The December issue of our flagship Money Fund Intelligence newsletter, which will be sent out to subscribers Wednesday morning, features the articles: "Top 10 Stories of 2022: Rising Yields, Reform Reactions, D&I," which highlights Crane Data's biggest News pieces of the past year; "J.P. Morgan's 2023 Outlook: Supply-Demand Gap Narrows," which reviews the outlook for money markets in the coming year; and, "BlackRock's Circle Reserve Fund USDC Stablecoin," which covers the new money market fund used by the USDC stablecoin. We will also send out our MFI XLS spreadsheet Wednesday a.m., and we've updated our Money Fund Wisdom database with 11/30/22 data. Our December Money Fund Portfolio Holdings are scheduled to ship on Friday, Dec. 9, and our December Bond Fund Intelligence is scheduled to go out on Wednesday, Dec. 14. (Note: Our MFI, MFI XLS and Crane Index products are all available to subscribers via our Content center. Note too: Register ASAP for our Money Fund University, Dec. 15-16 in Boston, Mass, at the Hyatt Regency. Clients are welcome to stop by Crane Data's Holiday Cocktail Party at MFU on 12/15 from 5-7pm!)
MFI's "Top 10 Stories" article says, "After almost two years of zero interest rates, money fund yields skyrocketed in 2022, rising from 0.02% to 3.60% (Crane 100 MF Index). While this was the biggest story of the year, money funds also spent time discussing the SEC's Money Fund Reform Proposal from December 2021. (We're still waiting for the final rules to come out any day now.) Other major themes of the past year included: the pivot of ESG money funds towards Social MMFs, carnage in the stock and bond fund markets and asset outflows from ultra-shorts, the increase in yields in European and worldwide markets, and the end of fee waivers. Below, we excerpt from a number of our biggest stories to highlight the major trends of 2022."
It continues, "Crane Data's Top 10 Stories of 2022 include (in chronological order): 'Rolling w/Reform Changes IV: Recap of '21 Exits & Entries, ESG & News' (1/4/22); 'ESMA Proposes Reforms to European Money Market Fund Regulations' (2/22/22); 'Dreyfus Announces New BOLD D&I Share Class with Howard University' (3/1/22); 'BlackRock: Redemption Fee Simpler Than Swing Pricing; Sliding Scale' (4/21/22); 'Money Fund Yields Break 0.50%; Fidelity Hikes Sweep Rate; ICI Holdings' (5/17/22); 'AFP's 2022 Liquidity Shows Deposits, MMFs, T-Bills Still Kings of Cash' (6/17/22); 'Schwab CFO Crawford Discusses Cash 'Sorting,' End of Fee Waivers in Q2' (8/3/22); 'Third 75's a Charm for Fed, Rates Head to 3%; Money Funds in the News' (9/22/22); 'European MMFs Jump on Sterling Surge, Euro Yields Positive; MFII Holds' (10/18/22); 'Money Funds Hot and Getting Hotter: Barron’s, and, WSJ, FT Feature Articles' (10/24/22). (As a bonus #11, see too: 'Fed Hikes 6th Time; Rates Head to 4%; Prime Over $1 Tril.; More Swing (11/3/22).'"
Our "2023 Outlook" piece states, "J.P. Morgan published its 'Short-Term Fixed Income 2023 Outlook' last week, and titled it, 'More supply and higher yields, what's not to like?' Authors Teresa Ho, Pankaj Vohra and Holly Cunningham tell us, 'The sharp rise in rates this year was a welcome relief for the US money markets -- markets that were plagued by the Fed's zero interest rate policy for at least two years. Even so, it was not all good news, as high inflation and tight labor markets pushed the Fed to embark on one of the most aggressive tightening cycles in modern history. In response, liquidity investors significantly shortened duration at a time when the supply-and-demand mismatch in the money markets was substantial.'"
It Continues, "They say, '[T]his pushed short-dated T-bills and SOFR to trade meaningfully through RRP.... All told, balances at the Fed's ON RRP continued to grow, increasing from $1.5tn ... to $2.1tn, as investors used the facility as a source of backstop supply, to shorten duration, and/or to [support] their yields.'"
Our "Circle Reserves" piece states, "BlackRock recently launched a new Treasury (and repo) money market fund, Circle Reserve Fund, exclusively for Circle Internet Financial, which offers one of the largest stablecoins, USDC. The fund, with ticker USDXX (for its Institutional Shares), was launched on November 3, and has already grown to a hefty $15.9 billion. It has an expense ratio of 0.21% (0.17% after waivers), a minimum initial investment of $2 billion, a WAM (weighted average maturity) of 41 days and a 7-day yield of 3.86% (as of 11/30). BlackRock is the Manager and Distributor, while BNY Mellon is the Custodian and Accounting Services Provider, according to the fund's N-1A registration filing. USDC is approximately $43.9 billion in size, while the largest stablecoin, Tether, is $65.9 billion (though the latter has been decreasing of late)."
MFI writes, "An article from Coindesk, entitled, 'Circle Begins Putting Reserves Into New BlackRock Fund,' explains, 'Circle Internet Financial has begun moving the reserves for its USDC stablecoin into a dedicated fund set up by BlackRock and registered with the U.S. Securities and Exchange Commission, the company disclosed.... The Circle Reserve Fund -- a government money market fund managed by BlackRock Advisors -- has been in the works for months after BlackRock initially sought to register it in May. Circle will be its only eligible investor, and the stablecoin issuer has already started putting its reserves there, expecting to be 'fully transitioned' by the end of March.'"
MFI also includes the News brief, "Crane 100 Money Fund Index Hits 3.60%, Top MFs Break 4.0%." It says, "Money fund yields jumped again last month; our Crane 100 (7-Day Yield) rose 72 bps to 3.57% in Nov. (and has risen to 3.61% since). Eight money funds are yielding 4.0% or higher. Sweep rates also continue inching up, as Fidelity hiked its FDIC insured rates to 1.94%. Brokerage Sweeps average 0.43%."
Another News brief, "Retail MMFs Hit Record, Total Poised to Break," explains, "Crane Data's totals show assets rising $55.4 billion in November to $5.121 trillion, just below May 2020's record $5.163 trillion. ICI's latest weekly 'Money Market Fund Assets' report shows money fund assets jumping over the past week, the 4th increase in the past 5 weeks. Retail money fund assets hit a record $1.6 trillion recently."
Also, a sidebar, "NY Fed Blog: Deposit Betas," states, "The Federal Reserve Bank of New York's 'Liberty Street Economics' asks, 'How Do Deposit Rates Respond to Monetary Policy?' It tells us, 'When the Federal Open Market Committee (FOMC) wants to raise the target range for the fed funds rate, it raises the interest on reserve balances (IORB) paid to banks, the primary credit rate offered to banks, and the award rate paid to participants that in- vest in the overnight reverse repo (ON RRP) market to keep the fed funds rate within the target range.'"
Another sidebar, "MFs Bigger Than Bond Funds," says, "The Investment Company Institute's latest monthly 'Trends in Mutual Fund Investing' shows that money fund assets increased $36.8 billion in October to $4.607 trillion. Meanwhile, bond fund assets continued their steep decline, falling by $88.1 billion to $4.445 trillion. Money fund assets surpassed bond fund assets last month for the first time since 2010; bond funds have declined by over $1.1 trillion year-to-date in 2022. (The bond fund totals don't include bond ETFs, which total $1.204 trillion as of 10/31, according to ICI.)"
Our December MFI XLS, with November 30 data, shows total assets increased $55.4 billion to $5.121 trillion, after increasing $42.2 billion in October, $1.7 billion in September, $2.3 billion in August, $26.0 billion in July and $31.9 billion in June. They decreased $10.7 billion in May and $74.3 billion in April. MMFs increased $24.1 billion in March, decreased $34.6 billion in February and decreased $128.1 billion in January. Assets increased $104.6 billion in December and $49.7 billion in November. Our broad Crane Money Fund Average 7-Day Yield was up 63 bps to 3.37%, and our Crane 100 Money Fund Index (the 100 largest taxable funds) was up 72 bps to 3.57% 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 3.69% and 3.73%, respectively. Charged Expenses averaged 0.38% and 0.26% for the Crane MFA and the Crane 100. (We'll revise expenses on Thursday once we upload the SEC's Form N-MFP data for 11/30/22.) The average WAM (weighted average maturity) for the Crane MFA was 16 days (up one day from previous month and the first increase in 11 months) while the Crane 100 WAM was also higher by one day at 15 days. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
