Money fund yields declined by 1 basis point to 4.44% on average during the week ended Friday, Nov. 29 (as measured by our Crane 100 Money Fund Index), after falling 3 bps the week prior and 9 bps two weeks prior. Yields are now reflecting most of the Federal Reserve's 25 basis point cut on November 7, but they may continue inching lower this week and next. They've declined by 62 bps since the Fed cut its Fed funds target rate by 50 bps percent on Sept. 18 and they've declined by 19 bps since the Fed cut rates by 1/4 point on 11/7. Yields were 4.65% on average on 10/31, 4.75% on 9/30, 5.10% on 8/31, 5.13% on 7/31 and 6/28, 5.14% on 5/31, 5.13% on 4/30, 5.14% on 3/31 and 2/29/24, 5.17% on 1/31/24, and 5.20% on 12/31/23.
The broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 672), shows a 7-day yield of 4.35%, down 1 bp in the week through Friday. Prime Inst money fund yields were unchanged at 4.56% in the latest week. Government Inst MFs were down 1 bp at 4.45%. Treasury Inst MFs were down 1 bp at 4.40%. Treasury Retail MFs currently yield 4.19%, Government Retail MFs yield 4.15%, and Prime Retail MFs yield 4.34%, Tax-exempt MF 7-day yields were down 19 bps to 2.67%.
Assets of money market funds rose by $70.1 billion last week to a new record high $7.063 trillion, according to Crane Data's Money Fund Intelligence Daily. For the month of November, MMF assets have surged by $200.5 billion, after increasing by $97.5 billion in October and $149.8 billion in September. Weighted average maturities were up 1 bp at 37 days for the Crane MFA and unchanged at 37 days for the Crane 100 Money Fund Index.
According to Monday's Money Fund Intelligence Daily, with data as of Friday (11/29), 112 money funds (out of 786 total) yield under 3.0% with $134.8 billion in assets, or 1.9%; 76 funds yield between 3.00% and 3.99% ($77.3 billion, or 1.1%), 598 funds yield between 4.0% and 4.99% ($6.851 trillion, or 97.0%) and following the recent rate cut there continues to be zero funds yielding 5.0% or more.
Our Brokerage Sweep Intelligence Index, an average of FDIC-insured cash options from major brokerages, was unchanged at 0.46%, after dropping 2 basis points two weeks prior. The latest Brokerage Sweep Intelligence, with data as of Nov. 29, shows that there was one change over the past week. Merrill Lynch lowered rates once again for their advisory accounts; they're now at 4.47% (down 1 bp from the week prior). Three of the 10 major brokerages tracked by our BSI still offer rates of 0.01% for balances of $100K (and lower tiers). These include: E*Trade, Merrill Lynch and Morgan Stanley.
In sweep-related news, Investment News writes, "Fidelity to move RIA clients' sweep balances to in-house product." They explain, "Cash sweep account options have long been a source of contention. These programs, used by major broker-dealers as a short holding place for client cash that is between investments, are often criticized for prioritizing profits."
The piece tells us, "Recently, Fidelity began notifying RIAs that it will default all non-retirement cash to its in-house option, FCASH. Beginning in 2025, RIAs partnered with Fidelity will find sweep account cash going from money market funds to FCASH. That decision adds to the recent dilemmas of cash sweep practices. Industrywide, companies have been criticized for having low rates in their sweep options.... There have been numerous lawsuits filed over the issue, and companies have responded to the pressure by increasing the rates they pay clients for those cash positions [on advisory-type accounts]."
It states, "Last year, Fidelity disclosed that FCASH, which has a much lower yield than money market funds, would become the only available option for RIAs' non-retirement core sweep accounts. 'To provide consistency for our advisor clients, custody non-retirement brokerage accounts will convert and default into FCASH as the core sweep position, beginning in 2025,' a Fidelity spokesperson said in an email. 'The FCASH rate is 2.32 percent as of Nov. 8, 2024.' Advisors who prefer other cash options for their clients continue to have access to a wide array of cash management choices with the ability to transact directly from those cash management vehicles, the spokesperson said."
The article quotes, "A Fidelity spokesperson told InvestmentNews via email that that the company does not resell client deposits to other banks. Fidelity's cash option, at its current rate of 2.32 percent, is significantly below the 4.27 percent available on the firm's government money market fund. RIAs could seek alternative options that maximize yield for their clients' cash holdings."
Ryan Halliday, managing partner at Crewe Advisors tells Investment News, "We still have the ability to purchase money market funds, even if they force everything back to FCASH. We just have to make sure we're watching and paying attention." The article adds, "Citywire earlier reported on Fidelity's pending switch to FCASH for all non-retirement sweep assets."
