The December issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Thursday morning, features the articles: "Top 10 Stories of 2023: Assets Surge $1T to $6.2T; Yields 5%," which reviews the biggest news stories of 2023; "J.P. Morgan's 2024 Outlook: Cash to Remain Attractive," which covers JPM’s expectations for the year to come; and, "CFTC Proposal Allows Only Govt MMFs for Collateral," which reviews the potential changes to investments by FCMs. We also sent out our MFI XLS spreadsheet Thursday a.m., and we've updated our Money Fund Wisdom database with 11/30/23 data. Our December Money Fund Portfolio Holdings are scheduled to ship on Monday, December 11, and our December Bond Fund Intelligence is scheduled to go out on Thursday, December 14. (Note: Register ASAP for our Money Fund University, Dec. 18-19 in Jersey City, New Jersey, at the Westin Jersey City Newport. Clients and friends are also welcome to stop by Crane Data's Holiday Cocktail Party at MFU on 12/18 from 5-7:30pm!)
MFI's "Top 10 Stories of 2023: Assets Surge $1T to $6.2T; Yields 5%" article says, "Money fund assets soaring $1.1 trillion to a record $6.2 trillion was the biggest story of the year in 2023. With 3 weeks still to go, money funds will likely show the biggest annual increase in their 50+ year history. Last year, rising yields were the big news, and yields continuing to climb and breaking 5% was also major this year. Other top stories of 2023 included: the long-awaited passage of the SEC's Money Fund Reform Proposal, the continued growth of Social MMFs and the increase in yields in European and worldwide markets. Below, we excerpt from a number of these to highlight the major trends of the past year."
It continues, "Crane Data's Top 10 Stories of 2023 include: 'Schwab's Crawford Comments on Cash Sorting, Purchase Money Funds' (2/2/23); 'FT on Cash Pouring Into MMFs; MFs Record $5.4T; $9.2 Trillion Uninsured' (3/20/23); 'Fed Hikes Rates 10th Time to 5.0-5.25%' (5/4/23); 'SEC's Money Market Fund Reforms: Swing Pricing Out, More Liquidity In' (7/14/23); 'Money Fund Assets Resume Record Run, Up 20% in 12 Months; Repo Dip' (7/28/23); 'Crane 100 Money Fund Index Breaks 5.0%; WSJ on MF Reforms' (8/1/23); 'European Money Fund Assets Hit Record E1.5 Trillion; Yields Hit 5.15%' (8/22/23); 'Fund Companies Prep for Liquidity Fees Via Filings, Discretionary Fees' (10/26/23); 'HSBC Launches 'P' Purpose Share Class; Cavu Paper on DEI Money Funds' (11/2/23); and, 'Money Fund Assets Hit Record $6.2 Trillion' (11/29/23).
We write in our 2024 Outlook article, "J.P. Morgan published its 'Short-Term Fixed Income 2024 Outlook' last week, which is entitled, 'More of more and less of less.' Authors Teresa Ho, Pankaj Vohra and Holly Cunningham tell us, 'In contrast to the long end of the Treasury curve, it was a remarkably stable year in the money markets. Despite the regional banking crisis, massive T-bill issuance, finalization of MMF reform, all the while with QT going on in the background, spreads in the money markets traded mostly in a narrow range. That stability underscored the abundance of liquidity still in the financial system, most of which seemed to be sitting in the very front end. Indeed, MMF AUMs grew by nearly $1tn this year, with balances currently registering $6tn, as investors could not ignore the 5% yield on an overnight asset, a dynamic we haven't seen since 2007.'"
It tells us, "They continue, 'To be sure, markets have made use of that liquidity, as Fed ON RRP balances declined by a substantial $1.3tn. It helped too that the Fed was nearing the end of its tightening cycle, giving MMFs a reason to rotate out of the facility and into T-bills. As of the time of writing, usage at the Fed ON RRP has fallen below $1tn.'"
Our "CFTC" piece states, "A release entitled, 'CFTC Seeks Public Comment on a Proposal on Investment of Customer Funds' tells us, 'The Commodity Futures Trading Commission ... issued, for public comment, a proposed rule on the Investment of Customer Funds by Futures Commission Merchants and Derivatives Clearing Organizations. The proposal would amend the Commission's regulations governing the safeguarding and investment by futures commission merchants (FCMs) and derivatives clearing organizations of funds held for the benefit of customers engaging in futures, foreign futures, and cleared swaps transactions. The proposed amendments would specifically revise the list of permitted investments in Regulation 1.25 and introduce certain related changes and specifications."
It continues, "The 'Fact Sheet and Q&A' explain, 'Commission Regulation 1.25 permits FCMs to invest funds deposited by customers to margin futures, foreign futures, and cleared swap transactions ('Customer Funds') in specified categories of investments. Regulation 1.25 further permits DCOs to invest Customer Funds that FCMs post with the DCOs as margin for their customers' positions in the same specified categories of investments. Regulation 1.25(a)(1) currently lists seven specific investments that FCMs and DCOs may enter into with Customer Funds: (i) obligations of the U.S. and obligations fully guaranteed as to principal and interest by the U.S.; (ii) general obligations of any State or political subdivision; (iii) obligations of any U.S. government corporation or enterprise sponsored by the U.S.; (iv) certificates of deposit issued by a bank; (v) commercial paper fully guaranteed by the U.S. under the TLGP as administered by the FDIC; (vi) corporate notes and bonds fully guaranteed as to principal and interest by the U.S. under the TLGP; and (vii) interests in money market funds ('MMF').'"
MFI also includes the News brief, "MMMF Assets Surge in November," which says, "Our MFI XLS shows assets jumping $219.8 billion, or 3.6%, to a record $6.281 trillion. YTD, MMFs are up over $1.1 trillion (21.5%) with Taxable Retail MMFs up $557.0 (34.1%) and Taxable Inst MMFs up $544.1 (15.9%). Over 12 months, MMFs are up a massive $1.168 trillion, or 22.8%. Assets continue surging higher in December too, rising by $29.6 billion in the first 5 days of Dec., according to MFI Daily. (We should break the $6.3 trillion level this week.)"
Another News brief, "Money Fund Yields Inch Up to 5.20%," explains, "Yields rose by another basis point in the month ended 11/30 to 5.20%, as measured by our Crane 100, an average of 7-day yields for the 100 largest taxable money funds."
A third News brief, "Nov. Portfolio Holdings: Treasuries Continue Surge; Repos, Assets Slide," says, "Our latest Money Fund Portfolio Holdings show that Treasury holdings surged in October while Repo fell. Repo declined $329.2 billion but remains the largest portfolio segment. Treasuries jumped by over $175 billion, ranking in the No. 2 spot. In October, U.S. Treasury holdings jumped to $1.929 trillion vs. the Fed RRP's $1.077 trillion (down $400.8 billion). Agencies were the third largest segment, CP remained fourth, ahead of CDs, Other/Time Deposits and VRDNs."
A sidebar, "SSGA Reviews RRP Impact," says, "State Street Global Advisors' recent 'Monthly Cash Review,' tells us, 'As 'higher for longer' starts to bite the economy, we are keeping a close eye on the Fed's Reverse Repo Program (RRP), which is the best example of excess liquidity. The US Federal Reserve (Fed) must 'drain' this liquidity in order to keep market rates in line with its policy rate range.... This outcome was expected -- real yields and term premiums have done much of the work for the Fed (although it cautioned that it was too soon to tell if this was having an impact on economic growth and inflation).'"
Our December MFI XLS, with November 30 data, shows total assets increased $219.8 billion to $6.281 trillion, after decreasing $39.3 billion in October, increasing $77.8 billion in September, $104.2 billion in August, $21.0 billion in July, $20.3 billion in June, $152.7 billion in May, $56.5 billion in April, $345.1 billion in March, $56.0 billion in February, $22.5 billion in January and $70.2 billion in December."
Our broad Crane Money Fund Average 7-Day Yield was up 1 bp to 5.09%, and our Crane 100 Money Fund Index (the 100 largest taxable funds) was up 1 bp to 5.20% in November. On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA and the Crane 100 both were both higher at 5.35% and 5.27%, respectively. Charged Expenses averaged 0.37% and 0.26% for the Crane MFA and the Crane 100. (We'll revise expenses on Friday once we upload the SEC's Form N-MFP data for 11/30/23.) The average WAM (weighted average maturity) for the Crane MFA was 34 days (up 3 days from previous month) and the Crane 100 WAM was also up 5 at 35 days. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
