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Money market fund assets inched down in the latest week, their seventh drop in a row and 15th decline in the past 18 weeks. Assets, which broke below the $4.5 trillion level earlier this month, are at their lowest level since April 1. ICI's latest weekly "Money Market Fund Assets" report says, "Total money market fund assets decreased by $2.11 billion to $44.41 trillion for the week ended Wednesday, September 23, the Investment Company Institute reported.... Among taxable money market funds, government funds increased by $8.71 billion and prime funds decreased by $9.38 billion. Tax-exempt money market funds decreased by $1.44 billion." ICI's stats show Institutional MMFs rising $3.1 billion and Retail MMFs decreasing $5.2 billion. Total Government MMF assets, including Treasury funds, were $3.574 trillion (81.0% of all money funds), while Total Prime MMFs were $725.1 billion (16.4%). Tax Exempt MMFs totaled $114.8 billion (2.6%). ICI shows money fund assets up a still massive $782 billion, or 21.5%, year-to-date in 2020, with Inst MMFs up $629 billion (27.8%) and Retail MMFs up $154 billion (11.2%). Over the past 52 weeks, ICI's money fund asset series has increased by $972 billion, or 28.7%, with Retail MMFs rising by $218 billion (16.9%) and Inst MMFs rising by $754 billion (36.0%). (Crane Data's separate and broader Money Fund Intelligence Daily data series shows total MF assets are down $119.2 billion in September (as of 9/23) to $4.791 trillion.) They explain, "Assets of retail money market funds decreased by $5.22 billion to $1.52 trillion. Among retail funds, government money market fund assets decreased by $1.12 billion to $991.86 billion, prime money market fund assets decreased by $3.05 billion to $427.81 billion, and tax-exempt fund assets decreased by $1.05 billion to $103.93 billion." Retail assets account for just over a third of total assets, or 34.5%, and Government Retail assets make up 65.1% of all Retail MMFs. ICI adds, "Assets of institutional money market funds increased by $3.10 billion to $2.89 trillion. Among institutional funds, government money market fund assets increased by $9.82 billion to $2.58 trillion, prime money market fund assets decreased by $6.34 billion to $297.31 billion, and tax-exempt fund assets decreased by $383 million to $10.87 billion." Institutional assets, which broke below the $3.0 trillion level for the first time since April 22 last week, accounted for 65.5% of all MMF assets, with Government Institutional assets making up 89.4% of all Institutional MMF totals.

Early this week, The Wall Street Journal wrote, "Banks Pile Into Treasurys, Helping to Fund Government Borrowing Spree." The article tells us, "Surging deposits and declining lending are driving banks to dramatically increase their holdings of U.S. Treasurys, offering significant support to the bond market at a time of massive government borrowing.... Larger factors also are helping drag down Treasury yields, which fall when bond prices rise. Inflation has been low for years, investors want a safe place to put their money, and the Federal Reserve has been both buying bonds and promising near-zero short-term interest rates for years to come. Even so, demand from banks and other sources like money-market funds has played a critical role, analysts say, allowing the government to issue more than $3 trillion in debt since February without pushing yields significantly higher, as some had feared. The yield on the benchmark 10-year note settled Friday at 0.694%, down from 1.909% at the end of 2019." The piece continues, "Money-market funds have also received huge inflows as many investors have moved out of riskier investments and into cash. Most of that has gone into government money-market funds, which invest only in Treasurys and other government-backed securities. But managers of prime money-market funds, which can buy a wider range of short-term debt, also have increased their holdings of government debt. Together both types of money-market funds have lifted their holdings of short-term Treasury bills, which carry maturities of up to one year, by more than $1.3 trillion since the end of February." The piece adds, "So much cash flooded into these funds that, for a short time before the Treasury started issuing new debt, yields on Treasury bills actually went negative. Some government money-market funds, such as ones run by Fidelity Investments, stopped taking money from new investors because of concerns about where they could invest it. Blake Gwinn, head of front-end rates strategy at NatWest Markets, said money-market funds' need for short-term bills has helped keep yields in a tight range even as the Treasury began to pump out new bills. These securities made up $2.5 trillion of the $3.3 trillion net Treasury issuance between the end of February and the end of August. Banks and money-market funds have been so important that some have started wondering how the market would respond if either source of demand became less reliable. Bank lending, for example, is expected to increase as the economy improves, likely supplanting some bond purchases. Investors also tend to pull cash from money-market funds once they move on from major market shocks -- a pattern that has shown signs of repeating recently."

The Carfang Group published a release entitled, "Corporate Cash Surges by $1.1 Trillion to $3.9 Trillion," which reviews the Federal Reserve's recent Z.1 Flow of funds data. (See yesterday's Crane Data News, "Fed's Z.1 Shows Household and Business MMFs, Treasuries Surge in Q2.") The release explains, "Corporations in the U.S. added $1.1 trillion or 38.5% to their cash holdings in the first half of 2020 according to recent data Federal Reserve data analyzed by The Carfang Group. For the second quarter, cash is up $424B or 12% and now stands at $3.9T. According to Anthony J. Carfang, Managing Director at The Carfang Group, 'The Covid pandemic led to a global flight to liquidity. Corporations drew down their bank credit lines. Those who could, issued commercial paper or other debt. Central banks intervened. Corporate cash soared.' The Fed's balance sheet grew from $4.1T to $7.0T during the first half. Even currency in circulation set a record as it rose 10% from $1.8T to $2.0T. As a result of these factors, corporate treasurers substantially increased their cash holdings. All major cash categories increased significantly this year. Cash + checkable deposits grew by $488B, time deposits by $96B and money funds grew by $404B. Corporate cash holdings were equivalent to an historic 20.1% of U.S. GDP and 3.5X the level of the early 1990s. Cash levels soared as US GDP plunged. There had been a three-decade long upward trend in this ratio, but the current leap is well above that trendline. As this is unprecedented, the macroeconomic effects remain to be seen." The release adds, "Corporate holdings of checkable deposits + currency grew 38% YTD and time deposits grew by 49%. However, their holdings of money market funds jumped by 72%. Checkable deposits and currency remained at 45% of corporate cash, after increasing from 35% following the SEC's tighter rules on money market funds. Time deposits now account for 7.5% of corporate cash, sitting at the same plateau where they have been range-bound for a several years. Money funds, at 25% corporate cash, pulled back slightly during the quarter, but still remain near their highest level since mid-2016 when the SEC instituted new regulations. That's still less than half the 59% level of December 2008."

Money market fund yields continue to bottom out just above zero; our flagship Crane 100 was flat again on the last week at 0.04%. The Crane 100 Money Fund Index fell below the 1.0% level in mid-March and below the 0.5% level in late March. It is down from 1.46% at the start of the year and down from 2.23% at the beginning of 2019. Just over two-thirds all money funds and over a third of MMF assets have since landed on the zero yield floor, though many continue to show some yield. According to our Money Fund Intelligence Daily, as of Friday, 9/18, 591 funds (out of 846 total) yield 0.00% or 0.01% with assets of $2.077 trillion, or 43.5% of the total. There are 196 funds yielding between 0.02% and 0.10%, totaling $2.036 trillion, or 42.6% of assets; 55 funds yielded between 0.11% and 0.25% with $578.6 billion, or 12.1% of assets; only 3 funds yielded between 0.26% and 0.50% with $82.7 billion in assets. No funds yield over 0.37%. The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 667), shows a 7-day yield of 0.03%, unchanged in the week through Friday, 9/18. The Crane Money Fund Average is down 44 bps from 0.47% at the beginning of April. Prime Inst MFs were flat at 0.08% in the latest week and Government Inst MFs were flat at 0.03%. Treasury Inst MFs were unchanged at 0.02%. Treasury Retail MFs currently yield 0.01%, (unchanged in the last week), Government Retail MFs yield 0.01% (unchanged in the last week), and Prime Retail MFs yield 0.03% (unchanged), Tax-exempt MF 7-day yields were also unchanged at 0.02%. (Let us know if you'd like to see our latest MFI Daily.) Our Crane Brokerage Sweep Index, which hit the zero floor five and a half months ago, remains at 0.01%. The latest Brokerage Sweep Intelligence, with data as of September 18, 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 22 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).

Last week, Reuters wrote, "COVID-19 market turmoil raises questions about central bank liquidity strategy, says BIS," which is based on a recent Bank For International Settlements' "BIS Quarterly Review." The article says, "Market turmoil due to coronavirus lockdowns in March raises questions about whether central banks should offer access to liquidity more widely in future shocks, the Bank for International Settlements (BIS) said.... The BIS, a forum for the world's central banks, said in a quarterly review article that banks' cross-border claims on so-called non-banks -- like insurers, clearing houses, money market funds and hedge funds -- rocketed by 63% to $7.5 trillion between the first quarter of 2015 and the end of March this year. The increase in links with non-banks was concentrated at lenders in the United States, Britain, the Cayman Islands, and Japan." The BIS piece comments, "The market turmoil unleashed by the COVID-19 shock brought to the fore vulnerabilities associated with these links." Reuters continues, "It also showed that money market funds, used by banks and companies for day-to-day cash management, can be 'fickle' funding providers, it added. The sheer size of non-banks and their links to lenders warrants continued monitoring by the authorities, the BIS said." The BIS Quarterly adds, "The fact that some non-bank financial institutions face a substantially different regulatory environment compared with banks -- as well as no or limited formal access to central bank liquidity or public sector credit guarantees -- only heightens this need." Finally, the article tells us, "Central banks have said that money market funds, meant to be low risk places to hold cash, would have had to suspend themselves without central banks like the Federal Reserve providing emergency liquidity. The article bolsters the case made by central banks that regulatory reforms may be needed to ensure that non-banks hold enough liquidity to cope better in market shocks and avoid undermining the wider financial system but stops short of specifying any measures. Securities regulators, which directly supervise funds, have been more cautious about jumping to reforms, with broad consensus needed for a global sector. Claudio Borio, the head of BIS Monetary and Economic Department, said it was clear there can be tension between regulators over market finance, but the question of whether additional rules were needed and possible will be looked at very closely."

Money market fund assets plummeted in the latest week as the Sept. 15 tax payment date sucked assets out. This is the sixth decrease in a row for MMFs, and their 14th decrease over the past 17 weeks. Assets broke below the $4.5 trillion level earlier this month for the first time since April 15. ICI's latest weekly "Money Market Fund Assets" report says, "Total money market fund assets decreased by $51.89 billion to $4.42 trillion for the week ended Wednesday, September 16, the Investment Company Institute reported.... Among taxable money market funds, government funds decreased by $43.24 billion and prime funds decreased by $7.17 billion. Tax-exempt money market funds decreased by $1.48 billion." ICI's stats show Institutional MMFs dropping $50.5 billion and Retail MMFs decreasing $1.4 billion. Total Government MMF assets, including Treasury funds, were $3.566 trillion (80.7% of all money funds), while Total Prime MMFs were $734.5 billion (16.6%). Tax Exempt MMFs totaled $116.2 billion (2.6%). ICI shows money fund assets up a still massive $784 billion, or 21.6%, year-to-date in 2020, with Inst MMFs up $626 billion (27.7%) and Retail MMFs up $159 billion (11.6%). Over the past 52 weeks, ICI's money fund asset series has increased by $1.014 trillion, or 30.0%, with Retail MMFs rising by $227 billion (17.6%) and Inst MMFs rising by $787 billion (37.6%). (Crane Data's separate and broader Money Fund Intelligence Daily data series shows total MF assets are down $118.8 billion in September (as of 9/16) to $4.791 trillion.) They explain, "Assets of retail money market funds decreased by $1.35 billion to $1.53 trillion. Among retail funds, government money market fund assets increased by $3.10 billion to $992.98 billion, prime money market fund assets decreased by $3.28 billion to $430.85 billion, and tax-exempt fund assets decreased by $1.17 billion to $104.99 billion." Retail assets account for just over a third of total assets, or 34.6%, and Government Retail assets make up 65.0% of all Retail MMFs. ICI adds, "Assets of institutional money market funds decreased by $50.54 billion to $2.89 trillion. Among institutional funds, government money market fund assets decreased by $46.34 billion to $2.57 trillion, prime money market fund assets decreased by $3.88 billion to $303.64 billion, and tax-exempt fund assets decreased by $316 million to $11.26 billion." Institutional assets, which broke below the $3.0 trillion level for the first time since April 22, accounted for 65.4% of all MMF assets, with Government Institutional assets making up 89.1% of all Institutional MMF totals.

Please join us next week for our latest virtual event, Crane's Bond Fund Webinar: Ultra-Shorts & Alt-Cash, which will take place Thursday, Sept. 24 from 1-2pm Eastern. Crane Data's Peter Crane will give a brief update on the ultra-short bond fund and "enhanced cash" market, and will host a panel including J.P. Morgan Asset Management's Cecilia Junker, UBS Asset Management's David Walczak and J.P. Morgan Securities' Alex Roever. Also, mark your calendars and register for our Money Fund Symposium Online, which will take place Oct. 27 from 1-4:30pmET and will feature a full afternoon of money fund discussions; and our "European Money Fund Symposium Online," which will be Nov. 19 from 10am-12pmET. While we're still developing the agenda, Money Fund Symposium Online is expected to feature keynotes from ICI's Paul Schott Stevens and the U.S. Treasury's Tom Katzenbach, Ratings Agency and Dealer panels, a Future of Money Funds session with Crane and Federated Hermes' Deborah Cunningham, and virtual cocktail party. (Watch for the official agenda in coming days.) As a reminder, we've officially cancelled this year's live Money Fund Symposium which had been scheduled for October 26-28, 2020 at The Hyatt Regency Minneapolis. We're still in the process of scheduling our next big show for 2021 (it's tentatively June 23-25, 2021 in Philadelphia), but we'll let you know once we have an official date and location. We will refund or credit any registration or sponsor fees, and we hope we're able to resume our physical conference schedule as we get into 2021. Finally, mark your calendars for our 2021 conferences (and keep your fingers crossed): Money Fund University, scheduled for Jan. 21-22, 2021 in Pittsburgh, Pa.; Bond Fund Symposium, scheduled for March 25-26, 2021, in Newport Beach, Calif.; and European Money Fund Symposium, scheduled for October 21-22, 2021 in Paris. We hope to see you on a webinar, or at a physical event, soon!

Yesterday, the Investment Company Institute hosted a webinar entitled, "After the Pandemic: The Future of the Global Fund Industry." Led by the ICI's Paul Schott Stevens, it featured George Gatch of J.P. Morgan Asset Management, Lisa Jones of Amundi Pioneer Asset Management and Brad Vogt of the Capital Group. The only mention of money funds was at the end, when Gatch fielded a question on potential money market reforms in the aftermath of March 2020. He commented, "I think this is going to be an important question, and one that regulators are going to look very closely at, European regulators as well as the U.S. I think that the question is around the [2a-7] reforms for money market funds from the last crisis, and what adjustments, if any, should be made to that. There is no doubt that the weekly liquidity requirements and the reporting of those requirements became a new hair trigger for institutional investors. Funds had, in most cases, over 30 percent weekly liquidity to deal with, but because investors saw that as the potential that a fund would gate and/or add fees, that became the new reason for institutional investors to leave funds. I think there is an entire question around whether there are better ways to ensure that funds continue to have large positions in liquidity and government securities to handle redemption activity, but not lead to a point where you're encouraging investors to be first movers. I think that's where the debate is going to be." Gatch added, "Now there are some asset managers who have decided to exit the prime money fund business. I think these products provided an extraordinary service to investors; they enhance returns. The previous reforms, 2a-7, have strengthened money funds, but this question about the 30 percent liquidity becoming the trigger is one that we need to look very closely at." In other news, see Bloomberg's bearish article, "The $1 Trillion Commercial-Paper Market Is Fading Into Obscurity."

Money market fund yields continue to bottom out just above zero; our flagship Crane 100 was flat in the last week at 0.04%. The Crane 100 Money Fund Index fell below the 1.0% level in mid-March and below the 0.5% level in late March. It is down from 1.46% at the start of the year and down from 2.23% at the beginning of 2019. Just over two-thirds all money funds and over a third of MMF assets have since landed on the zero yield floor, though many continue to show some yield. According to our Money Fund Intelligence Daily, as of Friday, 9/11, 595 funds (out of 846 total) yield 0.00% or 0.01% with assets of $2.106 trillion, or 43.6% of the total. There are 189 funds yielding between 0.02% and 0.10%, totaling $2.059 trillion, or 42.6% of assets; 59 funds yielded between 0.11% and 0.25% with $584.1 billion, or 12.1% of assets; only 3 funds yielded between 0.26% and 0.50% with $82.6 billion in assets. No funds yield over funds yield over 0.38% <b:>`_. The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 667), shows a 7-day yield of 0.03%, unchanged in the week through Friday, 9/11. The Crane Money Fund Average is down 44 bps from 0.47% at the beginning of April. Prime Inst MFs were flat at 0.08% in the latest week and Government Inst MFs were flat at 0.03%. Treasury Inst MFs were unchanged at 0.02%. Treasury Retail MFs currently yield 0.01%, (unchanged in the last week), Government Retail MFs yield 0.01% (unchanged in the last week), and Prime Retail MFs yield 0.04% (unchanged), Tax-exempt MF 7-day yields were also unchanged at 0.01%. (Let us know if you'd like to see our latest MFI Daily.) Our Crane Brokerage Sweep Index, which hit the zero floor five months ago, remains at 0.01%. The latest Brokerage Sweep Intelligence, with data as of September 11, 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 21 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).

AssetTV published a video entitled, "Straight from PIMCO: Time to Be Conscious of Your Cash." It features PIMCO's Jerome Schneider, who explains, "Today's economic environment is one fraught with uncertainty, where being selective in risk taking will likely prove to be beneficial. Focusing on the defense is important, in fact, we've had over $800 billion year-to-date and over $2 trillion the past three years into money market funds as investors have grown more defensive. Although the Fed's policy response, really cutting rates as well as providing liquidity through its various programs has resulted in money market funds really being a safe haven, the cost to investors is growing. Money market funds currently yield about zero percent, just over, and as a result, it's going to have a dramatic impact on savers for the foreseeable future." He continues, "Interest rates are expected to remain depressed for years, versus the prior recovery periods we've seen. In fact, if you compare 2012 to 2015, another zero percent interest rate cycle, we see that the expectation for interest rates was actually going to be moving higher over the foreseeable future. Today, we see the exact opposite, with interest rates remaining at or low near zero for the foreseeable future. Truly a secular phenomenon that we’re going to have to contend with." Schneider explains, "It's time for investors to be conscious with their cash. A broader opportunity set affords potential for additional yields beyond money market funds for modest increase in risk. Investors can do better than those immediate liquidity solutions if they're time horizon is beyond a few weeks or even a few months, by stepping out of those restrictive money market funds and capturing the premiums that exist today, and will likely exist into the future." He adds, "At PIMCO we aim to benefit from these higher yields and these structural premiums, at the same time focusing on downside protection and most of all liquidity management and capital preservation. So, despite the zero rate environment that we're seeing at this point in time, clients should be focused on opportunities which are diverse enough, high in quality and most importantly, can actively adapt to the changing landscapes to help produce positive total returns over secular horizons."

Money market fund assets fell for the fifth week in a row, their 13th decrease over the past 16 weeks. Assets broke below the $4.5 trillion level last week for the first time since April 15. ICI's latest weekly "Money Market Fund Assets" report says, "Total money market fund assets decreased by $26.45 billion to $4.47 trillion for the week ended Wednesday, September 9, the Investment Company Institute reported.... Among taxable money market funds, government funds decreased by $19.52 billion and prime funds decreased by $5.75 billion. Tax-exempt money market funds decreased by $1.19 billion." ICI's stats show Institutional MMFs decreasing $29.9 billion and Retail MMFs increasing $3.5 billion. Total Government MMF assets, including Treasury funds, were $3.609 trillion (80.8% of all money funds), while Total Prime MMFs were $741.6 billion (16.6%). Tax Exempt MMFs totaled $117.7 billion (2.6%). ICI shows Money fund assets up a still massive $836 billion, or 23.0%, year-to-date in 2020, with Inst MMFs up $676 billion (29.9%) and Retail MMFs up $160 billion (11.7%). Over the past 52 weeks, ICI's money fund asset series has increased by $1.071 trillion, or 31.5%, with Retail MMFs rising by $236 billion (18.2%) and Inst MMFs rising by $835 billion (39.7%). (Crane Data's separate and broader Money Fund Intelligence Daily data series shows total MF assets are down $33.7 billion in September (as of 9/9) to $4.847 trillion.) They explain, "Assets of retail money market funds increased by $3.48 billion to $1.53 trillion. Among retail funds, government money market fund assets increased by $6.62 billion to $989.88 billion, prime money market fund assets decreased by $2.40 billion to $434.14 billion, and tax-exempt fund assets decreased by $737 million to $106.15 billion." Retail assets account for just over a third of total assets, or 33.2%, and Government Retail assets make up 64.7% of all Retail MMFs. ICI adds, "Assets of institutional money market funds decreased by $29.93 billion to $2.94 trillion. Among institutional funds, government money market fund assets decreased by $26.14 billion to $2.62 trillion, prime money market fund assets decreased by $3.35 billion to $307.48 billion, and tax-exempt fund assets decreased by $448 million to $11.57 billion." Institutional assets, which broke below the $3.0 trillion level for the first time since April 22, accounted for 65.8% of all MMF assets, with Government Institutional assets making up 89.1% of all Institutional MMF totals.

Federated Hermes' Deborah Cunningham writes on, "Prime reasons for money markets." She explains, "For more than 40 years, the cash management sector has been a pillar of the American financial system. Be it money market funds, investment pools or other structures, it has offered liquidity, stability and convenience for millions of investors both small and large. Throughout the pandemic-induced volatility this year, these vehicles have aided businesses, banks and governments on every level. In the best and worst of times, liquidity products have provided much of the short-term funding that lubricate the gears of the American economy." She continues, "It's no coincidence that Federated Hermes also can count more than 40 years in the cash management industry. We have been a pioneer here and want to be clear that we remain committed to it -- particularly prime. We have no intention of diminishing our dedication to this space. In fact, we are as enthusiastic about the broad prime markets as we ever have been as a firm." Cunningham tells us, "Prime funds and like vehicles help corporations be nimble during volatile times by purchasing commercial paper that aids their cash flow and productivity. They offer investors a solid regulatory framework, daily liquidity, diligent credit analysis, broad diversification and historically higher yields than many competing products. Prime funds spread out risk by investing in different securities across business types, asset classes and geography." She concludes, "Lastly, when the Federal Reserve slashes rates, every penny counts. Any potential yield advantage provided by prime could add up to needed returns for investors of all stripes -- from individuals to nonprofits to municipalities to corporations. The acknowledgment of this can be seen in the substantial industry inflows to the space after March. As the U.S. economy recovers in a post-coronavirus world, when neighborhood restaurants fully open, people travel again, live entertainment and 'un-bubbled' sporting events flourish, and the labor market strengthens, the nearly $5 trillion money fund industry will be there."

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