The $75.9 billion Vanguard Market Liquidity Fund, the second largest Prime Institutional money market fund, has filed to "go Government," joining the largest fund, American Funds Central Cash, in exiting the Prime sector. A "Form N-1A Registration Statement" for the Vanguard CMT Funds explains, "Vanguard has designated Vanguard Market Liquidity Fund as a government money market fund. Government money market funds are required to invest at least 99.5% of their total assets in cash, U.S. government securities, and/or repurchase agreements that are collateralized solely by U.S. government securities or cash (collectively, government securities). The Fund generally invests 100% of its assets in government securities and therefore satisfies the 99.5% requirement for designation as a government money market fund. Government money market funds may, but are not required to, maintain a stable NAV through the use of amortized cost accounting and may, but are not required to, implement liquidity fees. The Fund will maintain a floating NAV and does not currently intend to voluntarily implement liquidity fees." (Note: There's still time to register for our Bond Fund Symposium next week in Philadelphia, March 25-26! Attendees and Crane Data subscribers may access the conference binder, Powerpoints and recordings (after the show) via the "Bond Fund Symposium 2024 Download Center.")
It continues, "Liquidity fees are designed to transfer the costs of liquidating securities from shareholders who remain in the Fund to those who leave the Fund during periods when liquidity is limited. Discretionary liquidity fee. The Fund may impose a liquidity fee of up to 2% on all redemptions if the board of trustees of Vanguard Market Liquidity Fund (the Board) determines that it is in the best interest of the Fund. The Board may delegate liquidity fee determinations to the Advisor or its officers, subject to written guidelines. Subject to practical limitations necessary to implement the fee, the discretionary liquidity fee may be implemented the same day that the Board determines to impose a fee. Any liquidity fee imposed will remain in effect until the Board determines that imposing such liquidity fee is no longer in the best interests of the Fund."
Crane Data's Feb. 6 News featured the story, "American Funds Central Cash to Convert to Govt to Avoid Liquidity Fees," which says, "Capital Group's $144.4 billion American Funds Central Cash fund, the largest Prime Inst money market fund, has filed to convert to a Government MMF, making it the first major Prime MMF casualty of the latest round of the SEC's pending Money Fund Reforms. A Form N-1A filing for the Capital Group Central Fund Series' American Funds Central Cash M (CMQXX) tells us, "On or about June 7, 2024 (the 'Effective Date'), the fund intends to operate as a government money market fund pursuant to rule 2a-7 under the 1940 Act. Under rule 2a-7, a government money market fund is a money market fund that invests at least 99.5% of its total assets in cash, U.S. Treasury securities and other government securities guaranteed or issued by an agency or instrumentality of the U.S. government, and repurchase agreements that are fully collateralized by cash or government securities."
The largest Prime Inst MMFs (who will be subject to the new emergency liquidity fee regime) tracked by Crane Data currently include: American Funds Central Cash (CMQXX, $134.6B), Vanguard Market Liquidity Fund (VAN01, $75.9B), BlackRock Cash Inst MMF SL (BISXX, $68.7B), Fidelity Cash Central Fund (FID01, $53.7B), JPMorgan Prime MM Capital (CJPXX, $42.7B), Fidelity Sec Lending Cash Central Fund (FID05, $31.6B), Federated Hermes Inst Prime Obligs IS (POIXX, $21.4B), JPMorgan Prime MM Institution (JINXX, $18.5B), Columbia Short-Term Cash Fund (COL01, $17.1B), Morgan Stanley Inst Liq Prime Inst (MPFXX, $16.1B), DFA Short Term Investment Fund (DFA01, $15.5B), Federated Hermes Inst Prime Value Obl IS (PVOXX, $15.2B), PGIM Inst Money Market Fund (PRU01, $15.1B), State Street Inst Liquid Res Prem (SSIXX, $14.6B), BlackRock Lq TempCash Inst (TMCXX, $14.1B), JPMorgan Prime MM IM (JIMXX, $13.3B), UBS Select Prime Money Mkt Inst (SELXX, $11.4B), UBS Select Prime Money Mkt Pref (SPPXX, $11.4B), Schwab Variable Share MF Ultra (SVUXX, $6.0B) and MFS Inst Money Market A (MFS01, $5.4B).
The largest Prime Retail MMFs (who won't be subject to liquidity fees) include: Schwab Value Adv MF Inv (SWVXX, $180.4B), Schwab Value Adv MF Ultra (SNAXX, $101.0B), Fidelity Money Market Fund Premium (FZDXX, $94.5B), Fidelity Inv MM: MM Port Inst (FNSXX, $69.8B), Federated Hermes Prime Cash Oblig WS (PCOXX, $60.7B), Fidelity Inv MM: MM Port I (FMPXX, $55.1B), Allspring MMF Prm (WMPXX, $33.6B), JPMorgan Liquid Assets Premier (PJLXX, $25.7B), JPMorgan Liquid Assets Capit (CJLXX, $14.9B), Fidelity Money Market Fund (SPRXX, $11.0B), JPMorgan Liquid Assets Instit (IJLXX, $10.3B), UBS Prime Reserves Fund (UPRXX, $7.6B), JPMorgan Liquid Assets Morgan (MJLXX, $7.1B), UBS Prime Preferred Fund (UPPXX, $6.6B), Goldman Sachs Investor MM Inst (FMJXX, $6.6B), Invesco Premier Institutional (IPPXX, $6.3B), T Rowe Price Cash Reserves (TSCXX, $4.6B), Federated Hermes Capital Reserves (FRFXX, $3.9B), JPMorgan Liquid Assets Agen (AJLXX, $3.9B) and Federated Hermes Prime Cash Oblig SS (PRCXX, $3.8B).
For more info, see these Crane Data News stories: "More from the SEC's Money Market Fund Reforms: Liquidity Fee Excerpts" (7/24/23), "Big Shift Out of Prime and Muni MMFs Hits $1 Trillion" (9/30/16), "ICI on Orderly Prime to Govt Transition; Managing Flows; Reforms, Rates" (9/29/16), "HSBC Latest to Exit Prime; Turn Off the Lights? BlackRock on NRSROs" (9/12/16), "Prime Asset Declines Attracting Attention; Prime/Govt Spread Shrinks" (8/2/16), "UBS Liquidates Sweeps, Goes Govt; Vanguard Floats Internal Money Fund" (6/29/16), "Northern Streamlines MMFs: One Prime to Govie, Two T-E Liquidations" (6/2/16), "Another Two Bite the Dust: SEI Liquidates Prime; Wilmington Goes Govt" (3/29/16), "Even More Prime to Govie: Great West; Columbia, ProFund, Rydex File" (3/16/16), "Harbor, Payden Convert from Prime to Govt; JPM on Flows; iTreasurer" (3/15/16), "Govt MMF Assets Surpass Prime for First Time Ever; Highest in 5 Yrs" (2/26/16) and "Latest Guessing Game: How Much Investor Cash Will Leave Prime MMFs <i:http://cranedata.com/archives/all-articles/5960/>`_?" (2/3/16).
See also: "More Funds Jump on Prime to Govt Conversion Bandwagon; Mergers" (12/22/15), "Dec. MFI: Asset Flat in '15, Prime Exodus; BlackRock's Henderson, T-E" (12/7/15), "RBC Latest to Abandon Prime MMFs; BlackRock Designates Retail, Inst" (12/1/15), "OppenheimerFunds Latest MF to Go Govt; Deutsche Unveils Ultra-Short" (11/25/15), "Columbia Threadneedle Going Govt; Dreyfus Details MF Moves; Deutsche" (11/18/15), "JP Morgan Global Liquidity Survey Shows 70 Percent Will Stick w/Prime" (11/16/15), "ICI on Prime to Govt Reclassifications; Ignites Recaps Shifts To-Date" (11/13/15), "Sungard Survey Shows Majority of Corps Will Stick w/Prime; Portals" (11/9/15), "JPM: 650 Billion Could Move from Prime; BNY Mellon on Floating NAVs" (11/4/15), "Pioneer, Nationwide Converting Prime to Govt; 2 More Exit MMF Space" (10/29/15), "Franklin Goes Government; $200 Billion To-Date to Convert from Prime" (9/1/15), "August MFI Features Going Govt, PIMCO's Schneider; SEC FAQ Update" (8/10/15), "BlackRock to Liquidate 3 Muni MMFs, Convert Old Merrill Primes to Govt" (7/31/15), "American Funds Leans Government; Abate on Fidelity; Fido on TBills" (7/29/15), "UBS Announces Govt MF Plans, Private MMFs; Bloomberg on Repo Trend" (6/12/15), "Will There Be Enough Supply in the Government Money Fund Space?" (5/6/15) and "Fidelity Announces Major Changes to MMFs; Staying Stable, Going Govt" (2/2/15).
In other news, State Street Global Advisors latest "Monthly Cash Review February 2024 (USD)," "The current positioning of money market funds leans toward long durations, aiming to target the point just shy of where the yield curve inverts so as not to dilute the current yield and be fooled by the mispricing of the term premium. Meanwhile, Treasury Bills remain attractively priced, whereas discount notes offer limited value. We recognized the inherent seasonal shortage of T-Bills in the spring months as tax payments leave the US Treasury flush."
They write, "Commercial paper (CP) appears rich compared to the levels over the past year. We remain cautious on credit given the expectation that recessionary pricing has yet to arrive. Prime MMF yields stand at approximately 15 bp over government MMF yields, slightly tighter than the past one-year average of 18 bp. Overall, MMF flows exhibit notable strength, and we continue to see record levels of total assets under management in MMFs."
SSGA says, "The upcoming March meeting carries significant weight, particularly as discussions revolve around the tapering of quantitative tightening (QT). Fed Chair Jerome Powell's remarks during the January Federal Open Market Committee press conference made it clear that a policy easing is not on the table for the March meeting. As a result, our attention is focused on the potential reduction in QT."
They conclude, "Though we do not expect a change in approach to MBS holdings, we do anticipate a reduction in the amount of US Treasuries that roll off the balance sheet. There is an expectation that the volume of Treasuries rolling off will decrease, potentially by around $30 billion. This adjustment reflects the Fed's ongoing efforts to gradually normalize its balance sheet while carefully managing market expectations and economic conditions. In essence, as we navigate through the turbulence of market repositioning, it is imperative to remain vigilant and adaptable, recognizing the nuanced signals amid the noise."
