Daily Links Archives: December, 2024
Weekly MF Portfolio Holdings
Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics Tuesday, which track a shifting subset of our monthly Portfolio Holdings collection. The most recent cut (with data as of Nov. 29) includes Holdings information from 46 money funds (down 27 from a week ago), or $2.780 trillion (down from $3.899 trillion) of the $7.063 trillion in total money fund assets (or 39.4%) tracked by Crane Data. (Our Weekly MFPH are e-mail only and aren't available on the website. See our latest Monthly Money Fund Portfolio Holdings here and our Nov. 13 News, "Nov. Money Fund Portfolio Holdings: Treasuries Surge, Reclaims Top Spot.") Our latest Weekly MFPH Composition summary shows Government assets dominating the holdings list with Treasuries totaling $1.328 trillion (down from $1.864 trillion a week ago), or 47.8%; Repurchase Agreements (Repo) totaling $925.6 billion (down from $1.310 billion a week ago), or 33.3%, and Government Agency securities totaling $271.9 billion (down from $359.0 billion), or 9.8%. Commercial Paper (CP) totaled $95.4 billion (down from a week ago at $144.9 billion), or 3.4%. Certificates of Deposit (CDs) totaled $60.2 billion (down from $80.1 billion a week ago), or 2.2%. The Other category accounted for $66.6 billion or 2.4%, while VRDNs accounted for $31.7 billion, or 1.1%. The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $1.328 trillion (47.8% of total holdings), Fixed Income Clearing Corp with $272.4B (9.8%), the Federal Home Loan Bank with $185.5 billion (6.7%), BNP Paribas with $69.1B (2.5%), Citi with $62.8B (2.3%), JP Morgan with $61.9B (2.2%), Federal Farm Credit Bank with $59.6B (2.1%), RBC with $52.7B (1.9%), Goldman Sachs with $48.0B (1.7%) and Mitsubishi UFJ Financial Group Inc with $37.0B (1.3%). The Ten Largest Funds tracked in our latest Weekly include: JPMorgan US Govt MM ($288.8B), Goldman Sachs FS Govt ($259.9B), JPMorgan 100% US Treas MMkt ($229.0B), Fidelity Inv MM: Govt Port ($213.6B), Morgan Stanley Inst Liq Govt ($174.0B), State Street Inst US Govt ($165.3B), Fidelity Inv MM: MM Port ($139.9B), Dreyfus Govt Cash Mgmt ($127.3B), Allspring Govt MM ($122.7B) and First American Govt Oblg ($98.7B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary.)
DWS on Record Money Fund Levels
DWS asks, "What now for record U.S. money market funds?" They comment, "Holdings of U.S. money market funds have grown strongly over the past two years, breaking record after record. The question has been whether rate cuts by the Federal Reserve (Fed) would bring their rise to a halt. Not so far. Since the Fed's first interest rate cut in September, the amount invested in these funds has risen by a further $40 billion [sic] to $6.65 trillion. Depending on the source, some reports even put the figure above $7 trillion. Although there was a slight setback last week according to the data provider ICI, we do not believe there is any reason to expect any major change and a wave of withdrawals from money market funds in the near future. Investors still seem to be comfortable with these short-term investments, especially as the Fed has recently scaled back expectations of rate cuts this year and next." DWS explains, "In our CIO Special from May 21, 2024, we had already suggested that rapid outflows were unlikely. However, we have to admit that we did not anticipate the further rise in inflows that we have seen recently. Since Donald Trump's victory in the U.S. presidential election at the beginning of November, the question marks surrounding U.S. political developments and market reactions have not diminished. As a result, we do not expect any major changes to the status quo for U.S. money market funds in the short term. The conclusions of our Special therefore remain valid. In our view, U.S. money market funds remain an attractive haven for investors in times of nervous markets."
Northern Trust Asset Management recently published "Global Investment Outlook 2025." The section on "U.S. Money Markets," titled, "Money fund assets up while rates go down," tells us, "For 2025, there is significant uncertainty over the economic outlook and monetary policy. A fairly wide range of outcomes with respect to the federal funds target range are possible. Accordingly, we favor a neutral position for our portfolios. Importantly for money market investors, we and the markets see little chance rates return to the zero lower bound anytime soon -- a welcome change from much of the past 15 years of very low yields on cash." It explains, "While the federal funds target range is the biggest driver of money market fund yields, money markets also exhibited signs of normalization in 2024, with more rate volatility within the federal funds target range. Credit spreads were generally little changed, to slightly tighter. While participation in the Fed’s reverse repurchase agreement operations (RRP) peaked at $2.3 trillion in 2023, it has trended substantially lower to as low as $150 billion. This is a consequence of balance sheet reduction by the Fed. While money market rate volatility is normal, rates near or above the top of the target range may be a sign of reserve scarcity. The Fed's balance sheet reduction may need to end, a dynamic we'll be monitoring closely." Northern adds, "While intuition may suggest that as yields on money market funds move lower along with policy rates they would be less attractive and drive outflows, we've seen the opposite in 2024, consistent with historical experience. Money market fund industry assets have increased by more than $500 billion this year ..., setting all-time-high records. Assets have been going up even as rates are going down, as money market funds remain an attractive alternative to other cash management options like deposits or Treasury bills."
