Allspring Money Market Funds recently released its "Overview, Strategy, and Outlook," which states, "The annual year-​end funding rite is upon the money markets. As of October 25, 2023, the outstanding securities of Tier 1 and asset-​backed commercial paper (​CP) that matures after the end of the year increased to just over 40% -- a 3% increase from the previous week and a level that is slightly higher than past years' statistics. While the pressure on issuers to extend over year-​end for regulatory requirements remains the same, the rate environment has caused the maturity distribution to skew toward longer-​dated maturities as it fits with investors' need to lock in the positive-​sloping rate curve. This is illustrated in the Fed'​s weekly reports of CP outstanding, which shows $​29 billion in CP outstanding maturing in greater than three months, up from $​20 billion in 2022 and $​12 billion in 2021." Commenting on the Municipal Sector, they say, "Yields in the municipal money market space drifted higher during October as the Securities Industry and Financial Markets Association (​SIFMA) Index continued its volatile ways. After beginning the month at 3.​98%, the SIFMA Index initially fell to 3.​36% before rapidly rising to 4.​19%, or 78% of effective federal funds, on October 18. The attractiveness of SIFMA on both a nominal and relative basis resulted in approximately $​7 billion in inflows into municipal money market funds, according to Crane Data. Further out on the curve, benchmark yields rose roughly 15 to 20 bps as market participants reassessed the outlook for monetary policy. Yields on one-​year high-​grade paper closed out the month at 4.​00%, up from 3.​79% at the end of September." Allspring adds, "During the month, we continued to adopt a conservative posture in terms of weighted average maturities (​WAMs) and liquidity. Accordingly, during the month, we continued to focus our purchases primarily in variable-​rate demand notes (​VRDNs) and tender option bonds (​TOB) with daily and weekly puts in order to emphasize principal preservation while benefiting from elevated rates given the backup in SIFMA. However, we did opportunistically add exposure to fixed-​rate CP and notes targeted in the three-​month and six-​month space as rates backed up toward the end of the month. Seasonal weakness in the municipal space provided the opportunity to invest at attractive ratios relative to taxable alternatives."

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