Money fund assets had declined by 5.0% year-to-date through April 30 (down $124.0 billion), but it appears that they will show large gains in May. Assets rose strongly for the second time in three weeks according to the latest data from the ICI. Its latest "Money Market Mutual Fund Assets" says, "Total money market mutual fund assets increased by $19.53 billion to $2.601 trillion for the week ended Wednesday, May 22, the Investment Company Institute reported today. Taxable government funds increased by $9.25 billion, taxable non-government funds increased by $10.18 billion, and tax-exempt funds increased by $100 million." Money fund assets moved above the $2.6 trillion level for the first time since prior to the April 15 tax deadline, and assets have risen by $38.1 billion month-to-date.
ICI writes, "Assets of retail money market funds increased by $1.33 billion to $893.78 billion. Taxable government money market fund assets in the retail category increased by $430 million to $193.45 billion, taxable non-government money market fund assets increased by $830 million to $513.02 billion, and tax-exempt fund assets increased by $70 million to $187.31 billion." According to ICI's latest numbers, Retail assets represent 34.4% of all money funds assets with Retail Nongovernment (or "Prime") accounting for 19.7%, Retail Government accounting for 7.4%, and Retail Tax Exempt accounting for 7.2%.
ICI also comments, "Assets of institutional money market funds increased by $18.20 billion to $1.708 trillion. Among institutional funds, taxable government money market fund assets increased by $8.82 billion to $711.02 billion, taxable non-government money market fund assets increased by $9.35 billion to $924.35 billion, and tax-exempt fund assets increased by $30 million to $72.13 billion." They show Institutional assets accounting for 65.6% of all money fund assets, with Prime Institutional assets making up 35.5%. Government Inst assets made up 27.3% and Tax Exempt Inst made up 2.8%.
Crane Data's Money Fund Intelligence Daily, which tracks daily assets, yields and information on money funds, shows that the largest weekly asset gains were shown by the following funds: Dreyfus Treas Prime Cash Mg Ins (up $3.3 billion to $27.4 billion), JPMorgan Prime MM Capital (up $2.7B to $64.9B), Dreyfus Tr&Ag Cash Mgmt Inst (up $2.2B to $15.6B), Morgan Stanley Inst Liq Govt Inst (up $1.6B to $20.9B), JPMorgan US Govt MM Capital (up $1.5B to $28.6B), BlackRock Lq T-Fund Inst (up $1.4B to $16.6B), Fidelity Instit MM: Prime MMP I (up $1.3B to $47.8B), Fidelity Instit MM: MM Port I (up $1.1B to $68.9B), Federated US Trs Cash Res IS (up $1.1B to $18.9B), and Fidelity Instit MM: Treas Port I (up $1.0B to $13.4B).
In other news, Wells Fargo Securities published a piece on the "FTT" entitled, "Short-Term Strategy: Taxation Without Representation." Author Garret Sloan summarizes, "On February 14, 2013 the European Commission released a proposal for 11 Member States to implement a Financial Transaction Tax (FTT). If approved in its current form, implementation is expected to occur by January, 2014. The objectives of the proposal are to "harmonize legislation on the indirect taxation of financial transactions", to "ensure that financial institutions make a fair and substantial contribution to covering the cost of the recent crisis", and to create "appropriate disincentives for transactions that do not enhance the efficiency of financial markets.""
Wells tells us, "If implemented, the FTT will have a number of implications, including: The FTT's effects are not limited to the 11 participating Member States; rather, the extra-territorial nature of the tax will impact the way that participants operate in all financial markets around the world. Because the FTT is a flat tax that does not consider the duration of the security or agreement, short-term market liquidity will be heavily impacted as the FTT will overwhelm the yields currently available."
Sloan writes in the piece, "The impact of the FTT on overnight and short-term markets cannot be understated. The transactional nature of the FTT will forcibly impact short-term funding markets more severely than longer-term markets regardless of the underlying risk profiles of the securities in question. The most punitive example of the proposed FTT is in the repo market. While the proposal has provided some relief to repo investors in that it recognizes both legs (i.e. the sale and buyback) as one trade, all repo counterparties and collateral with ties to the EU-11 will be subject to the FTT."
He adds, "The fact that the FTT has made it this far suggests that it has some traction. The final version of the proposal, in our opinion, is likely to differ from the current draft for many of the reasons stated here, but we do think there is sufficient support for the FTT proposal to be approved. Opposition remains, however, and we anticipate many concessions to be made before anything is unanimously agreed upon. In his final monetary policy meeting before retirement, Bank of England governor Mervyn King suggested that the tax has many skeptics, even amongst the countries that have preliminary approval for the tax. He noted that he does not know of a single central banker that believes it is a good idea. Case in point, German finance minister Wolfgang Schauble noted that the EU-11 states are only at the preliminary steps in the process and that any tax could be years away."
