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The Bank for International Settlements' BIS Quarterly Review writes on "Open-ended bond funds: systemic risks and policy implications." The summary says, "The March 2020 market turmoil revived concerns about the amplification of financial stability risks by non-bank financial intermediaries, including open-ended bond funds ('bond OEFs'). A bond OEF pools capital to invest in fixed income instruments -- corporate and other bonds -- while typically granting its investors the right to redeem their shares for cash on a daily basis. Through this liquidity transformation, bond OEFs collectively can give rise to financial stability risks. During the early days of the Covid19 pandemic, bond OEFs experienced intensive but short-lived outflows amid a significant decline in market liquidity and high valuation uncertainty. Conditions remained tense until major central banks stepped in to backstop bond markets." It continues, "This episode has sparked a discussion about bond OEFs' resilience, the comprehensiveness of their liquidity management tools, especially in times of stress, and the tools' adequacy for financial stability more broadly. Advocates of the current industry setup point to the swift market recovery and the reversal of fund outflows that followed the turmoil of March 2020. Critics, pointing to previous, similar episodes, question bond OEFs' ability to withstand large shocks without public sector support and call for these funds' regulation to be revisited." The piece adds, "In this special feature, we analyse redemption dynamics and bond OEFs' response during the March 2020 turmoil, asking whether funds' existing liquidity management tools are conducive to financial stability. Our focus is on actively managed high-yield, investment grade and general bond OEFs. Given their liquidity transformation, these OEFs employ several tools to manage the risk of large redemptions, such as holding liquidity buffers or using swing pricing. We find, however, that bond OEFs' lines of defence did not prevent spillovers across funds and procyclical asset sales."

The Federal Reserve Bank of New York updated its list of "Reverse Repo Counterparties" twice over the past week. The first statement says, "PIMCO Funds: PIMCO Government Money Market Fund has been added to the list of reverse repo counterparties, effective December 3, 2021." The latest tells us, "The following Wells Fargo funds changed their names, effective December 6." Wells Fargo Government Money Market Fund is now Allspring Government Money Market Fund, Wells Fargo Heritage Money Market Fund is now Allspring Heritage Money Market Fund, Wells Fargo Money Market Fund is now Allspring Money Market Fund, and Wells Fargo Treasury Plus Money Market Fund is now Allspring Treasury Plus Money Market Fund." The NY Fed's current list of "Money Market Funds" now includes: AllianceBernstein: AB Fixed-Income Shares, Inc., AB Government Money Market Portfolio; BlackRock Liquidity Funds: FedFund, T-Fund, TempCash, TempFund, Money Market Master Portfolio and Treasury Money Market Master Portfolio; BNY Mellon Investment Adviser: Dreyfus Cash Management, Dreyfus Government Cash Management, Dreyfus Institutional Preferred Government Money Market Fund, Dreyfus Treasury and Agency Liquidity Money Market Fund, Dreyfus Treasury Obligations Cash Management; Capital Research and Management Company: American Funds U.S. Government Money Market Fund and Capital Group Central Fund Series, Capital Group Central Cash Fund; Charles Schwab Investment Management: Schwab Government Money Fund, Schwab Treasury Obligations Money Fund, Schwab Value Advantage Money Fund and Schwab Variable Share Price Money Fund; Columbia Management Investment Advisers: Columbia Short-Term Cash Fund, a series of Columbia Funds Series Trust II; Deutsche Investment Management Americas: Government Cash Management Portfolio; Dimensional Fund Advisors LP: The DFA Short Term Investment Fund of The DFA Investment Trust Company; Federated Investment Management: Edward Jones Money Market Fund, Federated Hermes Capital Reserves Fund, Federated Hermes Government Obligations Fund, Federated Hermes Government Obligations Tax-Managed Fund, Federated Hermes Government Reserves Fund, Federated Hermes Inst Prime Obligations Fund, Federated Hermes Inst Prime Value Obligations Fund, Federated Hermes Municipal Obligations Fund, Federated Hermes Prime Cash Obligations Fund, Federated Hermes Tax-Free Obligations Fund, Federated Hermes Treasury Obligations Fund, Federated Hermes Trust for U.S. Treasury Obligations and Federated Hermes U.S. Treasury Cash Reserves; Fidelity Management & Research Company: Fidelity Colchester Street Trust: Government Portfolio, Fidelity Colchester Street Trust: Money Market Portfolio, Fidelity Colchester Street Trust: Treasury Portfolio, Fidelity Hereford Street Trust: Fidelity Government Money Market Fund, Fidelity Hereford Street Trust: Fidelity Money Market Fund, Fidelity Newbury Street Trust: Fidelity Treasury Money Market Fund, Fidelity Phillips Street Trust: Fidelity Government Cash Reserves, Fidelity Revere Street Trust: Fidelity Cash Central Fund, Fidelity Revere Street Trust: Fidelity Securities Lending Cash Central Fund, Fidelity Salem Street Trust: Fidelity Series Government Money Market Fund and VIP Government Money Market Portfolio; Franklin Advisers: The Money Market Portfolio; Goldman Sachs Asset Management: Goldman Sachs Financial Square Government Fund, Goldman Sachs Financial Square Money Market Fund, Goldman Sachs Financial Square Prime Obligations Fund, Goldman Sachs Financial Square Treasury Obligations Fund and Goldman Sachs Financial Square Treasury Solutions Fund; HSBC Global Asset Management (USA): HSBC U.S. Government Money Market Fund; Invesco Advisers: STIT Government and Agency Portfolio and STIT Treasury Portfolio; J.P. Morgan Investment Management: JPMorgan Liquid Assets Money Market Fund, JPMorgan Prime Money Market Fund, JPMorgan Tax Free Money Market Fund, JPMorgan U.S. Government Money Market Fund and JPMorgan U.S. Treasury Plus Money Market Fund; Legg Mason Partners Fund Advisor: Western Asset/Government Portfolio, Western Asset/Liquid Reserves Portfolio and Western Asset/U.S. Treasury Reserves Portfolio; Morgan Stanley Investment Management: Morgan Stanley Institutional Liquidity Funds Government Portfolio, Morgan Stanley Institutional Liquidity Funds Government Securities Portfolio, Morgan Stanley Institutional Liquidity Funds Prime Portfolio, Morgan Stanley Institutional Liquidity Funds Treasury Portfolio and Morgan Stanley Institutional Liquidity Funds Treasury Securities Portfolio; Northern Trust Investments: NTAM Treasury Assets Fund, Northern Funds - U.S. Government Money Market Fund, Northern Funds - U.S. Government Select Money Market Fund, Northern Institutional Funds - Government Portfolio, Northern Institutional Funds - Government Select Portfolio and Northern Institutional Funds - Treasury Portfolio; Principal Global Investors, LLC: Principal Funds, Inc. - Government Money Market Fund; RBC Global Asset Management (U.S.): RBC Funds Trust, U.S. Government Money Market Fund; SSgA Funds Management: Institutional Liquid Reserve Portfolio, Institutional US Gov. Money Market Fund, a series of the State Street Master Funds, State Street Navigator Securities Lending Government Money Market Portfolio and State Street Treasury Plus Money Market Portfolio; T. Rowe Price Associates: T. Rowe Price Government Money Fund, Inc., T. Rowe Price Government Reserve Fund, T. Rowe Price Treasury Reserve Fund and T. Rowe Price U.S. Treasury Money Fund; UBS Asset Management (Americas): Government Master Fund, Limited Purpose Cash Investment Fund, Prime Master Fund and Treasury Master Fund; U.S. Bancorp Asset Management: First American Government Obligations Fund and First American Treasury Obligations Fund; The Vanguard Group: Vanguard Treasury Money Market Fund, Vanguard Market Liquidity Fund and Vanguard Cash Reserves Federal Money Market Fund; Wells Fargo Funds Management: Wells Fargo Government Money Market Fund, Wells Fargo Heritage Money Market Fund, Wells Fargo Money Market Fund and Wells Fargo Treasury Plus Money Market Fund and Wilmington Funds Management: Wilmington U.S. Government Money Market Fund. The NY Fed describes the "Eligibility criteria of the program, "In order to be eligible to become a reverse repo counterparty, a firm must be either: A state or federally chartered bank or savings association (or a state or federally licensed branch or agency of a foreign bank) with total assets equal to or greater than $30 billion, or reserve balances equal to or greater than $10 billion on the last quarter for which relevant reports are available; or A government-sponsored enterprise; or An SEC-registered 2a-7 fund that has, measured at each month-end for the most recent six consecutive months, either net assets of no less than $2 billion or an average outstanding amount of RRP transactions of no less than $500 million. Firms must already have arrangements in place to operate in the triparty repo market, in transactions collateralized by U.S. government debt, agency debt and agency mortgage-backed securities. Firms must be able to execute RRPs with securities margined at 100% (i.e. the value of the securities provided by the New York Fed will equal the funds provided by the counterparty)." (See here for the NY Fed's latest "Repo and Reverse Repo Operations".)

Crane Data continues to make plans for its next live event, Money Fund University. Our 12th annual MFU "basic training" conference will take place (live and in person) at the Hyatt Regency in Boston, Mass., January 20-21, 2022. Crane's Money Fund University is designed for those new to the money market fund industry or those in need of a concentrated refresher on the basics. The event also focuses on hot topics like money market fund regulations, money fund alternatives, offshore markets, and other recent industry trends. Our educational conference features a faculty of the money fund industry's top lawyers, strategists, and portfolio managers, and the Boston show will include an extended free training session (and lunch) for Crane Data clients. Money Fund University offers a 2-day crash course on money market mutual funds, educating attendees on the history of money funds, the Fed, interest rates, ratings, rankings, and money market instruments such as commercial paper, Treasury bills, CDs and repo. We also cover portfolio construction and credit analysis. Registrations are now being taken, and the latest agenda is available here. (E-mail us to request the latest brochure.) New portfolio managers, analysts, investors, issuers, service providers, and anyone interested in expanding their knowledge of "cash" investing should benefit from our comprehensive program. Even experienced professionals may enjoy a refresher course and the opportunity to interact with peers in an informal setting. Attendee registration for Crane's Money Fund University is just $500, exhibit space is $2,000, and sponsorship opportunities are $3K (Bronze), $4K (Silver), and $5K (Gold). A block of rooms has been reserved at the Boston Hyatt Regency. We'd like to thank our past and pending MFU sponsors -- BlackRock, Dreyfus CIS, J.P. Morgan Asset Management, Fitch Ratings, TD Securities, S&P Global Ratings, Dechert LLP, Fidelity Investments and Federated Investors -- for their support, and we look forward to seeing you in Boston in January. E-mail Pete Crane (pete@cranedata.com) for the latest brochure or visit www.moneyfunduniversity.com to register or for more details. Crane Data is also preparing the agenda for our next Bond Fund Symposium, which will be held March 28-29, 2022, at the Hyatt Regency in Newport Beach, Calif. Our Bond Fund Symposium offers a concentrated and affordable educational experience, as well as an excellent and informal networking venue. Registration for Bond Fund Symposium is $750; exhibit space is $2,000 (includes 2 tickets); and sponsorship opportunities are $3K, $4K, $5K, and $6K. Our mission is to deliver the best possible conference content at a reasonable price to bond fund professionals and investors. We're also beginning to make plans for our next "big show," Money Fund Symposium, which will be held June 20-22, 2022, at the Hyatt Regency in Minneapolis. (Let us know if you'd like details on speaking or sponsoring.) Finally, mark your calendars for our next European Money Fund Symposium, which will be held Sept. 27-28, 2022, in Paris, France. Watch for more details on these shows in coming weeks and months. Note that the recordings and materials from our past events are available to Crane Data subscribers at the bottom of our "Content" page. Let us know if you'd like more info on any of our (or other "cash") events, and we hope to see you in Boston in January, Newport Beach in March, Minneapolis in June or Paris in September in 2022!

Fitch Ratings released its "Global Money Market Fund Flows Dashboard: 3Q21 this week, which says, "Fitch Ratings estimates that total global money market fund assets under management (AUM) remained stable at USD7.6 trillion at end-September 2021, with individual regions also experiencing limited change from quarter to quarter. Divergent growth rates are more prominent at the sub-sector level, particularly the fund-type level in the US and the currency level in Europe." They write, "Total AUM in US prime MMFs dropped by 4% in 3Q21, leading to an overall 14% reduction in total assets for the fund type in the first three quarters of the year. Nevertheless, net inflows to government MMFs (USD35 billion) throughout 3Q21 more than offset the net outflows from prime (USD19 billion) and tax-free (USD5 billion) MMFs. Government, prime and tax-free MMFs represented 88%, 10% and 2% of US MMF AUM, respectively, at end-3Q21." Fitch tells us, "European MMFs' AUM remained at EUR1.4 trillion at end-September 2021. When measured in base currency, US dollar- and UK pound-denominated MMFs' total assets fell during 3Q21 by USD17 billion (-3%) and GBP5 billion (-2%), respectively. In contrast, euro MMFs rose by EUR13 billion (2%) in the same period, offsetting most of the decrease in the other two major currencies." The dashboard adds, "Chinese MMFs grew marginally in 3Q21, by just under 2%. Nevertheless, total Chinese money fund assets reached a new peak of CNY9.8 trillion at end-August, before dropping to CNY9.4 trillion at end-September.... Fitch would expect limited direct impact on MMFs' mark to market net asset values in an interest rate shock scenario ..., as investments reset to new rates quickly given short durations. Nevertheless, larger outflows may be triggered by underlying investors, such as bond mutual funds, which could be reluctant to sell securities into declining markets, but may be willing to redeem their holdings in MMFs. For example, fixed-income mutual funds with longer durations may face increased redemption requests if a rate rise scenario triggered material market value losses. Investors may redeploy their investments from bond mutual funds into safe haven assets, such as government MMFs, in reaction to market volatility, countering these effects. Modest flows are immaterial to ratings but large or sustained outflows can put pressure on fund liquidity metrics and, in severe cases, ratings."

A press release entitled, "BMO Investments Inc. Launches ETF Series for BMO Money Market Fund," tells us, "BMO Investments Inc., the manager of the BMO Mutual Funds, today announced the launch of ETF Series units for the BMO Money Market Fund. BMO Money Market Fund – ETF Series' (Ticker: ZMMK) objective is to provide capital preservation by investing in a portfolio of high-quality money market instruments issued by governments and corporations in Canada. To support this objective, the portfolio manager selects high-quality money market instruments that mature in less than 365 days and have an average term of 90 days or less to reset date and 180 days to maturity date. The offering of ETF Series units of the fund has closed and it will begin trading on the Toronto Stock Exchange today." Mark Raes, Head of Product, BMO Global Asset Management Canada, comments, "We're pleased to be expanding our ETF shelf to include ETF Series units of BMO Money Market Fund. ZMMK provides a solution for investors looking for a liquidity sleeve, or a place to hold their cash as they assess the market for other investments." BMO adds, "Further information about BMO ETFs and ETF Series of the BMO Mutual Funds can be found at www.bmo.com/etfs." According to ICI's latest Worldwide mutual fund totals, Canada ranks 14th among money fund managers with $27.0 billion.

Earlier this month, Moody's Investors Service distributed a slide deck entitled, "Money Market Funds – Global: 2022 Outlook," which tells us, "Moody's money market fund outlook is stable, previously negative. Moody's rates 166 MMFs with combined assets under management (AUM) of over $3.6 trillion." Its summary explains, "The return to a stable outlook from negative reflects improving credit conditions, steady assets under management (AUM), an increased likelihood of short-term rate increases, and continued lack of clarity around upcoming regulatory reform." Moody's lists the following points: "MMF outlook raised to stable from negative: Industry has recovered from early COVID market disruption; AUM levels remain at or near all-time highs. Upcoming regulatory change creates uncertainty: More MMF regulation is coming, but its timing and final shape have not yet been decided. Portfolio credit quality remains strong: Improvement in banks' credit profiles and outlooks support the credit quality and stability of prime MMFs, which invest mainly in short term debt issued by financial institutions; Higher short-term rates are on the horizon: Increases in short-term rates will help reduce the impact of fee waivers on MMF sponsors' revenue and earnings; Tail risks are contained: Tapering of US central bank asset purchases, disruption as the deadline for raising the US debt ceiling approaches, the phase out of LIBOR reference rates, stablecoins and regulatory scrutiny of ESG investing pose limited threats to the sector." They ask, "What could change outlook to negative?" Moody's lists these factors: Regulatory changes in the US and/or in the EU making MMFs less attractive to institutional investors; Rapid deterioration in sovereign and bank credit profiles; and the crystallization of tail risks such as a technical US default due to a failure to extend the government's borrowing limit, disruption due to the phase-out of LIBOR reference rates, sponsor concentration, 'greenwashing' allegations and potential stablecoin related disruption." The "Drivers of a stable outlook" include: MMFs' AUM is holding steady in spite of low interest rates; Increased likelihood of short-term rate increases makes MMFs more attractive to investors, improves portfolio yields, and eases pressure on MMF revenues; and the Final shape of upcoming regulatory changes in US and EU is uncertain, but the new rules should make the sector safer and more resilient."

"Fitch Rates Dreyfus Institutional Preferred Government Plus Money Market Fund 'AAAmmf'" says a new press release. It tells us, "Fitch Ratings has assigned an 'AAAmmf' rating to the Dreyfus Institutional Preferred Government Plus Money Market Fund. The fund is a Rule 2a-7 registered government money market fund (MMF) managed by BNY Mellon Investment Adviser, Inc. (BNY Mellon).... The rating reflects Fitch's review of the fund's investment and credit guidelines, credit quality and diversification, liquidity profile, as well as the capabilities of BNY Mellon to manage the fund. The 'AAAmmf' rating assigned to the fund indicates an extremely strong capacity to achieve the investment objective of preserving principal and providing liquidity through limiting credit, market and liquidity risk." Fitch explains, "The fund invests solely in fixed and floating rate government securities, repurchase agreements collateralized by government securities, and cash. Specifically, government securities include obligations issued or guaranteed as to principal and interest by the U.S. government or by its agencies or instrumentalities." They add, "The Negative Rating Outlook assigned to the United States and to U.S. government sponsored entities does not have a direct impact on the fund's rating, nor would a hypothetical downgrade of U.S. government and agency debt to 'AA+', assuming no changes to the current portfolio. This is due to the fact that 'AA+'-rated investments are still viewed as supportive of a 'AAAmmf' rating, provided all other maturity, duration, diversification and liquidity guidelines outlined in Fitch's MMF rating criteria are satisfied. That said, in the event that a downgrade of the U.S. rating had material impacts on the fund's asset liquidity and/or ability to meet redemptions, these could adversely impact Fitch's rating analysis.... The fund seeks to limit interest rate and spread risk by maintaining a weighted average maturity and a weighted average life below 60 days and 120 days, respectively, consistent with Fitch's 'AAAmmf' criteria.... The fund seeks to maintain sufficient levels of daily and weekly liquidity to meet investors' redemption requests. Specifically, the pool invests at least 10% of total assets in securities offering daily liquidity and at least 30% of total assets in securities providing weekly liquidity. As of the review date, the fund met the liquidity requirements mandated by Rule 2a-7 and were in line with the liquidity guidelines outlined in Fitch's 'AAAmmf' rating criteria."

Last week, the Federal Reserve released its "Minutes of the Federal Open Market Committee, Nov. 2–3, 2021," which made a few mentions of money market funds and repo. They write, "Turning to money market developments, the manager noted that the transition away from LIBOR (London Interbank Offered Rate) had gained momentum with a pick-up in the interdealer trading volume of Secured Overnight Financing Rate (SOFR) derivatives; that said, much remained to be done to complete the LIBOR transition. Market participants were attentive to some temporary downward pressure on the SOFR over the period. This softness appeared to be the result of technical factors and was observed primarily in centrally cleared repurchase agreement markets. The Federal Reserve's administered rates -- the interest on reserve balances rate and the overnight reverse repurchase agreement (ON RRP) rate -- continued to support effective interest rate control and, outside of month- and quarter-end, the federal funds rate remained stable over the period. Regarding the debt ceiling, the short-term resolution reached in October increased the debt limit by $480 billion. Market participants' estimates of the new date when the Treasury would exhaust its extraordinary measures and cash balance were wide-ranging but some estimates suggested the date might be as early as mid-December. Most market participants anticipated that a resolution to the debt ceiling would again be reached without a delayed payment on maturing Treasury securities although uncertainty about the debt ceiling resolution remained a source of concern in financial markets." The minutes add, "The staff provided an update on indicators related to the stability of the financial system. Vulnerabilities associated with funding risks remained at money funds and other mutual funds. In addition, funding risks were an emerging concern at entities issuing stablecoins, because they appeared to have structural maturity and liquidity transformation vulnerabilities similar to those for money funds but with considerably less transparency and an underdeveloped regulatory framework. The staff noted that the President's Working Group on Financial Markets was engaged in interagency work to address these risks."

The Investment Company Institute's latest weekly "Money Market Fund Assets" report shows assets rising for the third week in a row and the fourth week out of the past five. The release says, "Total money market fund assets increased by $22.02 billion to $4.60 trillion for the six-day period ended Tuesday, November 23, the Investment Company Institute reported today. Among taxable money market funds, government funds increased by $27.19 billion and prime funds decreased by $4.76 billion. Tax-exempt money market funds decreased by $401 million." Money fund assets are up by $300 billion, or 7.0%, year-to-date in 2021. Inst MMFs are up $390 billion (14.1%), while Retail MMFs are down $90 billion (-5.9%). ICI's stats show Institutional MMFs increasing $19.5 billion and Retail MMFs increasing $2.5 billion in the latest week. Total Government MMF assets, including Treasury funds, were $4.061 trillion (88.3% of all money funds), while Total Prime MMFs were $448.7 billion (9.8%). Tax Exempt MMFs totaled $87.8 billion (1.9%). Over the past 52 weeks, money fund assets have increased by $273 billion, or 6.3%, with Retail MMFs falling by $98 billion (-6.4%) and Inst MMFs rising by $371 billion (13.3%). (Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data, so they're almost $400 billion lower than Crane's asset series.) ICI explains, "Assets of retail money market funds increased by $2.49 billion to $1.44 trillion. Among retail funds, government money market fund assets increased by $3.13 billion to $1.15 trillion, prime money market fund assets decreased by $466 million to $206.85 billion, and tax-exempt fund assets decreased by $179 million to $77.13 billion." Retail assets account for just under a third of total assets, or 31.2%, and Government Retail assets make up 80.2% of all Retail MMFs. They add, "Assets of institutional money market funds increased by $19.54 billion to $3.16 trillion. Among institutional funds, government money market fund assets increased by $24.05 billion to $2.91 trillion, prime money market fund assets decreased by $4.30 billion to $241.79 billion, and tax-exempt fund assets decreased by $223 million to $10.63 billion." Institutional assets accounted for 68.8% of all MMF assets, with Government Institutional assets making up 92.0% of all Institutional MMF totals.

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 Nov. 19, 2021) includes Holdings information from 78 money funds (up from 71 a week ago), which represent $2.458 trillion (down from $2.549 trillion) of the $4.925 trillion (49.9%) in total money fund assets tracked by Crane Data. (Our Weekly MFPH are e-mail only and aren't available on the website.) Our latest Weekly MFPH Composition summary again shows Government assets dominating the holdings list with Repurchase Agreements (Repo) totaling $1.086 trillion (down from $1.127 trillion a week ago), or 44.2%; Treasuries totaling $1.004 trillion (down from $1.086 trillion a week ago), or 40.8%, and Government Agency securities totaling $148.9 billion (up from $147.1 billion), or 6.1%. Commercial Paper (CP) totaled $73.4 billion (up from a week ago at $64.4 billion), or 3.0%. Certificates of Deposit (CDs) totaled $49.0 billion (up from $42.9 billion a week ago), or 2.0%. The Other category accounted for $71.8 billion or 2.9%, while VRDNs accounted for $24.4 billion, or 1.0%. The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $1.004 Trillion (40.8% of total holdings), the Federal Reserve Bank of New York with $590.1B (24.0%), Fixed Income Clearing Corp with $63.7B (2.6%), Federal Home Loan Bank with $63.0B (2.6%), RBC with $62.8B (2.6%), BNP Paribas with $62.6B (2.5%), Federal Farm Credit Bank with $48.9B (2.0%), Societe Generale with $27.2B (1.1%), Sumitomo Mitsui Banking Corp with $27.2B (1.1%) and Federal National Mortgage Association with $25.4B (1.0%). The Ten Largest Funds tracked in our latest Weekly include: JPMorgan US Govt MM ($235.4B), Goldman Sachs FS Govt ($212.3B), Morgan Stanley Inst Liq Govt ($151.0B), Wells Fargo Govt MM ($142.7B), Fidelity Inv MM: Govt Port ($136.0B), Federated Hermes Govt Obl ($127.6B), Dreyfus Govt Cash Mgmt ($121.3B), Goldman Sachs FS Treas Instruments ($112.4B), JPMorgan 100% US Treas MMkt ($99.7B) and State Street Inst US Govt ($89.4B). (See our Nov. 10 News, "Nov. MF Portfolio Holdings: Treasuries Recover But Repo Still No. 1" for more, and 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.)

The Wall Street Journal writes, "Pension Cash Dwindles, Risking Liquidity Crunch," which tells us, "Cash allocations have dropped to a seven-year low at the funds that manage more than $4.5 trillion in retirement savings for America's teachers, police and firefighters. Public pension funds, which have increasingly turned to illiquid private markets to drive up returns, are now aiming to keep about 0.8% of their holdings in cash, according to data from the Boston College Center for Retirement Research. These funds are managing a juggling act faced by many institutional and household investors who want to put their money to work but also want easy access to it in a pinch." The piece explains, "The $496 billion California Public Employees' Retirement System, despite aiming for a slightly more conservative 6.8%, still plans to invest more in private markets, borrow against up to 5% of the fund, and keep less cash on hand, to meet that target, under a plan the board approved this month. Meanwhile, smaller pension funds serving school employees in Ohio, city workers in Illinois and other public employees across the country are putting more of their money into real estate, private equity or private debt. Public pension funds have hundreds of billions of dollars less on hand than the amount they will need to cover promised benefits after two decades of underfunding, unrealistic demands from public-employee unions, and losses during the 2007-2009 financial crisis." It adds, "Calpers staff said at a meeting earlier this month that the fund uses a dashboard to closely monitor liquidity, which is a measure of how easily holdings can be converted to cash without losses. The retirement fund, which is the nation's largest, eliminated its target of holding 1% of its assets in cash as part of the new asset allocation approved this month, which takes effect July 1, 2022. Finding a strategy that can accomplish what bonds once did, providing yield in good times and accessible cash in bad, is 'not a problem with an easy solution,' said Ash Williams, who recently retired as executive director and chief investment officer of the State Board of Administration, which manages investments for the Florida Retirement System. 'Everybody's wrestling with this same thing,' he said."

As we wrote in our Nov. 18 News, "Treasury'​s OFR Posts Annual Report, Money Funds, Repo Among Risks," the "OFR 2021 Annual Report to Congress" analyzes threats to the financial stability of the U.S. and contains several sections relating to money market funds. Today, we quote two more sections that weren't included in our original coverage. The first is a sidebar discussing, "Sponsor Support to Money Market Funds." It says, "`Sponsors can help prevent money market funds from letting the net asset value of their shares drop below $1 and mitigate potential spillovers to affiliate funds and short-term funding markets more broadly. Both Moody's Investors Service and the SEC have identified several events over the years where some fund sponsors chose to provide support or take other measures to maintain either price stability or share liquidity.... The SEC data show that some sponsors' support extends beyond prime funds to government and municipal money market funds." It continues, "Voluntary support over several decades may have lessened investors' perception of the risk in money market funds; however, uncertainty about the availability of sponsor support has fueled runs. The implicit support connects the health of a sponsor to the stability of a fund's net asset value; however, the sponsor's ability to provide support has not been a focal point for regulators." Another section comments, "From January 2020 to July 2020, bank deposits rose by $2.3 trillion, while reserves grew by $1.3 trillion, mostly for the largest banks. Money also moved into alternative types of deposits, such as money market funds, and rose to $1 trillion over the same period before decreasing gradually. The increase in bank deposits compounded the negative effect of declining interest rates on banks' net interest margins.... But after March 2020, spreads between rates on deposits and rates on other short-term investments narrowed. The flow of deposits caused banks' net interest margins to fall from 3.28% at the end of 2020 to 2.56% at the end of the first quarter of 2021."

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