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Analyst Adam Josephson asks in his new "As the Consumer Turns" blog, "What Happened to the Growth in Bank Deposits?" He tells us, "​In my last post I wrote about U.​S. banks' loan trends, specifically the disproportionate amount of lending going to levered nondepository financial institutions (​NDFIs) as opposed to real economy borrowers (​meaning households and businesses). This time I'​ll focus on their deposit trends. From 2018 to February 2020, deposit growth averaged 4-​5%, considerably below the 2000-​2017 rate of 7.​2% but nonetheless much better than what followed the pandemic spike.... [​A] historic amount of government stimulus spending led to an unprecedented increase in bank deposits, from $​13.​3 trillion in February 2020 to $​18 trillion by the end of 2021." He explains, "​When the Fed started reducing its asset holdings in mid-​2022 via its quantitative tightening (​QT) program, bank deposits fell for the following year, from $​18 trillion to just over $​17 trillion. They'​ve since recovered to just over $​18 trillion, effectively unchanged versus three years ago. Deposits began growing on a year-​over-​year basis last March, but the average growth rate has only been around 2%, far lower than the historical growth rate. Just as bank loan growth has been unusually weak over the past two years (​even with booming lending to NDFIs), so too has deposit growth. What explains the latter? Likely to a significant extent, QT and the growth of money market funds (​MMFs). Just as QE created deposits, QT has done the opposite." Josephson'​s tells us, "MMFs have grown rapidly over the past few years. Money is a commodity, and as such it often goes whenever institutions and retail can earn the most attractive rates. And the rates on MMFs are far more attractive than what banks are paying on savings accounts. The Crane 100 Money Fund Index’​s 7-​day yield as of March-​end was 4.​15%, compared to the Crane Brokerage Sweep Index'​s yield of just 0.​41%. Per the FDIC, the national deposit rate on savings accounts is an identical 0.​41%. For any yield-​sensitive institution or retail investor with the ability to move excess funds, the choice seems clear."

The Public Funds Investment Institute published a brief titled, "Something’​s Up in Texas," which says, "Local government investment pools have flourished in Texas and its local governments have benefitted from the highly competitive marketplace that provides a myriad of options, many at very low cost. But recently the industry has attracted the attention of state legislators who have introduced bills that would alter the landscape, likely to the detriment of Texas localities.... Texas may have the best local government investment pool industry in the nation. Eight statewide programs offer a total of 17 pooled investment options. The programs have assets of around $​140 billion and expense ratios that are as low as four basis points.... And they all operate under a detailed state law that sets accounting and operating standards and promotes transparency." It continues, "Yet the Texas LGIP industry has attracted the attention of state legislators who have introduced bills that would restrict LGIP activities and alter the competitive landscape: One proposal would effectively give the state-​sponsored pool a monopoly and eliminate the ability of local governments to use other programs; A second would require that at least 35% of the investments made by a local government be placed in Texas banks without regard to the effect this might have on local government interest earnings; A third proposal would prohibit an LGIP from entering into a sponsorship agreement with any organization and seems particularly directed at a program sponsored by the Texas Association of School Boards.... The biennial Texas legislative session ends on June 2, so one way or another these proposals will be resolved in short order." Note: Crane Data will be attending TEXPO 2025 in San Antonio, which takes place April 27-​29. We hope to see some of you there!

Federated Hermes' latest monthly insight, titled, "Staying steady," is subtitled, "The stability of the money markets is shining amid the greater financial turbulence." Author Deborah Cunningham writes, "​The impact of Trump'​s '​Liberation Day' tariffs -- and the subsequent changes and recent delay -- on the broad financial market has been seismic ... but not necessarily for the liquidity space. The tariffs, which have caused massive equity and bond volatility, have not had the same effect on the money markets, which are relatively steady amid the turbulence. We presume some inflows are due to a flight to quality -- hot money that might soon be deployed in depressed stocks. But some retail investor purchases will likely stay put as we believe they are attracted by the yields of liquidity products. We deal with only banks of the highest quality, all of which in our analysis appear to have ample reserves and excellent credit metrics, and we see continued health in those markets." She continues, "​A more significant '​named' date for most Americans is the dreaded Tax Day, which is almost upon us. The focus, of course, is on individuals and corporations, but it also affects asset managers. Money market vehicles traditionally see net outflows as people and entities redeem shares to meet their obligations. Portfolio managers must decide how much liquidity is needed to accommodate this. It'​s a complex, but familiar territory for the cash business. Despite that other government-​imposed complication -- not raising the debt limit -- that process is going smoothly." Cunningham adds, "The Federal Reserve remains the government entity with the most impact on the money markets. It is focused on the extent to which Trump'​s sweeping tariffs, whatever form they end up taking, change the course of employment and inflation. Policymakers likely will cut if the former weakens but pause -- or at least ease at a slower pace -- if the latter rises. Either way, it'​s not yet time to react to the levies that are whipsawing every day. However, with volatility comes opportunity, as we can maintain our weighted average maturities to continue to benefit from the higher-​for-​longer environment."

Money fund yields (​7-​day, annualized, simple, net) were unchanged at 4.​14% on average during the week ended Friday, April 11 (​as measured by our Crane 100 Money Fund Index), after going unchanged last week and rising 1 bp the week prior. Fund yields should remain relatively flat until the Fed moves rates again. They'​ve declined by 92 bps since the Fed first cut its Fed funds target rate by 50 bps on Sept. 18, and they'​ve declined by 49 bps since the Fed cut rates by 1/​4 point on 11/​7. Yields were 4.​14% on 3/​31/​25, 4.​16% on 2/​28/​25, 4.​19% on 1/​31/​25, 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 684), shows a 7-​day yield of 4.​04%, unchanged in the week through Friday. Prime Inst money fund yields were unchanged at 4.​28% in the latest week. Government Inst MFs were unchanged at 4.​15%. Treasury Inst MFs were unchanged at 4.​08%. Treasury Retail MFs currently yield 3.​84%, Government Retail MFs yield 3.​85%, and Prime Retail MFs yield 4.​04%, Tax-​exempt MF 7-​day yields were up 66 bps to 3.​15%. Assets of money market funds fell by $​38.​4 billion last week to $​7.​307 trillion, according to Crane Data'​s Money Fund Intelligence Daily. For the month of April, MMF assets fell by $​17.​1 billion, after increasing by $​2.​8 billion in March, $​94.​2 billion in February, $​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 at 35 days for the Crane MFA and 36 days the Crane 100 Money Fund Index. According to Monday'​s Money Fund Intelligence Daily, with data as of Friday (​4/​11), 48 money funds (​out of 796 total) yield under 3.​0% with $​24.​4 billion in assets, or 0.​3%; 306 funds yield between 3.​00% and 3.​99% ($​1.​420 trillion, or 19.​4%), 442 funds yield between 4.​0% and 4.​99% ($​5.​862 trillion, or 80.​2%) 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%. The latest Brokerage Sweep Intelligence, with data as of April 11, 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.

BlackRock released its Q1'​25 earnings and hosted its earnings call Friday, but made just a few comments on cash and fixed-​income CFO Martin Small tells us, "Finally, BlackRock'​s cash management platform saw $​1.​0 billion of net inflows in the first quarter. Cash management results reflected growth in the Circle Reserve Fund, partially offset by seasonal redemptions from U. S. Government funds." CEO Larry Fink comments, "Whether seeking capital preservation in cash and short duration or capitalizing on opportunities and equities or looking for income and uncorrelated returns in private markets, BlackRock'​s comprehensive offering is leading to clients consolidating more of their portfolio with them. I look at our cash business as one example of how we help clients manage asset allocation and liquidity. Our cash AUM is up at an all time high. As of April now, it'​s at $​950.​0 billion." He says, "We see large opportunities for growth in digital assets and more broadly for blockchain and tokenization technology. Digital assets drove cash management net inflows this quarter as we continue to manage cash-​based reserves through our relationship with Circle. And BlackRock tokenized digital liquidity fund [​BUIDL] available on a public blockchain became the first Wall Street issued fund to cross over $​1.​0 billion in AUM and just recently surpassed $​2.​0 billion. BlackRock will continue to look for ways to push on chain finance forward as part of our leadership in financial technology and innovation and in data." During the Q&​A, Fink adds, "We'​ve seen an elevated increase in April, which is an unusual time to see elevated increases in cash. We had $​20.​0 billion in inflows this month alone in cash. But let'​s be clear, there'​s over $​12.​0 trillion [​sic] in money market funds, so there is this huge reserve of money that will be put to work in the future. We'​re having a lot of conversations related to fixed income."

The SEC'​s Division of Corporate Finance posted a "Statement on Stablecoins," which says, "As part of an effort to provide greater clarity on the application of the federal securities laws to crypto assets, the Division of Corporation Finance is providing its views on certain types of crypto assets commonly referred to as '​stablecoins.' Specifically, this statement addresses stablecoins that are designed to maintain a stable value relative to the United States Dollar, or '​USD,' on a one-​for-​one basis, can be redeemed for USD on a one-​for-​one basis (​i.​e., one stablecoin to one USD), and are backed by assets held in a reserve that are considered low-​risk and readily liquid with a USD-​value that meets or exceeds the redemption value of the stablecoins in circulation. As discussed below, we refer to the types of stablecoins addressed by this statement as '​Covered Stablecoins.'" They explain, "A stablecoin is a type of crypto asset designed to maintain a stable value relative to a reference asset, such as USD or another fiat currency, or a commodity like gold, or a pool or basket of assets. Stablecoins generally are designed to track the value of the reference asset on a one-​for-​one basis. Stablecoins may use different methods to maintain a stable value. In some cases, stablecoins maintain a stable value by being backed by assets held in a reserve. In other cases, stablecoins are designed to use mechanisms other than reserves to maintain a stable value, such as using algorithms that increase or decrease the supply of stablecoins in response to demand. The risks associated with stablecoins vary significantly depending on multiple factors, including their stability mechanisms and the maintenance of a reserve (​if applicable). Stablecoin issuers generally offer and sell stablecoins at a price corresponding to that of the reference asset on a one-​for-​one basis. For example, if the stablecoin references USD, the issuer will offer and sell one stablecoin for one USD. Stablecoins can be issued and traded in fractions, and in such case the stablecoins maintain the one-​for-​one reference (​i.​e., 0.​5 stablecoin represents $​0.​50 USD). The issuer generally uses the assets held in the reserve to fund stablecoin redemptions (​i.​e., the delivery of the stablecoin in exchange for the reference asset on a one-​for-​one basis)." The piece adds, "It is the Division'​s view that the offer and sale of Covered Stablecoins, in the manner and under the circumstances described in this statement, do not involve the offer and sale of securities within the meaning of Section 2(​a)(​1) of the Securities Act of 1933 (​the '​Securities Act') or Section 3(​a)(​10) of the Securities Exchange Act of 1934 (​the '​Exchange Act'). Accordingly, persons involved in the process of '​minting' (​or creating) and redeeming Covered Stablecoins do not need to register those transactions with the Commission under the Securities Act or fall within one of the Securities Act'​s exemptions from registration."

Financial Advisor magazine published, "Solid Yields On Cash Are Still Possible, Advisors Say," which tells us, "​Inflation is edging up, making further interest-​rate cuts less likely anytime soon, experts say. In this unsteady, unpredictable market, where should clients be putting their cash? Advisors say there are several good options, each with its own pluses and minuses. For instance, one solution is Treasurys. 'T-​bills offer 4.​3% for three months [​and] 4.​2% for six months,' said Eric Lutton, CIO of Sound Income Strategies." The article continues, "​But bonds aren'​t liquid. For some clients, tying up cash in a bond -- even a short-​term one -- isn'​t desirable, especially when there are more liquid choices for generating solid yields, said Lutton. He cited 'ultrashort-​term exchange traded funds,' which are ETFs that invest in short-​term bonds, such as AllianceBernstein'​s Ultra Short Income ETF. It'​s an actively managed fund that primarily holds investment-​grade instruments (​corporates, Treasurys and others) with a duration of one year or less, chosen to deliver high-​yield and capital preservation, according to the AllianceBernstein web site." The piece also says, "Another good option is to move cash to a money market fund through a brokerage account, he said. Their payouts are significantly higher than money market accounts from the bank, though they'​re not quite as safe. Still, advisors say they'​re about as safe as a non-​bank account can be. 'Money market funds hold Treasury bills, government agency securities and repurchase agreements backed by these securities,' said Brian Therien, a senior fixed income analyst at Edward Jones.... They '​typically offer stable value by targeting a net asset value of $​1 [​per share], but there is no guarantee.' ... As of early April, money markets yielding 4% or higher were not hard to find, while inflation remains under 3%, said Peter Crane, president of Crane Data in Westborough, Mass."

A press release titled, "Vanguard Expands Active Bond ETF Suite with Short Duration ETF," which states, "Vanguard ... launched Vanguard Short Duration Bond ETF (​VSDB), an active fixed income ETF managed by Vanguard Fixed Income Group. VSDB is designed to provide clients with current income and lower price volatility consistent with short-​duration bonds." Sara Devereux, Global Head of Vanguard Fixed Income Group, comments, "The addition of Vanguard Short Duration Bond ETF reaffirms our commitment to meeting the evolving needs of investors who are increasingly seeking active bond solutions through an ETF wrapper. VSDB combines institutional-​quality active investment expertise with some of the lowest costs in the industry. VSDB seeks to deliver consistent, reliable returns that when compounded over time, can result in superior long-​term outperformance." The release continues, "Vanguard Short Duration Bond ETF offers diversified exposure to primarily short-​duration U.​S. investment-​grade bonds – including structured products exposure, like asset-​backed securities – with the flexibility to invest in below investment-​grade debt to seek additional yield. The ETF is actively managed, enabling the portfolio managers to seek the best opportunities within their investable universe while remaining highly risk aware. With the launch of VSDB, Vanguard has expanded its actively managed bond ETF portfolio to six, boosting the total number of actively managed products within the lineup to 27." It adds, "Vanguard Short Duration Bond ETF has an expense ratio of 15 bps. This expense ratio matches the lowest in the category, differentiating it relative to major competitors where the active ETF category has an average expense ratio of 39 bps. It will be managed by Arvind Narayanan and Thanh Nguyen, industry veterans each with two decades of experience."

Money fund yields (​7-​day, annualized, simple, net) were unchanged at 4.​14% on average during the week ended Friday, April 4 (​as measured by our Crane 100 Money Fund Index), after rising 1 bp last week and falling 1 bp the week prior. Fund yields have digested all of the Federal Reserve'​s 25 basis point cut from December 18, so they should remain relatively flat until the Fed moves rates again. They'​ve declined by 92 bps since the Fed first cut its Fed funds target rate by 50 bps on Sept. 18, and they'​ve declined by 49 bps since the Fed cut rates by 1/​4 point on 11/​7. Yields were 4.​14% on 3/​31/​25, 4.​16% on 2/​28/​25, 4.​19% on 1/​31/​25, 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 683), shows a 7-​day yield of 4.​04%, unchanged in the week through Friday. Prime Inst money fund yields were unchanged at 4.​28% in the latest week. Government Inst MFs were unchanged at 4.​15%. Treasury Inst MFs were down one bp to 4.​08%. Treasury Retail MFs currently yield 3.​85%, Government Retail MFs yield 3.​85%, and Prime Retail MFs yield 4.​04%, Tax-​exempt MF 7-​day yields were down 23 bps to 2.​49%. Assets of money market funds fell by $​9.​6 billion last week to $​7.​345 trillion, according to Crane Data'​s Money Fund Intelligence Daily. For the month of April, MMF assets rose by $​21.​3 billion, after increasing by $​2.​8 billion in March, $​94.​2 billion in February, $​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 35 days for the Crane MFA and 36 days the Crane 100 Money Fund Index. According to Monday'​s Money Fund Intelligence Daily, with data as of Friday (​4/​4), 114 money funds (​out of 795 total) yield under 3.​0% with $​137.​3 billion in assets, or 1.​9%; 239 funds yield between 3.​00% and 3.​99% ($​1.​301 trillion, or 17.​7%), 442 funds yield between 4.​0% and 4.​99% ($​5.​907 trillion, or 80.​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%. The latest Brokerage Sweep Intelligence, with data as of April 4, 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.

The Wall Street Journal writes "Americans Are Sitting on a Cash Pile as Stocks Reel," which tells us, "Cash is looking more and more attractive these days. Stocks tumbled after President Trump escalated his trade war against the rest of the world. But rather than scooping up shares trading at cheaper prices, many investors are opting to keep their cash on hand. Investors poured more than $​60 billion into money-​market funds in the first few days of April. That has sent assets in such funds to a record $​7.​4 trillion as of Thursday, according to Crane Data going back to 1972. Market watchers have closely monitored the trillions of dollars that have piled up in cash investments over the past few years, with some anticipating that much of it would eventually flood into stocks and power the market'​s next leg higher. Those expectations are on hold for now." The article explains, "Some analysts say that Americans have simply shifted their assets into higher-​yielding money markets from traditional bank accounts, and expect that cash to stay put. Money poured into such accounts after the Federal Reserve began hiking rates in 2022, with some banks paying north of 5%. Cash is still paying higher yields than before the pandemic, even with the Fed'​s rate cuts last year. The average return on money-​market funds is at 4.​2%, down from 4.​3% in December, Crane data show. In March, individual investors raised the share of cash in their portfolios to about 18.​3%, up from 17.​4% the prior month, according to the American Association of Individual Investors. Expectations for Fed rate cuts have climbed, but now it'​s because of the specter of a recession rather than easing inflation." The piece adds, "The decline in sentiment has cooled the “​buy the dip” mentality that helped power the stock market to repeated highs and quickly recover from selloffs in recent years." See also Barron'​s "As Stocks Slump, Investors Pour Cash Into Money-​Market Funds."

A press release titled, "BNY Expands Digital Asset Platform with Launch of Innovative On-​Chain Offering" tells us, "The Bank of New York Mellon Corporation ('​BNY') (​BK) ... announced the expansion of its Digital Asset Platform with the launch of its Digital Asset Data Insights product, designed to securely and efficiently deliver both on- and off-​chain data across blockchain networks. The launch underscores BNY'​s ambition to serve an expanded, fundamental role in the lifecycle of tokenized assets.... BlackRock will be the first client to leverage this product. BNY will broadcast fund accounting data for the BlackRock USD Institutional Digital Liquidity Fund ('​BUIDL' or '​the Fund'), its tokenized short-​term U.​S. Treasury fund. BNY currently acts as fund administrator and custodian of the Fund'​s assets." Robert Mitchnick, Head of Digital Assets at BlackRock, comments, "BNY'​s enablement of off-​chain data insights to public blockchains is an unprecedented event and a significant milestone for the industry. By enhancing data transparency and accessibility for our investors, BNY has set a new standard for digital asset innovation." Another article from the Financial Times, "Stablecoin operator Circle files for IPO as revenues jump to $​1.​7bn," says, "Tuesday'​s filing shows Circle'​s revenues on the reserves it maintains to back its USDC stablecoin jumped to $​1.​66bn last year, from $​1.​4bn in 2023. The group holds most of its reserves in a money-​market fund run by BlackRock, and benefited from US interest rates of 5 percent or more for most of last year as the Fed sought to fight inflation."

The Wall Street Journal writes on "Short-​Term or Long-​Term CDs: Which Should You Buy?" They tell us, "Bank customers often opt for short-​term certificates of deposit rather than higher-​yielding long-​term CDs because they are leery of potentially incurring early-​withdrawal fees if they need their funds before the term is up. That is often a mistake. In many cases, according to new research, investors would be better off choosing longer-​term CDs and paying an early-​withdrawal fee if they need the money before the CD reaches maturity. That is because most banks -- intentionally or unintentionally -- have '​internal inconsistencies in their deposit pricing,' meaning that their interest rates on shorter-​term CDs yield less than those on a longer-​term CD, even with an early-​withdrawal penalty, according to study co-​author Francis A. Longstaff, a finance professor at UCLA." The Journal piece says, "To arrive at their findings, researchers analyzed data from S&​P RateWatch, which tracks CD interest rates and early-​withdrawal fees from more than 96,​000 bank branches in the U.​S. The team obtained weekly data from Jan. 5, 2001, to June 30, 2023, on CDs that would mature in six months, one year, two years, three years, four years and five years. The study found that in 52.​4% of the CD term structures, there was at least one shorter-​term CD whose interest rate was '​dominated' by a longer-​term CD, meaning short-​term investors would get proportionately lower returns, Longstaff says." The working paper, titled, "`​Financial Sophistication and Bank Market Power," states, "We study the relation between bank funding costs and the financial sophistication of bank customers. In doing this, we make use of a natural experiment that allows us to identify banks that -- either intentionally or unintentionally -- price time deposits in a way that can result in financially unsophisticated customers essentially being shortchanged. We find that these banks have significantly lower deposit funding costs. These results provide evidence that having financially unsophisticated customers may provide banks with substantial market power and be an important component of the value of a bank'​s deposit franchise."

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