1.257 trillion (25.5%), up from $1.244 trillion the prior month. Government money fund portfolios were made up of 13.4% US Govt Agency Debt, 8.4% US Government Agency Repo, 20.8% US Treasury Debt, 57.1% in US Treasury Repo, 0.0% in Other Instruments. Treasury money funds were comprised of 62.7% US Treasury Debt and 37.0% in US Treasury Repo. Government and Treasury funds combined now total $4.038 trillion, or 81.8% of all taxable money fund assets.

European-affiliated holdings (including repo) increased by $52.0 billion in July to $397.8 billion; their share of holdings rose to 8.1% from last month's 7.2%. Eurozone-affiliated holdings increased to $278.9 billion from last month's $238.5 billion; they account for 5.7% of overall taxable money fund holdings. Asia & Pacific related holdings jumped higher to $176.6 billion (3.6% of the total) from last month's $170.8 billion. Americas related holdings rose to $4.360 trillion from last month's $4.301 trillion, and now represent 88.3% of holdings.

The overall taxable fund Repo totals were made up of: US Treasury Repurchase Agreements (up $66.2 billion, or 2.9%, to $2.312 trillion, or 46.8% of assets); US Government Agency Repurchase Agreements (up $21.3 billion, or 9.2%, to $252.9 billion, or 5.1% of total holdings), and Other Repurchase Agreements (up $1.2 billion, or 2.2%, from last month to $54.3 billion, or 1.1% of holdings). The Commercial Paper totals were comprised of Financial Company Commercial Paper (up $5.0 billion to $152.9 billion, or 3.1% of assets), Asset Backed Commercial Paper (up $2.0 billion to $28.5 billion, or 0.6%), and Non-Financial Company Commercial Paper (up $8.3 billion to $46.6 billion, or 0.9%).

The 20 largest Issuers to taxable money market funds as of July 31, 2022, include: the Federal Reserve Bank of New York ($2.088T, 42.3%), the US Treasury ($1.421 trillion, or 28.8%), Federal Home Loan Bank ($310.6B, 6.3%), Federal Farm Credit Bank ($104.9B, 2.1%), BNP Paribas ($80.6B, 1.6%), RBC ($70.3B, 1.4%), Fixed Income Clearing Corp ($45.9B, 0.9%), Sumitomo Mitsui Banking Co ($45.0B, 0.9%), JP Morgan ($39.4B, 0.8%), Citi ($35.8B, 0.7%), Credit Agricole ($34.3B, 0.7%), Bank of America ($34.0B, 0.7%), Mitsubishi UFJ Financial Group Inc ($32.6B, 0.7%), Barclays ($31.3B, 0.6%), Toronto-Dominion Bank ($26.8B, 0.5%), Mizuho Corporate Bank Ltd ($26.1B, 0.5%), Bank of Montreal ($24.0B, 0.5%), Canadian Imperial Bank of Commerce ($21.4B, 0.4%), Goldman Sachs ($19.0B, 0.4%) and ING Bank ($17.0B, 0.3%).

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 ($2.088T, 79.7%), BNP Paribas ($74.3B, 2.8%), RBC ($50.7B, 1.9%), Fixed Income Clearing Corp ($45.9B, 1.8%), JP Morgan ($32.4B, 1.2%), Sumitomo Mitsui Banking Corp ($31.5B, 1.2%), Bank of America ($29.4B, 1.1%), Citi ($27.0B, 1.0%), Mitsubishi UFJ Financial Group Inc ($19.6B, 0.7%) and Barclays PLC ($17.9B, 0.7%) <b:>`_. The largest users of the $2.088 trillion in Fed RRP include: Vanguard Federal Money Mkt Fund ($134.1B), Goldman Sachs FS Govt ($130.4B), Fidelity Govt Money Market ($127.3B), Fidelity Govt Cash Reserves ($115.4B), JPMorgan US Govt MM ($113.3B), Morgan Stanley Inst Liq Govt ($92.8B), Federated Hermes Govt ObI ($79.0B), BlackRock Lq FedFund ($74.0B), Dreyfus Govt Cash Mgmt ($70.0B) and State Street Inst US Govt ($66.5B).

The 10 largest issuers of "credit" -- CDs, CP and Other securities (including Time Deposits and Notes) combined -- include: Credit Agricole ($20.4B, 5.3%), RBC ($19.6B, 5.1%), Mizuho Corporate Bank Ltd ($18.7B, 4.8%), Toronto-Dominion Bank ($15.5B, 4.0%), Skandinaviska Enskilda Banken AB ($15.0B, 3.9%), Sumitomo Mitsui Banking Corp ($13.5B, 3.5%), Barclays PLC ($13.4B, 3.5%), Mitsubishi UFJ Financial Group Inc ($13.0B, 3.4%), Canadian Imperial Bank of Commerce ($12.4B, 3.2%) and Bank of Montreal ($12.3B, 3.2%).

The 10 largest CD issuers include: Sumitomo Mitsui Banking Corp ($11.4B, 9.3%), Credit Agricole ($9.7B, 8.0%), Canadian Imperial Bank of Commerce ($9.1B, 7.5%), Mitsubishi UFJ Financial Group Inc ($8.9B, 7.3%), Toronto-Dominion Bank ($7.3B, 6.0%), Bank of Nova Scotia ($6.2B, 5.1%), Sumitomo Mitsui Trust Bank ($5.7B, 4.7%), Citi ($5.1B, 4.2%), Svenska Handelsbanken ($4.7B, 3.9%) and Nordea Bank ($4.3B, 3.6%).

The 10 largest CP issuers (we include affiliated ABCP programs) include: RBC ($13.5B, 7.3%), Bank of Montreal ($8.0B, 4.3%), Toronto-Dominion Bank ($7.6B, 4.1%), JP Morgan ($7.0B, 3.8%), BNP Paribas ($5.2B, 2.8%), National Australia Bank Ltd ($5.2B, 2.8%), Barclays PLC ($5.2B, 2.8%), Svenska Handelsbanken ($4.9B, 2.7%), Macquarie Bank Limited ($4.9B, 2.6%) and Australia & New Zealand Banking Group Ltd ($4.9B, 2.6%).

The largest increases among Issuers include: Federal Reserve Bank of New York (up $77.2B to $2.088T), Federal Home Loan Bank (up $29.8B to $310.6B), Credit Agricole (up $15.3B to $34.3B), RBC (up $5.8B to $70.3B), Barclays PLC (up $5.6B to $31.3B), BNP Paribas (up $5.0B to $80.6B), Natixis (up $4.5B to $13.5B), Svenska Handelsbanken (up $4.2B to $12.2B), Societe Generale (up $4.0B to $16.8B) and Rabobank (up $3.8B to $7.5B).

The largest decreases among Issuers of money market securities (including Repo) in July were shown by: the US Treasury (down $33.2B to $1.421T), Fixed Income Clearing Corp (down $21.9B to $45.9B), Goldman Sachs (down $10.0B to $19.0B), Landesbank Baden-Wurttemberg (down $2.8B to $5.0B), Federal Home Loan Mortgage Corp (down $2.0B to $10.6B), National Australia Bank Ltd (down $1.7B to $6.9B), Mizuho Corporate Bank Ltd (down $1.5B to $26.1B), Nordea Bank (down $1.3B to $5.1B), Lloyds Banking Group (down $1.3B to $5.1B) and Sumitomo Mitsui Banking Corp (down $1.2B to $45.0B).

The United States remained the largest segment of country-affiliations; it represents 84.7% of holdings, or $4.186 trillion. Canada (3.5%, $174.3B) was in second place, while France (3.3%, $161.1B) was No. 3. Japan (3.1%, $153.4B) occupied fourth place. The United Kingdom (1.2%, $57.3B) remained in fifth place. Netherlands (0.9%, $43.1B) was in sixth place, followed by Sweden (0.8%, $40.8B) Australia (0.6%, $30.8B), ` Germany <b:>`_ (0.6%, $30.2B) and Switzerland (0.3%, $13.8B). (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 July 31, 2022, Taxable money funds held 64.9% (up from 63.8%) of their assets in securities maturing Overnight, and another 7.0% maturing in 2-7 days (up from 6.9%). Thus, 71.9% in total matures in 1-7 days. Another 6.7% matures in 8-30 days, while 7.4% matures in 31-60 days. Note that over three-quarters, or 86.1% 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 4.7% of taxable securities, while 7.4% matures in 91-180 days, and just 1.9% matures beyond 181 days. (Visit our Content center to download, or contact us to request our latest Portfolio Holdings reports.)

Aug 05
 

The August issue of our flagship Money Fund Intelligence newsletter, which was sent to subscribers Friday morning, features the articles: "MMF Yields Approach 2% on 2nd Fed 75; Assets $5 Trillion," which discusses the jump in yields and rise in assets in July; "CastleOak's Jones on Minority Dealers, Portals, D&I Shares," our most recent "profile"; and, "SEC's Birdthistle Speaks on MMFs, Pending Reforms," which quotes from a recent speech from the Director of the Division of Investment Management. We also sent out our MFI XLS spreadsheet Friday morning, and we've updated our database with 7/31/22 data. Our August Money Fund Portfolio Holdings are scheduled to ship on Tuesday, Aug. 9, and our August Bond Fund Intelligence is scheduled to go out on Friday, Aug. 12. (Note: Our MFI, MFI XLS and Crane Index products are all available to subscribers via our Content center.)

MFI's "Yields Approach 2%" article says, "Money fund yields surged higher again in July as the Federal Reserve hiked rates by 75 bps for the second time in 2 months. Our Crane 100 Money Fund Index (7-Day Yield) jumped by 44 basis points to 1.62% in July, and it's risen by 24 more bps already in August (through 8/3) to 1.86%. Average yields are now more than triple their level of 0.58% on May 31; they're up from 0.15% on March 31 and up from 0.02% on February 28 (where they'd been for 2 years prior)."

It continues, "The top-yielding money funds were poised just under 2.0% on 7/31, but they've since smashed through this level and are now above 2.25%. Yields continue to digest the Fed's 7/27 big hike, so the average money fund yield should break over 2.0% and the top-yielding funds should approach 2.5% in coming weeks. Money fund yields could even be as high as 3.0% or even 4.0% by year-end."

Our "CastleOak" piece explains, "This month MFI interviews David R. Jones, President & CEO of CastleOak Securities, a minority-owned dealer and one of the first firms to offer both an online money market trading portal and a D&I share class in the money fund space. We discuss the latest in diversity, corporate investing and cash. Our Q&A follows."

MFI says, "Give us some history. Jones comments, "I founded the firm back in 2006, and we've grown CastleOak to be one of the largest diverse investment banks on Wall Street. We've got six offices around the country and are headquartered in New York. We've grown the firm from four individuals ... and now we've got over 55 employees. We focus on the capital markets for our clients, and that includes primary issuance, both in debt and equity, and also the secondary trading that goes along with that. On the fixed income side, back in 2010 when I brought Dan Davis and his team on, that's when we got into the Treasury, Agency and Money Market space. We've got a very strong presence on the secondary side in the front end of the curve."

Our "Birdthistle" piece states, "U.S. Securities & Exchange Commission Division of Investment Management Director William Birdthistle recently gave a talk entitled, 'Remarks at PLI: Investment Management 2022,' where he spent some time discussing money funds. He comments, 'The final topic I would like to touch on today is `money market funds. These funds, together with a few others, have at times been called 'shadow banks.' Today, the more common, slightly less pejorative term is 'non-bank financial institution.' As a proud member of the SEC's Division of Investment Management, I tend to view the $128 trillion in regulatory assets under management subject to our oversight as a substantial universe in its own right.... But I understand that things might seem otherwise to advocates for the non-fund community."

Birdthistle explains, "Money market funds enjoyed their rise to prominence, of course, largely following the adoption of Regulation Q. Regulation Q imposed ceilings on interest rates that could be paid on bank deposits, which proved to be a competitive liability during the period of high inflation in the late 1970s and early 1980s. Instruments such as money market funds that could offer market interest rates (which peaked above 12% in 1981) prospered at the expense of bank accounts capped at the Regulation Q ceiling (which remained below 6% at the time). That moment served as the spark of life for an instrument that has since grown to hold approximately $5 trillion in assets."

MFI also includes the News brief, "Fed Hikes 75 Bps Again to 2.25-2.50%." It tells readers, "The Federal Reserve Board again hiked short-term interest rates by 75 basis points, raising its Fed funds target rate to a range of 2.25-2.50%."

Another News brief, "ICI President Eric Pan," explains, "ICI President Eric Pan posts, 'Fact-checking Statements on Money Market Fund Reform,' which briefly revisits pending SEC Money Fund Reforms and is partially in response to a recent speech by the SEC's William Birdthistle."

A third News brief, "The FT on "'`The return of cash': money market fund sector perks up on rising rates." They write, "Rising interest rates are turning the $4.6tn money market fund sector from a drag on profits into a source of earnings in a rare piece of good news for asset managers whose fees have been hit hard by falling equity and debt markets."

A sidebar, "Schwab on Cash Sorting," states, "Charles Schwab recently hosted a '2022 Summer Business Update,' which mentioned cash in a number of places. CFO Peter Crawford comments, 'Our performance was obviously helped by higher interest rates across the curve, which boosted our net interest margin and BDA [bank deposit account] yield and eliminated money fund fee waivers by the end of the quarter <b:>`_.... [T]he elimination of money fund fee waivers and organic inflows offset the impact of the market decline.'"

Another sidebar, "Fidelity Merging State MMFs," explains, "Fidelity Investments filed to liquidate and reorganize most of their State Municipal money market funds, merging its AZ, CT, MI, OH, and PA Muni MMFs into Fidelity Municipal Money Market Fund, and consolidating their CA, MA, NJ and NY State Muni fund offerings. While there haven't been many other moves in 2022, there has been a steady stream of exits in the Tax-Exempt space over the past decade. Over the past 5 years, the number of Muni MMFs has dropped from 245 to 150 <b:>`_, while the number of State funds has fallen from 116 to 53. Since June 2008, assets in `Muni MMFs have steadily declined from $490.6 billion to $111.4 billion (as of 6/30/22). Fidelity currently manages 33 Tax-Exempt MMFs with $28.0 billion; after the mergers go through, this will be reduced to 20 MFs."

Our August MFI XLS, with July 31 data, shows total assets increased $26.0 billion to $5.014 trillion, after increasing $31.9 billion in June, but decreasing $10.7 billion in May and $74.3 billion in April. MMFs increased $24.1 billion in March, decreased $34.6 billion in February and decreased $128.1 billion in January. Assets increased $104.6 billion in December, $49.7 billion in November and $20.5 billion October. Our broad Crane Money Fund Average 7-Day Yield was up 46 bps to 1.43%, and our Crane 100 Money Fund Index (the 100 largest taxable funds) was up 44 bps to 1.62% 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 1.82% and 1.89%, respectively. Charged Expenses averaged 0.40% 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 7/31/22.) The average WAM (weighted average maturity) for the Crane MFA was a record low 22 days (down 1 day from previous month) while the Crane 100 WAM decreased 1 day to 23 days. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)