The Board of Governors of the Federal Reserve has added a page entitled, "Money Market Funds: Investment Holdings Detail" to its "Financial Accounts Guide" for its Z.1 (formerly Flow of Funds) data series. The Fed writes, "These tables provide additional detail on the investment holdings of U.S. money market funds, based on a monthly dataset of security-level holdings for all U.S. money market funds. Table 1 reports the aggregate dollar amount of investments of U.S. money market funds since 2010, by the world region and country of the security issuer. The first row shows total U.S. money market fund assets (i.e., worldwide investments). The first row of each subsection represents total U.S. money market fund investments for each respective world region, with individual country investments listed below. U.S. investments are subcategorized into Treasury securities, agency and GSE securities, Federal Reserve reverse repurchase agreements, municipal securities, and other U.S. investments."
They continue, "Table 2 provides a finer level of detail by month, showing, for each country of issuer, the aggregate dollar amount of investments of U.S. money market funds by type of money fund (i.e., prime, government, and municipal bond funds), type of security (i.e., direct debt and deposits, repurchase agreement, asset-backed commercial paper, and other), and by maturity of the security. The first figure depicts the asset allocation of U.S. money market fund portfolios over time. Figures 2, 3, and 4 show the asset allocation of prime, government, and tax-exempt money market funds, respectively, over time. The sum of the values in these three figures equals the total value of Figure 1. Figures 5 and 6 report additional detail on the repurchase agreement holdings and the commercial paper holdings, respectively, for U.S. money market funds."
Tables now provided quarterly by the Fed include: Table 1. U.S. Money Market Fund Investment Holdings by Country of Issuance, Table 2. U.S. Money Market Fund Investment Holdings by Country of Issuance, Fund Type, Instrument, and Maturity.
They also include the following Charts: Figure 1. Total Money Market Fund Investment Holdings by Instrument, Figure 2. Prime Money Market Fund Investment Holdings by Instrument, Figure 3. Government Money Market Fund Investment Holdings by Instrument, Figure 4. Tax-exempt Money Market Fund Investment Holdings by Instrument:, Figure 5. Money Market Fund Repo Holdings, and, Figure 6. Money Market Fund Commercial Paper (CP) Holdings.
Historical Data Tables provided by the Fed include: U.S. Money Market Fund Investment Holdings by Country of Issuance, U.S. Money Market Fund Investment Holdings by Country of Issuance, Fund Type, Instrument, and Maturity, Total Money Market Fund Investment Holdings by Instrument, Prime Money Market Fund Investment Holdings by Instrument, Government Money Market Fund Investment Holdings by Instrument, Tax-exempt Money Market Fund Investment Holdings by Instrument, Money Market Fund Repo Holdings, and Money Market Fund Commercial Paper (CP) Holdings.
The Fed explains in its "Documentation," "U.S. money market funds are mutual funds that invest in short-term liquid assets and pay their investors dividends that reflect short-term interest rates. Like other mutual funds, they are registered with the Securities and Exchange Commission and regulated under the Investment Company Act of 1940. In addition, all U.S. money market funds must comply with rule 2a-7 of the Investment Company Act of 1940, which seeks to limit their liquidity risk. The data on money market fund investments are taken from the SEC form N-MFP filings. The reported values are the sums of the investments of all U.S. money market funds for the respective category. The country labels represent the country of domicile of the security issuer. The data are available at a monthly frequency beginning in December 2010. Total assets reported differ slightly from the number reported in Table L.121 of the Financial Accounts of the United States. The main difference is due to the fact that the data presented on this page include money market funds that are not marketed to the public, which are excluded from Table L.121."
In other news, Colleen Meehan wrote in a Dreyfus BNY Mellon "Tax-Exempt Money Market Commentary earlier this month, "The Securities Industry and Financial Markets Association (SIFMA) index continues to increase steadily beginning the year at 0.01% and reaching the current level of 0.63% (as of 10/26/16). The SIFMA index is a weekly high grade market index comprised of seven-day tax-exempt variable rate demand notes produced by Municipal Market Data Group. The year-to-date 2016 average is 0.38% versus a 0.05% average for 2015. We expect these levels to remain attractive compared to similar taxable investments as we head towards year-end."
She continues, "As expected, one-year rates have backed up as funds continue to stay short and liquid preparing for the shift in fund assets ahead of money market reform. Demand from separately managed accounts, intermediate-term bond funds and long-term bond funds has picked up as that sector of the market has seen continued asset inflows. The current tax-exempt yield curve is relatively flat one-year out to five-years, making one-year notes very attractive to this segment of the market."
According to Meehan, "Careful and well-researched credit remains key. Many state general obligation bonds, essential service revenue bonds issued by water, sewer and electric enterprises, certain local credits with strong financial positions and stable tax bases, and various health care and education issuers should remain stable credits. Overall, municipal credit now appears to have stabilized following years of slow improvement. This is particularly evident at the state government level, as rainy day emergency funds have been replenished to pre-recession levels, providing a cushion against future economic downturns. However, the degree of recovery continues to vary by region. Isolated credit concerns still persist, such as the State of New Jersey and the State of Illinois, as pension funding and retiree health care benefits remain challenges."
Finally, Meehan says, "The City of Chicago and the Chicago public school system are also high-profile credit concerns for the municipal market and the response of the State of Michigan to the Flint water crisis merits monitoring, as this issue may confront other municipal water supply systems. States and local economies dependent upon petroleum and natural resource activities have developed as pockets of credit concern and deterioration. In particular, the budgets of Alaska, Louisiana, North Dakota and Oklahoma have been damaged by the decline in oil prices. The Texas economy, which is larger and more diversified than other states, bears heightened scrutiny as tax revenue has begun to weaken."
