The February issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Tuesday morning, features the articles: "Money Fund Yields Attracting More Attention in Early 2023," which reviews the most recent news on MMFs; "Federated Q4 Earnings on Record Assets, No Waivers," which reviews Federated's latest comments on MMFs; and, "Treasury's OFR Posts Annual Report: Money Funds, Risks," which excerpts from OFR's 2022 Annual Report. We also sent out our MFI XLS spreadsheet Tuesday a.m., and we've updated our Money Fund Wisdom database with 1/31/23 data. Our February Money Fund Portfolio Holdings are scheduled to ship on Thursday, Feb. 9, and our February Bond Fund Intelligence is scheduled to go out on Tuesday, Feb. 14.
MFI's "Money Fund Yields Attracting More Attention" article says, "The Wall Street Journal again mentions money market funds in, 'Jittery Investors Turn to Cash in Hunt for Yield.' They explain, 'The dash for cash on Wall Street is back on. Investors have added about $135 billion to global money-market funds over the past four weeks, according to EPFR data through Jan. 18. That is the best stretch since the four-week period ended May 2020, when those funds logged roughly $175 billion in net inflows.'"
The piece continues, "Increased cash allocations are the latest sign of caution among investors who are questioning whether the recent rebound in stocks and bonds will continue after last year's steep selloff. Many expect markets to remain volatile because Federal Reserve officials have repeatedly said they are committed to fighting inflation with higher interest rates. The flows are also an indication that investors are hungry for yield. They shunned cash for years when interest rates were low and returns on money-market funds were meager."
Our "Federated Q4 Earnings" piece states, "Federated Hermes released its Q4'22 earnings and hosted its quarterly earnings call late last week, which discussed record money fund assets and seasonal flows, the end of fee waivers and money funds vs. bank deposits. The earnings press release quotes President & CEO J. Christopher Donahue, 'Federated Hermes' record assets at year-end 2022 were driven by money market asset increases and investor interest in our flagship Total Return Bond Fund and related separate accounts.... In addition, investors valued our investment perspective as they sought haven from market volatility in a diverse range of Federated Hermes products -- from money market funds to low-duration fixed-income options to market neutral and bear market alternative strategies.'"
The release explains, "Federated Hermes' money market assets were a record $476.8 billion at Dec. 31, 2022, up $28.9 billion or 6% from $447.9 billion at Dec. 31, 2021 and up $35.5 billion or 8% from $441.3 billion at Sept. 30, 2022. Money market mutual fund assets were $335.9 billion at Dec. 31, 2022, up $23.1 billion or 7% from $312.8 billion at Dec. 31, 2021 and up $26.0 billion or 8% from $309.9 billion at Sept. 30, 2022. Federated Hermes’ money market separate account assets were $140.9 billion at Dec. 31, 2022, up $5.8 billion or 4% from $135.1 billion at Dec. 31, 2021 and up $9.5 billion or 7% from $131.4 billion at Sept. 30, 2022.'"
Our "Treasury's OFR" piece states, "The U.S. Treasury's Office of Financial Research published 'OFR 2022 Annual Report to Congress,’ which analyzes threats to the financial stability of the U.S. and contains a section discussing money market funds. Under 'Financial Markets and Liquidity, Short-term Funding,' they write, 'Funding markets are relatively stable, but market liquidity remains fragile. Market volatility and the impact of Federal Reserve interest rate increases are magnified in short-term markets. First, a protracted period of low interest rates and the Federal Reserve's quantitative easing facilitated risk taking. Second, investors may have taken market liquidity and low price volatility for granted and underestimated the speed and pace of interest rate increases. Third, the market remains vulnerable to liquidity and maturity transformation mismatches for banks and nonbanks.'"
MFI writes, "The OFR tells us, 'To broaden support for the floor of overnight rates, the Federal Reserve uses the Overnight Reverse Repo Facility (ON RRP) to support a floor on short-term rates by providing an alternative investment for nonbank financial institutions such as money market funds (MMFs) and government-sponsored enterprises (GSEs). The ON RRP level is very high at $2.4 trillion as of Sept. 30, 2022, an increase of $846.4 billion since the start of 2022.... Traditionally, ON RRP usage tends to spike around month- and quarter-end reporting dates when some banks shrink their balance sheets.... As a result, eligible money market participants invested substantially in the ON RRP, with prime and government MMFs accounting for up to 92% of the total lending to the ON RRP.'"
MFI also includes the News brief, "Money Fund Assets Hit Record Again." It says, "ICI's <b:>`_ latest weekly 'Money Market Fund Assets' report shows money fund assets bouncing back to record levels following two weeks of modest declines. Money funds saw their biggest weekly increase since April 29, 2020 during the first week of 2023, and they've risen by $237.1 billion (or 5.2%) over the past 13 weeks."
Another News brief, "Fed Hikes Rates 25 bps to 4.50-4.75%," tells us, "A release entitled, 'Federal Reserve issues FOMC statement' tells us, 'The Committee ... decided to raise the target range for the federal funds rate to 4-1/2 to 4-3/4 percent."
A sidebar, "SSGA's '23 Outlook, Reforms," states, "State Street Global Advisors published a 'Global Cash Outlook,' entitled, 'The Year Ahead -- Chaos or Calm?' Will Goldthwait writes, 'The overall theme of 2023 will be confusion. The current geopolitical macro-economic back drop could deliver such a broad array of outcomes that it's anyone's guess where we will be at the end of the year.'"
Another sidebar, "Schwab on Cash Sorting," quotes Schwab CFO Peter Crawford comments in the earnings release, 'Schwab's record financial performance in 2022 highlighted the resiliency of our diversified financial model. Sustained business momentum ... helped drive 12% growth in ... revenues. Net interest revenue reached $10.7 billion, an increase of 33% versus the prior year, as higher interest rates more than offset the impact of balance sheet contraction due to client cash sorting. Lower market valuations throughout the year pushed asset management and administration fees down slightly to $4.2 billion, or 1% year-over-year.'"
Our February MFI XLS, with January 31 data, shows total assets increased $22.5 billion to $5.191 trillion, after increasing $70.2 billion in December, $55.4 billion in November, $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, but decreased $34.6 billion last February.
Our broad Crane Money Fund Average 7-Day Yield was up 15 bps to 4.02%, and our Crane 100 Money Fund Index (the 100 largest taxable funds) was up 10 bps to 4.15% in January. On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA and the Crane 100 both were both higher at 4.33% and 4.28%, respectively. Charged Expenses averaged 0.38% and 0.26% for the Crane MFA and the Crane 100. (We'll revise expenses on Wednesday once we upload the SEC's Form N-MFP data for 1/31/23.) The average WAM (weighted average maturity) for the Crane MFA was 17 days (up 1 day from previous month) while the Crane 100 WAM remained the same at 14 days. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)
