Link of The Day
VettaFi Talks Money Market ETFs
An article titled, "Money Market ETFs: New Ways to Reach for Yield in 2025," published by VettaFi, states, "Stocks are holding firm near all-time highs. But Wall Street can't ignore the record amounts of cash still parked on the sidelines.... The reinvestment risk into lower rates is significantly lessened this year from 2024. So the $7 trillion money market suddenly looks more appealing. Recent developments here may offer advisors and investors fresh pathways with which to attain higher yield in 2025." It continues, "BlackRock recently expanded its cash management strategies with the launch of two new money market ETFs. They are the iShares Government Money Market ETF (GMMF) and the iShares Prime Money Market ETF (PMMF). The funds both charge a fee 0.2%. They enable investors to diversify their cash holdings beyond traditional deposit accounts. This allows them to manage their cash needs flexibly.... The new products add to a small but growing lineup of money market ETFs. Last year, Texas Capital was the first to launch an ETF with the money market moniker -- the Texas Capital Money Market ETF (MMKT). Like GMMF, the fund acts as a government money market ETF that invests nearly all its assets in cash and U.S. government securities." The piece adds, "Short-term rate demand has driven monster flows into money market funds. Staying within a range of two to three years allows investors to pick up a little extra risk cushioned by a flight-to-safety trade that offers stability with minimal rate risk. Two actively managed ETFs drew in the bulk of last year's inflows. The Dimensional Short-Duration Fixed Income ETF (DFSD) boasts a low expense ratio of 0.16% and largely offers exposure to high-quality investment-grade bonds. The $12 billion PIMCO Enhanced Short Maturity Active ETF (MINT) is designed to provide a higher yield than traditional money market funds while maintaining minimal risk. Both funds drew in nearly $2 billion in net inflows last year."
Crane 100 MF Index Stays at 4.17%
Money fund yields (7-day, annualized, simple, net) were down 1 bp at 4.17% on average during the week ended Friday, Feb. 14 (as measured by our Crane 100 Money Fund Index), after falling 1 bp the week prior and going up 1 bp two weeks prior. Fund yields have digested almost all of the Federal Reserve's 25 basis point cut from December 18, though they may inch down a basis point or 2 lower in coming days. They've declined by 89 bps since the Fed first cut its Fed funds target rate by 50 bps percent on Sept. 18, and they've declined by 46 bps since the Fed cut rates by 1/4 point on 11/7. Yields were 4.28% on average on 12/31/24, 4.45% on 11/30/24, 4.65% on 10/31, 4.75% on 9/30, 5.10% on 8/31, 5.13% on 7/31 and 6/28, 5.14% on 3/31 and 5.20% on 12/31/23. The broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 679), shows a 7-day yield of 4.06%, down 2 bps in the week through Friday. Prime Inst money fund yields were down 1 bp at 4.28% in the latest week. Government Inst MFs were down 2 bps at 4.17%. Treasury Inst MFs were down 1 bp at 4.11%. Treasury Retail MFs currently yield 3.88%, Government Retail MFs yield 3.86%, and Prime Retail MFs yield 4.06%, Tax-exempt MF 7-day yields were up 64 bps at 2.54%. Assets of money market funds fell by $29.2 billion last week to $7.213 trillion, according to Crane Data's Money Fund Intelligence Daily. For the month of February, MMF assets have fallen by $14.0 billion, after increasing by $52.8 billion in January, $110.9 billion in December, $200.5 billion in November, $97.5 billion in October and $149.8 billion in September. Weighted average maturities were unchanged at 37 days for the Crane MFA and 1 day longer at 39 days the Crane 100 Money Fund Index. According to Monday's Money Fund Intelligence Daily, with data as of Friday (2/14), 107 money funds (out of 791 total) yield under 3.0% with $111.4 billion in assets, or 1.5%; 222 funds yield between 3.00% and 3.99% ($800.0 billion, or 11.1%), 462 funds yield between 4.0% and 4.99% ($6.301 trillion, or 87.4%) and following the recent rate cut there continue to be zero funds yielding 5.0% or more. Our Brokerage Sweep Intelligence Index, an average of FDIC-insured cash options from major brokerages, was unchanged at 0.41%, after rising 1 bp four weeks prior. The latest Brokerage Sweep Intelligence, with data as of Feb. 14, shows no changes over the past week. Three of the 10 major brokerages tracked by our BSI still offer rates of 0.01% for balances of $100K (and lower tiers). These include: E*Trade, Merrill Lynch and Morgan Stanley.
ICI's MMF Portfolio Holdings Summary
ICI's latest monthly "Money Market Fund Holdings" summary, which reviews the aggregate daily and weekly liquid assets, regional exposure, and maturities (WAM and WAL) for Prime and Government money market funds, tells us, "The Investment Company Institute (ICI) reports that, as of the final Friday in January, prime money market funds held 44.5 percent of their portfolios in daily liquid assets and 60.4 percent in weekly liquid assets, while government money market funds held 77.4 percent of their portfolios in daily liquid assets and 88.0 percent in weekly liquid assets." Prime DLA was up from 42.6% in December, and Prime WLA was up from 58.1%. Govt MMFs' DLA fell from 77.5% and Govt WLA was unchanged from the previous month. ICI explains, "At the end of January, prime funds had a weighted average maturity (WAM) of 30 days and a weighted average life (WAL) of 50 days. Average WAMs and WALs are asset-weighted. Government money market funds had a WAM of 40 days and a WAL of 93 days." Prime WAMs were 1 day longer and WALs were unchanged from the previous month. Govt WAMs were 2 days longer and WALs were 2 days longer from December. Regarding Holdings by Region of Issuer, the release tells us, "Prime money market funds' holdings attributable to the Americas declined from $632.02 billion in December to $580.55 billion in January. Government money market funds' holdings attributable to the Americas declined from $5,277.74 billion in December to $5,228.15 billion in January." The Prime Money Market Funds by Region of Issuer table shows Americas-related holdings at $580.6 billion, or 53.1%; Asia and Pacific at $189.7 billion, or 17.3%; Europe at $293.3 billion, or 26.8%; and, Other (including Supranational) at $30.1 billion, or 2.8%. The Government Money Market Funds by Region of Issuer table shows Americas at $5.228 trillion, or 91.6%; Asia and Pacific at $113.2 billion, or 2.0%; Europe at $347.6 billion, 6.1%, and Other (Including Supranational) at $21.1 billion, or 0.4%.
ICI's latest weekly "Money Market Fund Assets" report shows money fund assets inching up $5.5 billion to a record $6.923 trillion, after rising $44.9 billion the week prior but falling $30.3 billion two weeks ago. Money fund assets have risen in 20 of the last 28, and 31 of the last 43, weeks, increasing by $619.7 billion (or 9.8%) since the Fed cut on 9/18/24 and increasing by $945.8 billion (or 15.8%) since 4/24/24. MMF assets are up by $909 billion, or 15.1%, in the past 52 weeks (through 2/12/25), with Institutional MMFs up $487 billion, or 13.3% and Retail MMFs up $422 billion, or 17.9%. Year-to-date, MMF assets are up by $73 billion, or 1.1%, with Institutional MMFs up $23 billion, or 0.6% and Retail MMFs up $49 billion, or 1.8%. ICI's weekly release says, "Total money market fund assets increased by $5.48 billion to $6.92 trillion for the week ended Wednesday, February 12.... Among taxable money market funds, government funds increased by $5.90 billion and prime funds increased by $1.86 billion. Tax-exempt money market funds decreased by $2.28 billion." ICI's stats show Institutional MMFs increasing $2.8 billion and Retail MMFs increasing $2.7 billion in the latest week. Total Government MMF assets, including Treasury funds, were $5.680 trillion (82.0% of all money funds), while Total Prime MMFs were $1.112 trillion (16.1%). Tax Exempt MMFs totaled $131.3 billion (1.9%). It explains, "Assets of retail money market funds increased by $2.71 billion to $2.78 trillion. Among retail funds, government money market fund assets decreased by $375 million to $1.77 trillion, prime money market fund assets increased by $4.93 billion to $891.76 billion, and tax-exempt fund assets decreased by $1.85 billion to $119.98 billion." Retail assets account for over a third of total assets, or 40.2%, and Government Retail assets make up 63.7% of all Retail MMFs. They add, "Assets of institutional money market funds increased by $2.77 billion to $4.14 trillion. Among institutional funds, government money market fund assets increased by $6.28 billion to $3.91 trillion, prime money market fund assets decreased by $3.07 billion to $220.16 billion, and tax-exempt fund assets decreased by $436 million to $11.30 billion." Institutional assets accounted for 59.8% of all MMF assets, with Government Institutional assets making up 94.4% of all institutional MMF totals. According to Crane Data's separate Money Fund Intelligence Daily series, money fund assets have risen by $11.8 billion in February through 2/12/25 to $7.238 trillion. (They hit a record high on 1/7 at $7.266 trillion.) Assets rose by $52.8 billion in January, $110.9 billion in December, $200.5 trillion in November, $97.5 billion in October, $149.8 billion in September, $109.7 billion in August, $16.6 billion in July, $15.7 billion in June and $91.4 billion in May. They declined by $15.8 billion in April and $68.8 billion in March. They rose $72.1 billion last February. Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data, so they're about $340 billion lower than Crane's asset series.
Goldman on Debt Ceiling Uncertainty
Goldman Sachs Asset Management published, "Debt Ceiling Uncertainty: What Does it Mean for Money Markets?" They tell us, "The US debt ceiling is back in focus. After being suspended in 2023 -- allowing the federal government to borrow as needed -- the limit was restored on January 2, 2025, and set to the outstanding debt level of ∼$36.1 trillion at that date. Debt ceiling drama is primarily a US saga that plays out almost every other year and may lead to disruption. In the past, volatility and weakness in the US Treasury market has occurred over the timing for an agreement and fears of the Treasury being unable to continue paying the nation's bills and the US defaulting." The piece explains, "With the debt ceiling back and once again limiting additional borrowing, its reinstatement will likely cause the Treasury to utilize a series of cash-saving tools known as 'extraordinary measures'.... However, at some point, this account will reach a so-called 'X-date' if no resolution materializes -- the point at which the Treasury runs out of money and enters technical default, which we believe could fall around late 2Q or 3Q 2025. In 2023, on the final day of the debt limit standoff, the TGA dwindled down to $22 billion." It says, "In this article, we take a closer look at how money markets have typically reacted to past debt ceiling episodes. While a resolution is likely, we also examine why we believe the Treasury has the capacity and intention to prioritize principal and interest payments should we cross the 'X-date' and enter technical default territory.... The legal limit on the amount of money the US government can borrow has been suspended and reinstated seven times since 2013, rising from $16.7 trillion to today's ∼$36 trillion. Despite close calls, in each of the prior instances, Congress has always acted to raise the debt limit before 'extraordinary measures' and the Treasury's cash balance were exhausted. Finally, Goldman writes, "When considering what a technical default might look like for US Treasuries, our view and understanding of the 'Operational Plans for Various Contingencies for Treasury Debt Payments' paper from the Treasury Market Practices Group leads us to believe Treasuries would remain as liquid, transferable and marketable assets in a default scenario. The technical default could be viewed as a delay of payment in which maturities are rolled one day at a time until a resolution is reached by Congress. Additionally, there is no provision for cross-default among US Treasuries. Based on prior debt ceiling episodes, political brinkmanship may mean a resolution is not found until the eleventh hour once again, resulting in potential market volatility. We will continue to assess the situation and scenarios as they develop, making portfolio adjustments in real-time as information presents itself. Active risk management is important in constructing and maintaining resilient portfolios should stressed scenarios ultimately arise."
New Vanguard Ultra-Short T-Bill ETFs
A press release titled, "Vanguard Introduces New ETFs to Meet Investors' Short-Term Liquidity Needs" tells us, "Vanguard launched Vanguard Ultra-Short Treasury ETF (VGUS) and Vanguard 0-3 Month Treasury Bill ETF (VBIL), two fixed income index ETFs. The pair of ETFs will be managed by Vanguard Fixed Income Group veteran, Josh Barrickman, Co-Head of Fixed Income Group Indexing in the Americas." Sara Devereux, Global Head of Vanguard Fixed Income Group, comments, "These new ultra-short Treasury products serve as valuable tools for advisors and investors to build more precise and flexible portfolios, bridging the gap between money market funds and existing ultra-short-term bond offerings in the ETF wrapper. VGUS and VBIL reflect our drive to provide investors with a more diverse product range and complement our existing line-up of active and passive funds with Vanguard's signature low-costs and management expertise." The release continues, "Serving as part of investors' liquidity toolkit, the pair of new ETFs will offer exposure to U.S. Treasury securities, have short durations and low volatility, and are expected to have tight bid-ask spreads. VGUS will track the Bloomberg Short Treasury Index, which includes U.S. Treasury Bills, Notes, and Bonds with less than 12 months until maturity. VBIL will track the Bloomberg US Treasury Bills 0-3 Months Index. Both ETFs will have an estimated expense ratio of 0.07%, positioning each ETF as a low-cost leader in its respective category. Vanguard Fixed Income Group, a world leader in fixed income with over $2.5 trillion in global assets under management, will advise the new ETFs. Vanguard Fixed Income Group has been managing index funds since 1986, when it launched Vanguard Total Bond Market Index Fund, the world's first bond index fund." The Independent Vanguard Adviser newsletter says about the news, "Neither of these ETFs is exactly innovative. For example, 0-3 Month Treasury Bill ETF enters a crowded space. You can already buy SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) or iShares 0-3 Month Treasury Bond ETF (SGOV) -- both are around $30 billion funds, which gives you an idea of Vanguard's 'other' motivations here. Also, there's the U.S. Treasury 3 Month Bill ETF (TBIL), which holds the current 3-month Treasury bill, and WisdomTree's Floating Rate Treasury ETF (USFR), which plays in the same sandbox."
Money Fund Yields Flat at 4.18%
Money fund yields (7-day, annualized, simple, net) were down 1 bp at 4.18% on average during the week ended Friday, Feb. 7 (as measured by our Crane 100 Money Fund Index), after going up 1 bp the week prior and falling 1 bp three weeks prior. Fund yields have digested almost all of the Federal Reserve's 25 basis point cut from December 18, though they may inch down a basis point or 2 lower in coming days. They've declined by 88 bps since the Fed first cut its Fed funds target rate by 50 bps percent on Sept. 18, and they've declined by 45 bps since the Fed cut rates by 1/4 point on 11/7. Yields were 4.28% on average on 12/31/24, 4.45% on 11/30/24, 4.65% on 10/31, 4.75% on 9/30, 5.10% on 8/31, 5.13% on 7/31 and 6/28, 5.14% on 3/31 and 5.20% on 12/31/23. The broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 679), shows a 7-day yield of 4.08%, down 1 bp in the week through Friday. Prime Inst money fund yields were down 2 bps at 4.28% in the latest week. Government Inst MFs were down 2 bps at 4.18%. Treasury Inst MFs were down 1 bp at 4.12%. Treasury Retail MFs currently yield 3.90%, Government Retail MFs yield 3.89%, and Prime Retail MFs yield 4.08%, Tax-exempt MF 7-day yields were down 30 bps at 1.89%. Assets of money market funds rose by $9.4 billion last week to $7.236 trillion, according to Crane Data's Money Fund Intelligence Daily. For the month of February, MMF assets have jumped by $9.4 billion, after increasing by $52.8 billion in January, $110.9 billion in December, $200.5 billion in November, $97.5 billion in October and $149.8 billion in September. Weighted average maturities were down 1 day at 37 days for the Crane MFA and unchanged at 38 days the Crane 100 Money Fund Index. According to Monday's Money Fund Intelligence Daily, with data as of Friday (2/7), 115 money funds (out of 791 total) yield under 3.0% with $137.2 billion in assets, or 1.9%; 192 funds yield between 3.00% and 3.99% ($456.2 billion, or 6.3%), 484 funds yield between 4.0% and 4.99% ($6.643 trillion, or 91.8%) and following the recent rate cut there continue to be zero funds yielding 5.0% or more. Our Brokerage Sweep Intelligence Index, an average of FDIC-insured cash options from major brokerages, was unchanged at 0.41%, after rising 1 bp three weeks prior. The latest Brokerage Sweep Intelligence, with data as of Feb. 7, shows no changes over the past week. Three of the 10 major brokerages tracked by our BSI still offer rates of 0.01% for balances of $100K (and lower tiers). These include: E*Trade, Merrill Lynch and Morgan Stanley.
Barron's on Bond Funds vs. Cash
Barron's writes, "These Bond Funds Are Better Than Cash. It's Time to Go Longer." The piece states, "Many income investors have gravitated to cash these past few years, given the juicy yields at the front end of the yield curve. The yield curve was inverted until recently, and it made sense for investors to park money in shorter-dated products, including money-market funds. That had the added benefit of minimizing duration risk—a bond price's sensitivity to changes in interest rates. Now, though, moving further out on the curve appears more favorable for bond investors looking for income.... Cash is hardly trash, but it has lost some of its luster as longer-term yields have moved up. The Crane 100 Money Fund Index, which tracks the largest money-market funds, has a 4.19% average seven-day yield—down by nearly a percentage point from 5.13% on July 31 of last year." Barron's comments, "The 10-year U.S. Treasury yield, meanwhile, has risen sharply in recent months, even as the Federal Reserve has slashed short-term rates by one percentage point since September. The 10-year note is at around 4.4%, versus 3.75% in late September. The five-year Treasury over that period has climbed to around 4.2%. While there's a good case for moving out of cash toward the middle of the curve, adding even longer-dated holdings looks like a riskier move. The Vanguard Long-Term Treasury exchange-traded fund's one-year return is about minus 3%; the ETF has posted negative results in three of the past four calendar years. Rising interest rates were a big headwind." The article adds, "Gene Tannuzzo, global head of fixed income at Columbia Threadneedle Investments, also prefers moving from cash to bonds—in his case Treasuries with maturities of up to seven years.... [T]he average life of the holdings in the $49 billion JPMorgan Core Bond fund was just over six years.... As the table above shows, other options include the Baird Aggregate Bond fund, the American Funds Bond Fund of America, and the Vanguard Total Bond Market ETF."
ICI: MF Assets Hit Record $6.917 Tril.
ICI's latest weekly "Money Market Fund Assets" report shows money fund assets rising $44.2 billion to a record $6.917 trillion, after falling $30.3 billion the week prior but jumping $41.6 billion two weeks ago. Money fund assets have risen in 19 of the last 27, and 30 of the last 42, weeks, increasing by $613.5 billion (or 9.7%) since the Fed cut on 9/18/24 and increasing by $939.6 billion (or 15.7%) since 4/24/24. MMF assets are up by $899 billion, or 14.9%, in the past 52 weeks (through 2/5/25), with Institutional MMFs up $479 billion, or 13.1% and Retail MMFs up $420 billion, or 17.8%. Year-to-date, MMF assets are up by $67 billion, or 1.0%, with Institutional MMFs up $21 billion, or 0.5% and Retail MMFs up $46 billion, or 1.7%. ICI's weekly release says, "Total money market fund assets increased by $44.18 billion to $6.92 trillion for the week ended Wednesday, February 5, the Investment Company Institute reported.... Among taxable money market funds, government funds increased by $37.57 billion and prime funds increased by $7.22 billion. Tax-exempt money market funds decreased by $602 million." ICI's stats show Institutional MMFs increasing $19.8 billion and Retail MMFs increasing $24.4 billion in the latest week. Total Government MMF assets, including Treasury funds, were $5.673 trillion (82.0% of all money funds), while Total Prime MMFs were $1.110 trillion (16.0%). Tax Exempt MMFs totaled $133.6 billion (2.0%). It explains, "Assets of retail money market funds increased by $24.43 billion to $2.78 trillion. Among retail funds, government money market fund assets increased by $17.28 billion to $1.77 trillion, prime money market fund assets increased by $7.70 billion to $886.83 billion, and tax-exempt fund assets decreased by $556 million to $121.83 billion." Retail assets account for over a third of total assets, or 40.2%, and Government Retail assets make up 63.7% of all Retail MMFs. They add, "Assets of institutional money market funds increased by $19.75 billion to $4.14 trillion. Among institutional funds, government money market fund assets increased by $20.28 billion to $3.90 trillion, prime money market fund assets decreased by $486 million to $223.23 billion, and tax-exempt fund assets decreased by $46 million to $11.73 billion." Institutional assets accounted for 59.8% of all MMF assets, with Government Institutional assets making up 94.3% of all institutional MMF totals. According to Crane Data's separate Money Fund Intelligence Daily series, money fund assets have risen by $18.7 billion in February through 2/5/25 to $7.245 trillion. (They hit a record high on 1/7 at $7.266 trillion.) Assets rose by $52.8 billion in January, $110.9 billion in December, $200.5 trillion in November, $97.5 billion in October, $149.8 billion in September, $109.7 billion in August, $16.6 billion in July, $15.7 billion in June and $91.4 billion in May. They declined by $15.8 billion in April and $68.8 billion in March. They rose $72.1 billion last February. Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data, so they're about $340 billion lower than Crane's asset series.
DWS Says "Time for Multi Asset"
DWS writes "Time for Multi Asset," which tells us, "After years of minimal interest rates, investors have been piling into money-market funds since 2022 to take advantage of higher rates. Now is the time to rebalance and diversify." Their piece explains, "After years of dormancy, money-market funds have awakened with a surge over the past three years: since the beginning of 2022, some EUR 1,900 billion have flowed into money-market funds globally, an increase of 30.4%. Funds in other asset classes suffered, especially balanced funds.... However, due to the turnaround in interest rates and the heightened economic and political uncertainty following the U.S. elections in our opinion it is the right time to diversify again." It continues, "In our view, this means that investors in money-market funds are exposed to significant reinvestment risk over the next year or two, as money-market-fund rates track policy rates closely. Historically, there is another problem with money-market funds for long-term investors: their performance has lagged that of many other asset classes over a full cycle, and in many periods they have not even managed to preserve their capital in real terms. Such a period may be coming again; after all, the capital market is currently pricing in long-term inflation of just over two percent per year.... With last year's turnaround, the ECB's deposit rate has already fallen by a full percentage point. After the strong demand for money-market-related solutions in recent years, investors now face the challenge of having to reinvest their savings at lower interest rates in the medium term. While bonds and equities are an important building block, they remain only part of the solution." DWS adds, "To persist in the current market environment, it is essential to combine different asset classes. However, this also adds complexity to portfolio construction. The optimal mix of investments in the portfolio changes with the market environment and needs to be continuously adjusted. The more asset classes are combined, the greater the number of risk factors that influence each other. These relationships are not static but change over time. We believe that diversification is always important, but especially in the current market environment, where return expectations, the risk environment and expected correlations make it even more compelling. The right time for multi-asset is now."
Weekly MF Portfolio Holdings
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 Jan. 31) includes Holdings information from 47 money funds (down 28 from a week ago), or $2.901 trillion (down from $4.098 trillion) of the $7.227 trillion in total money fund assets (or 40.1%) tracked by Crane Data. (Note: Our Weekly MFPH are e-mail only and aren't available on the website. See our latest Monthly Money Fund Portfolio Holdings here and our Jan. 13 News, "January Money Fund Portfolio Holdings: Repo Surges, Treasuries Slide.") Our latest Weekly MFPH Composition summary shows Government assets dominating the holdings list with Treasuries totaling $1.383 trillion (down from $1.954 trillion a week ago), or 47.7%; Repurchase Agreements (Repo) totaling $1.003 trillion (down from $1.355 trillion a week ago), or 34.6%, and Government Agency securities totaling $273.5 billion (down from $355.1 billion), or 9.4%. Commercial Paper (CP) totaled $107.1 billion (down from a week ago at $169.1 billion), or 3.7%. Certificates of Deposit (CDs) totaled $58.4 billion (down from $104.5 billion a week ago), or 2.0%. The Other category accounted for $43.8 billion or 1.5%, while VRDNs accounted for $32.5 billion, or 1.1%. The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $1.383 trillion (47.7% of total holdings), Fixed Income Clearing Corp with $327.0B (11.3%), the Federal Home Loan Bank with $184.0 billion (6.3%), JP Morgan with $79.8B (2.8%), Citi with $71.3B (2.5%), BNP Paribas with $65.0B (2.2%), Federal Farm Credit Bank with $61.2B (2.1%), RBC with $45.0B (1.6%), Goldman Sachs with $44.7B (1.5%) and Bank of America with $36.6B (1.3%). The Ten Largest Funds tracked in our latest Weekly include: JPMorgan US Govt MM ($303.4B), Goldman Sachs FS Govt ($269.3B), JPMorgan 100% US Treas MMkt ($250.0B), Fidelity Inv MM: Govt Port ($222.1B), Morgan Stanley Inst Liq Govt ($186.8B), State Street Inst US Govt ($177.7B), Fidelity Inv MM: MM Port ($149.0B), Dreyfus Govt Cash Mgmt ($130.4B), Allspring Govt MM ($125.3B) and First American Govt Oblg ($102.9B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary.)
Federated's Cunningham on Fed Drama
Federated Hermes writes "Don't be distracted by the Fed drama," which is subtitled, "For liquidity investors, the Fed decision to pause cuts matters more than Powell and Trump locking horns." Author Deborah Cunningham explains, "We want inflation to fall while the economy and labor market remain strong. Everyone deserves this, and it's the reason the Federal Reserve decided last week to pause its rate-cutting cycle, leaving the fed funds target range at 4.25-4.50%. But investors in liquidity products have benefited from the elevated interest rates and should continue to if the pace of easing slows. The yields of most securities that funds and other vehicles hold are based on the market, rather than administered, meaning they tend to track the Fed moves." She says, "There's no better way to see this than looking at the recent asset flows into industry liquidity products since the Fed's December rate cut and year-end 2024. Offshore/European money funds are experiencing the same growth, hitting a record high of $1.463 trillion recently, according to Crane Data, despite the European Central Bank and the Bank of England cutting rates." Cunningham continues, "But holding rates steady is not the only way the Fed can help cash investors. Its Reverse Repo Facility (RRP) offers an overnight rate for securities set at or above the lower bound of the target range. It allows money market funds managers (not every liquidity product qualifies) to borrow from the Fed to ensure they receive adequate compensation for most securities they buy. I bring this up because, after years of setting the RRP level at five basis points above the lower bound, in December, the FOMC set it at that lower band, i.e., at 4.25% rather than 4.30%.... The good news is that market participant usage of the RRP has dropped significantly and marketplace rates have been generally higher. It is also due to good old supply and demand. At present, the marketplace has enough of the former that sellers must offer higher rates. But supply is going to dwindle if the federal government doesn't raise the country's debt limit, pushing rates down. Get it together, Congress."
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