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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 July 3) includes Holdings information from 55 money funds (down 26 from a week ago), which represent $1.959 trillion (down from $2.551 trillion) of the $5.122 trillion (38.2%) in total money fund assets tracked by Crane Data. (Note that our Weekly MFPH are e-mail only and aren't available on the website. For our latest monthly Holdings, see our June 10 News, "June Portfolio Holdings: Treasuries Skyrocket; Repo, Agencies Plunge.") Our latest Weekly MFPH Composition summary again shows Government assets dominating the holdings list with Treasury totaling $1.137 trillion (down from $1.425 trillion a week ago), or 58.0%, Repurchase Agreements (Repo) totaling $354.9 billion (down from $508.4 billion a week ago), or 18.1% and Government Agency securities totaling $294.5 billion (down from $408.1 billion), or 15.0%. Certificates of Deposit (CDs) totaled $67.1 billion (down from $75.2 billion), or 3.4%, and Commercial Paper (CP) totaled $58.6 billion (down from $65.9 billion), or 3.0%. VRDNs accounted for $27.2 billion, or 1.4%, while the Other category accounted for $19.9 billion or 1.0%. The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $1.137 trillion (58.0% of total holdings), Federal Home Loan Bank with $168.2B (8.6%), Federal Farm Credit Bank with $47.6B (2.4%), Fixed Income Clearing Corp with $44.7B (2.3%), Federal National Mortgage Association with $44.0B (2.2%), BNP Paribas with $34.7B (1.8%), Federal Home Loan Mortgage Corp with $33.0B (1.7%), RBC with $28.2B (1.4%), JP Morgan with $24.8B (1.3%) and Mitsubishi UFJ Financial Group Inc with $23.6B (1.2%). The Ten Largest Funds tracked in our latest Weekly include: Goldman Sachs FS Govt ($249.3B), JP Morgan US Govt MMkt ($185.7B), Fidelity Inv MM: Govt Port ($173.2B), Wells Fargo Govt MM ($143.6B), JP Morgan 100% US Treas MMkt ($116.8B), Goldman Sachs FS Treas Instruments ($99.1B), Morgan Stanley Inst Liq Govt ($98.5B), State Street Inst US Govt ($87.3B), Dreyfus Govt Cash Mgmt ($85.3B), JP Morgan Prime MMkt ($77.9B) and Fidelity Inv MM: MM Port ($66.5B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary, or our Bond Fund Portfolio Holdings data series.)

Our flagship Crane 100 Money Fund Index inched down another basis point to 0.11% in the latest week. The Crane 100 fell below the 1.0% level in mid-March and below the 0.5% level in late March, and it's down from 1.46% at the start of the year and down from 2.23% at the beginning of 2019. Over half of all money funds and over one quarter of MMF assets have already hit the zero floor, though many continue to show some yield. According to our Money Fund Intelligence Daily, as of Thursday, 7/2, 485 funds (out of 849 total) yield 0.00% or 0.01% with assets of $1.493 trillion, or 29.9% of the total. There are 179 funds yielding between 0.02% and 0.10%, totaling $1.591 trillion, or 31.9% of assets; 117 funds yielded between 0.11% and 0.25% with $1.381 trillion, or 27.7% of assets; 65 funds yielded between 0.26% and 0.50% with $438.4 billion in assets, or 8.8%; and just three funds yield between 0.51% and 0.99% with $81.2 billion in assets or 1.6% (no funds yield over 1.00%). The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 671), shows a 7-day yield of 0.07%, down a basis point in the week through Thursday, 7/2. The Crane Money Fund Average is down 40 bps from 0.47% at the beginning of April. Prime Inst MFs were down 2 basis points to 0.18% in the latest week and Government Inst MFs were flat at 0.06%. Treasury Inst MFs were unchanged at 0.05%. Treasury Retail MFs currently yield 0.01%, (unchanged in the last week), Government Retail MFs yield 0.02% (unchanged in the last week), and Prime Retail MFs yield 0.10% (down a basis point for the week), Tax-exempt MF 7-day yields were down a basis point at 0.03%. (Let us know if you'd like to see our latest MFI Daily.) The largest funds tracked by Crane Data yielding 0.00% or 0.01% include: Fidelity Govt Cash Reserves ($201.3B), Fidelity Government Money Market ($194.2B), Fidelity Treasury Fund ($29.5B) and Edward Jones Money Mkt Inv ($22.8B). Our `Crane Brokerage Sweep Index, which hit the zero floor a little over two months ago, remains at 0.01%. The latest Brokerage Sweep Intelligence, with data as of July 2, shows no changes in the last week. All of the major brokerages now offer rates of 0.01% for balances of $100K. No brokerage sweep rates or money fund yields have gone negative to date, but this could become a distinct possibility in coming weeks or months. Crane's Brokerage Sweep Index has been flat for the last ten weeks at 0.01% (for balances of $100K). Ameriprise, E*Trade, Fidelity, Merrill Lynch, Morgan Stanley, Raymond James, RW Baird, Schwab, TD Ameritrade, UBS and Wells Fargo all currently have rates of 0.01% for balances at the $100K tier level (and almost every other tier too).

Barron's published the article, "Why Your Money-Market Fund Isn't as Safe as You Think." It opines, "No one wants their money-market funds to be interesting. They are the cash-like income funds you buy when you're waiting to buy something else, with a $1 share price that you always want to stay $1. Unfortunately, during the coronavirus crisis, money funds became interesting. From March 2 to March 23, the assets under management of prime money-market funds, which buy high-quality corporate debt, dropped by $120 billion -- 15% of prime funds' assets at the time. To prevent a stampede like in the 2008 financial crisis, the Federal Reserve established the Money Market Mutual Fund Liquidity Facility, or MMLF, on March 18 to provide loans to banks to purchase money funds' underlying securities, thereby improving their liquidity. Given the crisis, it's time people stop thinking of money funds as risk-free." The piece explains, "While the last fund to break the buck was 2008's Reserve Primary, liquidity in 2020 proved a greater problem, ironically because of regulations the SEC created in 2014 as a result of the Reserve fund debacle. After the financial crisis, the SEC issued two rounds of reforms: The first, in 2010, tackled liquidity, mandating that a larger portion of the securities a fund owns must be easily sold. The second, in 2014, separated money-market funds into two categories -- retail funds, which were allowed to keep the $1 per share value so long as they held only government-issued securities, and institutional prime money-market funds, which have a floating NAV." They quote Wells Fargo Asset Management's Jeff Weaver, "As a manager of a prime money-market fund, you must maintain 30% in liquid assets, which are predominantly assets that mature within seven days and Treasury bills. If you drop below that 30%, then the [fund's] board of directors must consider fees and gates." Barron's adds, "Currently, the average fund in the Crane 100 Money Fund Index of the 100 largest taxable money funds yields only 0.12%. And that minuscule payout is only possible by money funds waiving part of their fees. 'About half of all money funds currently yield 0.01%,' says Peter Crane, president of money fund tracker Crane Data. 'And those are the ones that are waiving the most fees. They account for about a third of all money fund assets -- your smaller, higher-expense funds.' Total U.S. money-market fund assets were $5.2 trillion at the end of May. Such waivers can be costly even for the lowest-fee managers."

Federated Hermes Deborah Cunningham writes about the money markets' "Ebb and flow" in her latest commentary. She tells us, "The month of June-and the year for that matter-has shown the dynamic nature of the liquidity space. While stability is the asset class' defining feature, its reputation as static has always been unwarranted. Cash products are essential to the fluidity of the markets, especially in times of uncertainty, and crucial to portfolio reallocation, personal finances and capital expenditures in times of growth. All you have to do is look at flows. As the markets tanked due to fear of Covid-19, assets in government funds skyrocketed for their relative safety. The vast majority of that money came from investors selling positions in stocks, but some came from institutional prime portfolios. As it became clear the pandemic wasn't ushering in the apocalypse and the Federal Reserve and Congress stepped up, institutional prime funds regained assets, growing nearly 36% from March 31 to June 29. We consider this a vote of confidence from investors who value them for the combination of relative safety and a yield spread above many cash-like alternatives." Cunningham explains, "While the influx is impressive, flows reversed slightly in June. This is not a negative, but further proof of the dynamic aspect of money markets, showing they are part of the collective investing process. A certain amount of ebb and flow in money funds and similar portfolios is part of the process, whether it's due to investors conserving dry powder for future purchases (witness strong retail sales and the stock market) or businesses withdrawing assets to restart operations." She adds, "Recent Fed action on rates has been helpful. No, not a rise in interest rates, but policymakers increased the overnight and term repo rates by five basis points. We had advocated for a bump in the reverse repo program to raise the floor on overnight rates. But the result has been similar as rates have increased. Part of the reason for this rise is that the Fed moved the timing of its repo transactions from the morning to the afternoon.... The majority of volume in the repo takes place between 7-9 a.m. While the Fed is offering a higher rate than before, dealers don't want to wait until 2 p.m. to be funded, so they are offering higher rates in the morning. The Fed wants this -- and frankly most of its new programs -- to operate as a backstop, not as an active part of the markets. It is another smart move by policymakers."

As we told Sponsors and Speakers in an e-mail last week, due to the coronavirus pandemic and continued travel restrictions, we've again shifted back the dates of our annual Money Fund Symposium conference. Crane's Money Fund Symposium is now scheduled for October 26-28, 2020, at the Hyatt Regency Minneapolis. (It had been scheduled for August 24-26.) We'll continue to watch events carefully in coming weeks (and will keep our fingers crossed), and we'll be prepared to cancel and to switch to a virtual event if the pandemic persists. In the meantime, our planning goes on. The latest agenda is available and registrations are still being taken at: www.moneyfundsymposium.com. (Registrations for the August show will be transferred to the new October dates, and August hotel reservations will be cancelled if you've already made plans.) Register too for our next online event, "Crane's Money Fund Webinar: Portfolio Manager Perspectives," which will feature our Peter Crane hosting a panel including Federated Hermes' Sue Hill, Northern Trust Asset Management's Peter Yi and UBS Asset Management's David Walczak. Watch the replay of our previous "Portfolio Holdings Update" webinar too. Also, we're in the process of cancelling our next European Money Fund Symposium, which was scheduled for Sept. 17-18, 2020, in Paris, France. (We'll likely hold a virtual event this year, and next year's European MFS will be Oct. 20-21, 2021 in Paris.) Finally, mark your calendars for next year's Money Fund University, which will be Jan. 21-22, 2021, in Pittsburgh, Pa, and our next Bond Fund Symposium, which is scheduled for March 25-26, 2021 in Newport Beach, Calif. Crane Data will give full refunds or credits for any events that are cancelled or that registered attendees can't make it to. Let us know if you'd like more details on any of our events, and we hope to see you in Minneapolis later this fall! Watch for details in coming months, and let us know if you're interested in sponsoring or speaking, and contact us if you have any feedback or questions. Attendees to our events and Crane Data subscribers may access the latest recordings, Powerpoints and binder materials at the bottom of our Content page.

The Wall Street Journal writes that "Money-Market Shifts Are Bad News for Profit-Starved Global Banks." The piece states, "Last week, Fidelity Investments said it would close two institutional prime money-market funds with a total of around $14 billion in net assets. That's an ominous portent for some non-U.S. banks, which have increasingly come to rely on such funds to raise dollars they can't easily acquire at home. Fidelity cited volatile outflows from the funds -- which invest in short-term commercial paper and certificates of deposit issued by companies -- and into government money-market funds during moments of market stress. Fidelity's retail prime money-market funds, whose assets run into the hundreds of billions, will remain open." (See our June 22 News, "Fidelity to Liquidate Prime Instit Money Funds; Cites Investor Behavior.") The Journal explains, "But non-U.S. banks will feel the loss: 20% of the Prime Reserves Portfolio, the larger of the two funds being closed, is invested in certificates of deposit, all issued by Canadian, Japanese and European banks. Many have increasingly strayed into dollar-denominated lending in recent years.... In Japan in particular, the spread between short- and long-term yen-denominated interest rates has been squeezed narrower and narrower over time, making dollar lending far more profitable. To fund that longer-term lending -- in the absence of dollar deposits -- foreign banks have used short-term CDs. The closures don't mean an imminent funding crunch. But they are still bad news for the banks, watching one of their limited avenues for profit in recent years slowly closed off." The article adds, "In March, the surge in borrowing costs for foreign entities trying to obtain dollars using cross-currency basis swaps was a result in no small part of investors pouring out of prime money-market funds, draining them of more than $150 billion. Issuance fell by than half from late February into March. This time, the immediate risk isn't that funding violently dries up again, but that the dollar business foreign banks have engaged in slowly comes to make less and less economic sense. That source of earnings will be sorely missed, given how few other options are available."

Citi's Research's Steve Kang writes about "Stress tests on banks and prime funds" in his latest "Short-End Notes." His piece contains, "Thoughts on Prime fund closures and a possible reform," and tells us, "2016 MMF reform seems to have failed COVID-19 stress test. Prime funds, in essence, are serving as foreign banks' bank for USDs. Foreign banks typically lack stable funding source vs domestics, which are funded with more stable FDIC-insured retail deposits, FHLB advances (backed by stable government MMFs) and closer access to the Fed. Foreign banks rely on less diversified sources including prime funds, which in turn are backed by less sticky cash investors. Prime funds have been prone to runs in times of stress and foreign bank's USD funding prices (USD L/OIS and FX basis) has been pro-cyclical as a result." Kang explains, "Since 2008 financial crisis, as with banks, MMFs have been a target of regulatory reforms to make it less susceptible to runs, with 2016 MMF reform being the most notable effort, where institutional prime funds were mandated to offer VNAV instead of CNAV and both retail and institutional prime funds were mandated to impose gates/fees in times of stress. The liquidity crisis brought by COVID-19 was the first real stress test to see how resilient MMFs have become after the reform. Sadly, the pace of Prime outflow, frozen CD/CP market in March and another intervention directed at MMFs imply that fundamental issue of prime fund runs were not adequately addressed. Moreover, arguably, complex and unclear mandate on gates/fees made the pro-cyclicality worse, as it created first-mover advantage incentive to cash-out prior to others to avoid a possible lockdown of cash -- which initiated a feedback loop of a cheaper paper and lower VNAV, which further reinforced the first-mover incentive to cash out at a higher pricing. We also saw preference of MMFs to use a sponsor support rather than gates/fees to avoid reputational risk. Hence, regulatory mandate on gates/fees were rendered as an inadequate tool at the best and a counter-productive tool at the worst." He adds, "Runnable Prime institutional cash is problematic not only to regulators but also to the fund sponsors via increased sponsor support and a potential for yet another regulation. The industry is already facing challenging prospects as ZLB forced funds to waive management fees to pass along positive yields to clients -- making funds without scale especially unattractive. Two weeks ago, Fidelity Investments, the largest manager of money market funds, decided to liquidate their two institutional prime funds they offered to investors on Aug 12, 2020, citing investor behavior. At first blush, this can seem idiosyncratic, as the two closing funds amount to only $14bn in total, less than 2% of their MMF assets." Finally, the Citi article says, "The larger impact may come on changes in regulation. Very simplistically, the composition of the government is likely to determine the direction of this, a divided government is likely to keep the status quo, whereas a democratic sweep may tilt towards more regulation for this space. As for the latter scenario, we may see re-consideration of proposals that were more fundamental in nature, than what was delivered for the 2016 reform. The previous administration's options included (1) privately-backed emergency lending facilities for MMFs (2) government-backed insurance for MMFs similar to Treasury's Temporary Guarantee program for Money Market Funds (3) regulating CNAVs as special purpose banks.... The fundamental approach seems to be falling into two buckets, with the first kind being a bail-in provisions via private backstops (sponsor or privately-backed lending facilities) and the second kind treating funds like a public utility (such as banks) hence granting an access to a public backstop at a cost with a heavier regulatory burden. It is also possible for regulators to find a solution for foreign banks rather than on prime funds to address the problem of pro-cyclicality.... With the LIBOR reform well-underway for end-2021 target, we think it is unlikely for the regulators to consider implementing anything sweeping before that date. If the reform for Prime funds comes after the LIBOR reform, we expect FX basis to capture the change and move wider instead."

Fitch Ratings published, "Local Government Investment Pools: 1Q20" earlier this week. They explain, "Fitch Ratings expects the economic impact of the downturn for local governments to be largely felt in the second half of this year and in 2021, driven by reduced tax revenues, higher unemployment and inevitable budget cuts. In anticipation of this, local government investment pools (LGIPs) continue to build their near-term liquidity profiles to position themselves defensively for the expectation of increased investor redemptions, less cash inflows and the potential for more market volatility in the months ahead. In 1Q20, liquidity LGIPs reduced allocations to repos, CDs and CP while increasing allocations to deposits, MMFs and asset-backed securities (ABS)." The update continues, "Fitch-rated LGIPs were able to successfully manage through heightened market volatility caused by the coronavirus pandemic by maintaining adequate liquidity to meet redemptions while remaining defensively positioned in higher-quality, shorter-dated securities. LGIPs experienced flows cyclicality consistent with the time period relative to the wave of outflows experienced in the prime money market fund (MMF) sector during the peak of the market sell-off. Cumulative assets for the Fitch Liquidity LGIP Index and the Fitch Short-Term LGIP Index increased to a new high of $320 billion during 1Q20, an increase of $10 billion qoq and $40 billion yoy. Asset flows for both indices in 1Q20 (+6% qoq for the Fitch Liquidity LGIP Index and –3% qoq for the Fitch Short-Term LGIP Index) were on par with observed historical cyclical patterns, highlighting the limited effect on these pools during the recent market dislocation." Lastly, Fitch adds, "Not surprisingly, net yields dropped off significantly during the period as the Fed quickly lowered the Fed funds target rate to a range of 0–25 basis points (a cumulative reduction of 150 basis points [bps]) in March. The Fitch Liquidity LGIP Index and the Fitch Short-Term LGIP Index ended the quarter with average net yields of 1.03% (a drop of roughly 70 bps from YE19) and 1.69% (down 25 bps from YE19), respectively. As LGIPs' longer dated securities mature within the next few months and proceeds are reinvested at lower rates, Fitch expects LGIP yields to continue declining."

Website RIABiz and Bloomberg covered the news that Fidelity is exiting the Prime Inst MMFs space. (See our June 22 News, "Fidelity to Liquidate Prime Instit Money Funds; Cites Investor Behavior.") Bloomberg's article, "Fidelity to Drop Prime Institutional Money Funds in August," tells us, "Fidelity Investments plans to liquidate its two prime money market funds that cater to institutional investors in August, a decision taken after a market panic in March saw significant withdrawals amid wider distress in short- term credit markets. The funds -- the Fidelity Prime Money Market Portfolio and Fidelity Prime Reserves Portfolio -- hold about $13.9 billion, according to Bloomberg data." The piece continues, "Money funds that cater to retail investors, and those that hold only U.S.-government backed securities, remained largely stable through the panic. [Nancy] Prior said Friday that Fidelity believes its institutional clients' liquidity needs are better addressed by government-only funds. Boston Fed President Eric Rosengren, whose bank oversaw the emergency facility for money funds and who has long called attention to concerns about the money fund industry, welcomed the announcement. 'We should not have to keep creating facilities because of unsound money market fund structures,' he said in an interview. 'So, I'm very pleased from a financial stability standpoint that they're deciding not to have this type of money fund.' Rosengren said he hoped other prime institutional money fund providers would follow Fidelity's lead. Peter Crane, president of Crane Data, said he doubted the rest of the industry would take the same step, but said it 'certainly could cause others to inch away from the segment. It's not good news for the prime space.'" Finally, Bloomberg writes, "Fidelity's Prior said it was too early to say the March panic showed prime institutional funds should have had even tougher rules applied. 'It's too early to draw any conclusions,' she said 'We should do some more analysis around specific funds and how specific funds performed.'" In other news, the Financial Times writes, "Bullish investors pull $105bn from US money market funds in four weeks," and, finally, see also CNBC's "There's nearly $5 trillion parked in money markets as many investors are still afraid of stocks". The latter says, "The stock market's rapid rally from its March lows has brought the Nasdaq Composite back to record highs and the S&P 500 nearly positive for year, but trillions in cash remain parked on the sidelines. The coronavirus sell-off sent investors fleeing into money market funds, which ballooned well above $4 trillion, surpassing the peak of the financial crisis, according to research by LPL Financial."

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 June 19) includes Holdings information from 96 money funds (up 17 from a week ago), which represent $2.932 trillion (down from $2.571 trillion) of the $5.122 trillion (57.2%) in total money fund assets tracked by Crane Data. (Note that our Weekly MFPH are e-mail only and aren't available on the website. For our latest monthly Holdings, see our June 10 News, "June Portfolio Holdings: Treasuries Skyrocket; Repo, Agencies Plunge.") Our latest Weekly MFPH Composition summary again shows Government assets dominating the holdings list with Treasury totaling $1.577 trillion (up from $1.416 trillion a week ago), or 53.8%, Repurchase Agreements (Repo) totaling $598.8 billion (up from $540.2 billion a week ago), or 20.4% and Government Agency securities totaling $470.4 billion (up from $407.4 billion), or 16.0%. Commercial Paper (CP) totaled $95.6 billion (up from $64.0 billion), or 3.3% and Certificates of Deposit (CDs) totaled $93.0 billion (up from $74.2 billion), or 3.2%. The Other category accounted for $50.7 billion or 1.7%, while VRDNs accounted for $46.0 billion, or 1.6%. The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $1.577 trillion (53.8% of total holdings), Federal Home Loan Bank with $282.2B (9.6%), Fixed Income Clearing Co with $77.4B (2.6%), Federal Farm Credit Bank with $75.2B (2.6%), BNP Paribas with $71.8B (2.4%), Federal National Mortgage Association with $61.6B (2.1%), Federal Home Loan Mortgage Corp with $48.9B (1.7%), RBC with $46.0B (1.6%), JP Morgan with $45.0B (1.5%) and Citi with $34.2B (1.2%). The Ten Largest Funds tracked in our latest Weekly include: Goldman Sachs FS Govt ($246.9B), JP Morgan US Govt MMkt ($196.4B), Fidelity Inv MM: Govt Port ($178.3B), BlackRock Lq FedFund ($162.9B), Federated Govt Oblg ($141.5B), Wells Fargo Govt MM ($135.7B), JP Morgan 100% US Treas MMkt ($123.8B), Goldman Sachs FS Treas Instruments ($105.6B), Morgan Stanley Inst Liq Govt ($102.2B), State Street Inst US Govt ($92.8B) and Dreyfus Govt Cash Mgmt ($87.4B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary, or our Bond Fund Portfolio Holdings data series.) As a reminder, we will be hosting our second online event, "Crane's Money Fund Webinar: Portfolio Holdings Update," this Thursday, June 25 at 2:00pm (Eastern). The webinar will feature Crane Data's Peter Crane and J.P. Morgan Securities' Teresa Ho, who will give a 45 minute update on the latest trends in the money fund space with a focus on the latest Money Fund Portfolio Holdings data. (To register, click here.)

Last week, The Wall Street Journal published, "Investors Pull Cash From China's Money-Market Behemoth as Yields Tumble," which tells us, "China's biggest money-market fund is experiencing a pickup in withdrawals following a slide in yields, as people take out more cash to spend and invest in other products with higher returns. Ant Financial Services Group's flagship money-market fund, which has drawn investments from more than a third of China's population, has seen a significant increase in redemptions over the past month.... One of the world's largest mutual funds, the seven-year-old Tianhong Yu'e Bao fund had 1.26 trillion yuan ($178 billion) in assets under management at the end of March." The piece explains, "In early June, the fund's seven-day annualized yield fell below China's official one-year bank-deposit rate for the first time since June 2013, according to Wind, a data provider. Tianhong Yu'e Bao's yield was recently 1.4%, versus the 1.5% benchmark deposit rate. The fund's annualized returns used to be a few percentage points above deposit rates, and its yield once topped 6%. Its assets under management previously peaked at 1.69 trillion yuan in 2018, and Chinese regulators pressured it to cut its holdings of illiquid assets. As its yields fell, many investors shifted money to other funds. The further contraction could be a relief for Chinese officials who previously worried about the giant fund's risk to the financial system. Ant, a financial-technology company controlled by billionaire Jack Ma, owns Alipay, one of China's largest mobile-payments networks with more than 900 million active users. Besides Ant's flagship fund, 28 other money-market funds from other asset managers are sold on an investment platform similarly called Yu'e Bao.... Yields on those other money-market funds have similarly fallen in recent months as China has eased monetary policy to combat a severe economic downturn caused by the coronavirus pandemic." The Journal adds, "The central bank has pumped billions into the domestic financial system and slashed the rate it charges on seven-day repurchase agreements with banks, among other measures to boost liquidity and lower the cost of borrowing for businesses and households. As a result, short-term rates including the Shanghai interbank offered rate fell, affecting the returns of money-market funds that primarily invest in low-risk, short-term assets and securities that are easy to sell. The pandemic has also led fund managers to hold more cash to meet redemptions from people who lost their jobs or received smaller paychecks during business closures or revenue declines caused by the pandemic. Wang Jun, general manager of Ant's wealth-management unit, said some people switched from money-market funds into other wealth-management products offered on its Alipay mobile app."

Late last week, Bloomberg wrote, "A $1 Trillion Cash Pile Holds Key to Fate of Risk Assets." They explain, "The $1 trillion pile of cash that investors amassed amid the pandemic-fueled market turmoil may determine the length of the risk rally. U.S. money-fund assets have started to shrink from a record high. Roughly $105 billion has exited after four weeks of outflows, the longest such streak in more than three years, Investment Company Institute data show. The shift coincided with emerging signs of an economic recovery that drove the S&P 500 Index to the highest since February, and a historic rush into fixed-income exchange-traded funds as the Federal Reserve supported that market." Bloomberg's piece continues, "A lot is riding on whether the move out of cash, where it's earning virtually nothing, continues. On the one hand, it's an obvious potential source of additional fuel for the already-booming rebound in risk assets. But with virus worries mounting yet again, it may be premature to expect a major exodus anytime soon. A Deutsche Bank AG analysis shows that investors on edge over the pandemic have been sticking much more stubbornly to their cash holdings relative to past market crises." They add, "Assets in money-market mutual funds are still at a near-record $4.68 trillion, after soaring from $3.7 trillion in early March as the spreading virus battered stocks. At its peak, more than three-quarters of that was parked in Treasury-only and other government funds.... Even within money funds, there are signs that investors are willing to slowly take on more risk. Assets in prime funds -- which offer slightly more yield because they can also hold corporate obligations -- have risen the past 11 weeks, according to ICI data. Prime funds have added more than $100 billion from a near one-year low in early April, rising to $765 billion. Government funds have declined to about $3.79 trillion, from a record $3.92 trillion in early May." Finally, Bloomberg writes, "The trajectory of the cash stockpile relies on more than just investor confidence, according to JPMorgan Chase & Co. It may also decline in coming weeks because corporate and individual tax payments, delayed until July as part of government support measures, could trigger outflows, and as companies tap the cash to pay down credit lines, say strategists including Alex Roever."

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