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The Federal Reserve Bank of New York'​s Liberty Street Economics blog released an article entitled, "Treasury Bill Supply and ON RRP Investment," which examines shifts in money market fund supply over the past couple of years. It states, "Take-​up at the Federal Reserve'​s Overnight Reverse Repo Facility (​ON RRP) increased from a few billion dollars in January 2021 to around $​2.​6 trillion at the end of December 2022. In this post, based on a recent Staff Report, we explain how the supply of U.​S. Treasury bills (​T-​bills) affects the decision of money market mutual funds (​MMFs) to invest at the facility. We show that MMFs responded to a reduction in T-​bill supply by increasing their take-​up at the ON RRP, helping to explain the increased overall take-​up."

Discussing, "MMFs' Demand for U.​S. Treasury Securities," they write, "U.​S. MMFs are open-​end mutual funds regulated by the Securities and Exchange Commission (​SEC) that can only invest in safe and highly liquid money-​market instruments denominated in U.​S. dollars. Among such instruments, U.​S. Treasury securities are especially relevant because of their safety and liquidity. Since MMFs cannot hold securities with a remaining maturity greater than 397 days, T-​bills are an especially appealing investment option for them. MMFs' demand for Treasury securities, moreover, has grown significantly since October 2016, when the Securities and Exchange Commission (​SEC) implemented an important reform of the MMF industry; this reform led to an increase in assets under management of more than $​1 trillion for government MMFs -- a type of MMF that can only hold Treasury securities, agency debt, or repurchase agreements collateralized by these assets."

The blog continues, "​In response to the COVID-​19 pandemic, the U.​S. Treasury expanded its debt issuance, and in particular its issuance of T-​bills, which accounted for 83 percent of the newly issued marketable government debt between March and September 2020.... T-​bills outstanding increased from $​2.​66 trillion to $​5.​03 trillion during this period. As economic conditions improved, the issuance of T-​bills returned to levels closer to historical standards, and T-​bills outstanding decreased from $​4.​95 trillion to $​3.​51 trillion between January 2021 and July 2022."

It explains, "One of the drivers of the increase in ON RRP take-​up may have been the relative shortage of T-​bills, which limited MMFs' investment options, making investment at the ON RRP an attractive alternative. As we discussed in a previous post, the MMF industry grew substantially between 2016 and 2020, expanding from $​2.​99 trillion in January 2019 to $​4.​22 trillion in December 2020, partly as a result of monetary policy tightening; moreover, much of this increase was concentrated in government MMFs, which experienced large inflows during the early stages of the COVID crisis. The resulting increase in the demand for safe assets from MMFs, and especially from government MMFs, may have led MMFs to turn to the ON RRP facility as the supply of available T-​bills became scarce."

The New York Fed piece comments, "To identify the effect of T-​bill supply on ON RRP take-​up, we exploit the differential exposure to variation in T-​bill supply across MMFs. Government MMFs are more exposed to shocks in the T-​bill supply than prime MMFs, which can also lend to financial and nonfinancial corporations through unsecured debt instruments such as certificates of deposit and commercial paper. As a result, the ON RRP investment of government MMFs should be more sensitive to a decrease in T-​bill issuance than that of prime MMFs."

It tells us, "​To test our conjecture, we run a regression analysis of ON RRP investment on a daily panel of MMFs eligible to invest in the ON RRP, from April 2020 to August 2022, during the expansion and subsequent contraction of T-​bill issuance. Our regressions identify the effect of T-​bill issuance on the share of ON RRP investment in government-​MMF portfolios relative to prime-​MMF portfolios, controlling both for unobserved time-​invariant fund characteristics and for time-​varying common factors."

The paper summarizes, "We find that a decrease in monthly T-​bill issuance of $​100 billion leads government MMFs to increase the share of their portfolios invested at the ON RRP by roughly 2.​34 percentage points more than prime MMFs. The estimate is highly significant, suggesting a causal relationship between T-​bill supply and ON RRP investment. The effect is also economically important: government MMFs eligible to invest at the ON RRP had, on average, $​3.​3 trillion in assets under management between April 2020 and August 2022; considering that T-​bill issuance declined by almost $​1 trillion during the same period, its effect on the portfolio composition of government MMFs relative to that of prime MMFs corresponds to an additional increase in ON RRP investment of roughly $​750 billion, against a total increase in ON RRP take-​up of $​2.​2 trillion."

It adds, "A shortage of T-​bills reduces MMFs' investment options, pushing them to increase their investment at the ON RRP facility. This happened in 2021 and 2022, when the Treasury significantly reduced its issuance of bills; the impact of the reduction in T-​bill issuance was particularly significant because the size of the MMF industry, and especially government MMFs, had increased substantially between 2015 and 2020, as a result of monetary policy tightening, the SEC reform implemented in October 2016, and the increased demand for safe assets caused by the COVID crisis. In other words, as T-​bills became relatively scarce compared to MMFs' demand for safe assets after 2020, the ON RRP facility became an attractive alternative, absorbing MMFs' demand for safe, short-​term investments."

In other news, Reuters keeps promoting the myth that cash will leave money funds and move into stocks and bonds in its update, "Fed starting gun for $​6 trillion dash from cash: McGeever." They write, "​If cash has been king, the Fed may be plotting regicide. As the Federal Reserve'​s policy '​pivot' draws into view, investors face a $​6 trillion question -- where to deploy this record amount of cash if the beefy interest rate returns drawing people there evaporate again? Earning short-​term rates not seen for well over a decade, the attraction of 5% cash is considerable and raises a high bar for other assets to perform in such an uncertain economic environment."

The piece explains, "​There certainly is a lot of dry powder. The latest figures tracked by ICI, a global funds industry body, show that total money market fund assets stood at a record high $​5.​76 trillion on Nov. 21. Of that, $​2.​24 trillion is in retail investor funds and $​3.​52 trillion is in institutional funds. That has risen substantially since the Fed started its rate-​hiking cycle early last year. According to Bank of America, investors have poured $​1.​2 trillion into money market funds so far this year. Cash has been investors' favorite destination in recent years, and with an annual return tracking 4.​5%, it is on course for its best year since 2007."

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Money fund assets jumped $​22.​3 billion on Monday, breaking the $​6.​2 trillion level for the first time ever and hitting a record $​6.​200 trillion, according to Crane Data'​s Money Fund Intelligence Daily series (​as of November 27). Money fund assets have risen by $​63.​2 billion over the past week and by $​159.​0 billion in the first 27 days of November. Assets fell by $​31.​9 billion in October after rising by $​93.​9 billion in September, $​98.​3 billion in August and $​34.​7 billion in July. Year-​to-​date (​through 11/​27), money fund assets have increased by $​1.​009 trillion, or 19.​4%. (Note: Please join us for our upcoming Money Fund University in Jersey City, Dec. 18-​19. We'​ll also be hosting our Crane Data Holiday Party alongside MFU, so feel free to drop by the Westin Jersey City on Monday, Dec. 18 from 5:​00-​7:​30pm.)

Taxable MMFs have risen $​996.​0 billion YTD in 2023 to $​5.​073 trillion, or 19.​6%, according to MFI Daily. Treasury Institutional Money Funds are up $​208.​8 billion (​19.​0%) to $​1.​309 trillion, Government Institutional MMFs are up $​222.​1 billion (​12.​8%) to $​1.​956 trillion, but Prime Institutional MMFs were down $​26.​8 billion (-​4.​1%) to $​628.​6 billion. Treasury Retail Money Funds are up $​142.​1 billion (​82.​4%) to $​314.​6 billion, Government Retail MMFs are up $​195.​2 billion (​19.​7%) to $​1,​196 trillion, and Prime Retail MMFs are up $​254.​7 billion (​60.​5%) to $​675.​7 billion. Tax Exempt MMFs are up $​13.​2 billion (​11.​2%) to $​131.​2 billion.

The Investment Company Institute'​s latest separate weekly "Money Market Fund Assets" report showed MMF assets rising for the fifth week in a row and hitting yet another new record level. ICI shows assets up by $​1.​028 trillion, or 21.​7%, year-​to-​date in 2023, with Institutional MMFs up $​462 billion, or 15.​1% and Retail MMFs up $​566 billion, or 33.​8% (​through 11/​21). Over the past 52 weeks, they show money funds rising a massive $​1.​122 trillion, or 24.​2%, with Retail MMFs rising by $​633 billion (​39.​3%) and Inst MMFs rising by $​489 billion (​16.​1%). (​Note that ICI'​s asset totals don'​t include a number of funds tracked by the SEC and Crane Data, so they'​re over $​400 billion lower than Crane'​s asset series.)

In other news, 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 November 24) includes Holdings information from 74 money funds (​up 11 from a week ago), or $​3.​012 trillion (​up from $​2.​779 trillion) of the $​6.​178 trillion in total money fund assets (​or 48.​8%) 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.)

Our latest Weekly MFPH Composition summary shows Government assets dominating the holdings list with Repurchase Agreements (​Repo) totaling $​1.​242 trillion (​up from $​1.​132 trillion a week ago), or 41.​2%; Treasuries totaling $​1.​147 trillion (​down from $​1.​148 trillion a week ago), or 38.​1%, and Government Agency securities totaling $​290.​8 billion (​up from $​248.​4 billion), or 9.​7%. Commercial Paper (​CP) totaled $​108.​6 billion (​up from a week ago at $​83.​8 billion), or 3.​6%. Certificates of Deposit (​CDs) totaled $​90.​8 billion (​up from $​71.​9 billion a week ago), or 3.​0%. The Other category accounted for $​94.​7 billion or 3.​1%, while VRDNs accounted for $​38.​2 billion, or 1.​3%.

The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $​1.​154 billion (​38.​3% of total holdings), the Federal Reserve Bank of New York with $​277.​1 billion (​9.​2%), Fixed Income Clearing Corp with $​247.​6B (​8.​2%), Federal Home Loan Bank with $​217.​5B (​7.​2%), RBC with $​79.​4B (​2.​6%), Citi with $​65.​4B (​2.​2%), Federal Farm Credit Bank with $​63.​0B (​2.​1%), Bank of America with $​61.​5B (​2.​0%), JP Morgan with $​56.​8B (​1.​9%) and BNP Paribas with $​50.​9B (​1.​7%).

The Ten Largest Funds tracked in our latest Weekly include: JPMorgan US Govt MM ($​271.​3B), Goldman Sachs FS Govt ($​241.​0B), Fidelity Inv MM: Govt Port ($​184.​8B), JPMorgan 100% US Treas MMkt ($​174.​9B), Federated Hermes Govt ObI ($​145.​3B), Morgan Stanley Inst Liq Govt ($​140.​4B), State Street Inst US Govt ($​124.​2B), Fidelity Inv MM: MM Port ($​119.​0B), Allspring Govt MM ($​114.​7B) and Dreyfus Govt Cash Mgmt ($​105.​4B). (​Let us know if you'​d like to see our latest domestic U.​S. and/​or "​offshore" Weekly Portfolio Holdings collection and summary.)

Finally, a press release entitled, "Moomoo'​s Cash Sweep Program Offers A Highly Competitive 5.​1% APY; Increases Cash Management Efficiency says, "The intuitive investment and trading platform moomoo has recently updated its Cash Sweep program in the US, with a compelling 5.​1% annual percentage yield ('​APY') for eligible clients, adding one more powerful tool to help boost the cash management efficiency of their securities accounts. The highly competitive 5.​1% APY currently offers one of the highest yields for uninvested cash in the entire brokerage industry."

Nate Palmer, President of Moomoo Financial Inc, comments, "If you have excess funds in your US securities account and wish to avoid increased exposure to market volatility while you consider your next moves, moomoo'​s Cash Sweep could be an effective option for generating passive income. With this cash management tool, you can be confident that your money is working for you."

The release continues, "The Cash Sweep program does not impact the purchasing power of brokerage accounts because the swept funds in the program bank accounts are still part of a customer'​s securities account. Thanks to trouble-​free operation of the Cash Sweep, managing your funds on moomoo platforms is now incredibly convenient. If your securities account dips into negative balance, funds will be automatically redeemed from the bank for repayment. When cash starts to grow in excess in your securities account, it will be swept into the bank account to earn interest."

It adds, "With just several taps on a screen, new moomoo clients can activate the Cash Sweep feature and earn interest on their uninvested cash. Existing moomoo clients can still gain the 5.​1% APY rate through recent promotions, with additional terms and conditions applied. The swept money at the program banks are insured by the Federal Deposit Insurance Corporation (​FDIC), which means your money is secured up to a certain amount. Notably, moomoo'​s Cash Sweep program has no cap on the interest-​bearing principal and no minimum balance requirements for the accounts. Furthermore, no additional costs, such as service fees, will be incurred."

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Yesterday'​s Wall Street Journal featured an article entitled, "Investors Are Hungry for Risk -- and Holding Record Cash Sums," which was subtitled, "Some analysts see the investor balances in money-​market funds as a bullish sign for stocks and bonds." The piece explains, "​Stocks and bonds have surged in November. With record investor balances in money-​market funds, some analysts are optimistic that they have more room to run.... The S&​P 500 is up 8.​7% this month, while the Nasdaq Composite has climbed 11%. The yield on the benchmark 10-​year Treasury note, which falls as bond prices rise, is down by nearly half a percentage point to 4.​483% -- a substantial move in a market where daily moves are measured in hundredths of a point."

It continues, "Investors are plowing cash into stocks and bond funds. Invesco'​s QQQ exchange-​traded fund, which tracks the tech-​heavy Nasdaq-​100 Index, reported its largest weekly inflow in history the week of Nov. 13. Funds that track high-​yield bond indexes -- the higher risk portion of the corporate bond market -- reported their two highest weekly inflows on record in the middle of November. Meanwhile, institutions and investors together have a record $​5.​7 trillion parked in cash-​like money-​market funds, many of which are yielding above 5%, according to the Investment Company Institute."

The Journal states, "Some on Wall Street see the cash as a bullish signal and a potential tailwind for stocks and bonds if the inflation outlook continues to improve. Others say some of that money has simply shifted to higher-​yielding money markets from traditional bank accounts. They question the idea that the money is waiting on the sidelines and ready to enter the market.... 'For the first time in a long time, cash is a competitor,' said Ali Dibadj, chief executive of Janus Henderson Investors. '​But I think as soon as short-​term rates start to tick down, you'​re going to see large flows to other assets.'"

They say, "​At retail brokerage Webull, Chief Executive Anthony Denier has seen firsthand the newfound appeal of cash to everyday investors. Webull began offering a 5% yield on cash held at the brokerage earlier this year to remain competitive with money-​market funds. The offering attracted deposits, resulting in much-​higher-​than-​normal cash allocations for Webull customers that Denier said only began to shift this month. '​All that cash that customers have been piling into their brokerage account the last six months to earn yield, they'​re finally starting to use it this month and we'​re seeing it put into action,' Denier said."

The article comments, "David Littleton, chief executive of asset manager F/​m Investments, said he thinks the record sum in money-​market funds is contributing to the velocity of the rally in beaten-​down assets like small-​caps. '​With the new inflation outlook, people either got greedy or they got fearful they were going to miss out on a rally, and you saw a 5% up move in the index,' said Littleton. '​There'​s definitely some cash waiting for these moments, but I don'​t think you'​ll see it all move overnight.'"

Finally, it adds, "​In October, money-​market funds posted their first significant monthly outflow since interest rates began rising. Yet with short-​term rates still around 5%, sitting in cash is more attractive for many investors than it used to be. For that reason, David Kelly, chief strategist at J.​P. Morgan Asset Management, says he isn'​t expecting a mass exodus from money-​market funds soon. 'What I see here is a growing realization on the part of individuals and even institutions that there are just better yields to be had in a money-​market fund than bank accounts,' Kelly said."

In other news, a Prospectus Supplement for BlackRock Liquidity Funds states, "On November 16, 2023, the Board of Trustees of BlackRock Liquidity Funds (​the '​Trust') on behalf of its series California Money Fund and New York Money Fund, approved a proposal to close each Fund to new investors and thereafter to liquidate each Fund. Accordingly, effective at 1:​00 P.​M. (​Eastern time) on December 1, 2023, the Funds will no longer accept purchase orders from new investors. On or about February 23, 2024 (​the '​Liquidation Date'), all of the assets of each Fund will be liquidated completely, the shares of any shareholders holding shares on the Liquidation Date of each such Fund will be redeemed at the net asset value per share and each Fund will then be terminated as a series of the Trust."

It explains, "Shareholders may continue to redeem their Fund shares at any time prior to the Liquidation Date. Neither Fund may achieve its investment objective as the Liquidation Date approaches. Shareholders should consult their personal tax advisers concerning their tax situation and the impact of the liquidation on their tax situation."

For more on liquidations, see these recent Crane Data News articles: "JPMorgan Liquidates E*​Trade Shares" (​9/​7/​23), "Morgan Stanley Latest to Abandon ESG MMFs" (​8/​16/​23), "Goldman Liquidating Resource Shares" (​7/​19/​23), "SSGA to Liquidate State Street ESG Liquid Reserves" (​9/​19/​22), "DWS Liquidating Govt Cash Mgmt Fund" (​7/​7/​22), "Cavanal Hill Liquidates $​71M U.​S. Treasury Service Class, Added to Fed RRP List" (​5/​22/​23), "Ivy Funds Liquidating ... Again (​6/​2/​22); "AIG Govt MMF, MuniFund Liquidate (​8/​3/​21), "Western Files to Liquidate Tiny MMFs (​6/​7/​21), "BlackRock Liquidates Ready Assets (​2/​11/​21), "Delaware Liquidates Govt Cash Mgmt" (​1/​11/​21); "DWS Liquidating Govt CR (​BIRXX)" (​11/​25/​20); "BMO Liquidating Inst Prime MMF" (​11/​17/​20); "Morgan Stanley NY Muni MM Gone" (​10/​5/​20); "SEC'​s Blass on Push for More MMF Reforms; Vanguard Liquidating PA, NJ" (​9/​28/​20) and "Franklin, Legg Mason Deal Signals More Consolidation; More Liquidations (​2/​20/​20).

Finally, the Federal Reserve Bank of New York'​s "​Liberty Street Economics" published a brief, "The Nonbank Shadow of Banks." It explains, "Financial and technological innovation and changes in the macroeconomic environment have led to the growth of nonbank financial institutions (​NBFIs), and to the possible displacement of banks in the provision of traditional financial intermediation services (​deposit taking, loan making, and facilitation of payments). In this post, we look at the joint evolution of banks -- referred to as depository institutions from here on -- and nonbanks inside the organizational structure of bank holding companies (​BHCs)."

The piece states, "​Using a unique database of the organizational structure of all BHCs ever in existence since the 1970s, we document the evolution of NBFI activities within BHCs. Our evidence suggests that there exist important conglomeration synergies to having both banks and NBFIs under the same organizational umbrella."

Under the section entitled, "The Evolution of Banks and Nonbanks: Alternative Views," it say, "​The traditional view of financial intermediation is that banks and nonbanks evolve independently. Banks are fundamentally depository institution that make loans and facilitate payments, and their evolution remains anchored on these '​core' activities. NBFIs, on the other hand, are seen as a heterogenous bunch -- insurers, specialty lenders, investment funds, et cetera, with each segment operating under distinct business models, governing structures, and even regulations. One commonality of NBFIs, however, is that they can substitute for banks as financial intermediaries."

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J.​P. Morgan published its "Short-​Term Fixed Income 2024 Outlook" last week, which is entitled, "More of more and less of less." Authors Teresa Ho, Pankaj Vohra and Holly Cunningham tell us, "In contrast to the long end of the Treasury curve, it was a remarkably stable year in the money markets. Despite the regional banking crisis, massive T-​bill issuance, finalization of MMF reform, all the while with QT going on in the background, spreads in the money markets traded mostly in a narrow range. That stability underscored the abundance of liquidity still in the financial system, most of which seemed to be sitting in the very front end. Indeed, MMF AUMs grew by nearly $​1tn this year, with balances currently registering $​6tn, as investors could not ignore the 5% yield on an overnight asset, a dynamic we haven'​t seen since 2007. To be sure, markets have made use of that liquidity, as Fed ON RRP balances declined by a substantial $​1.​3tn. It helped too that the Fed was nearing the end of its tightening cycle, giving MMFs a reason to rotate out of the facility and into T-​bills. As of the time of writing, usage at the Fed ON RRP has fallen below $​1tn.." (Note: JPMorgan'​s Pankaj Vohra will present the "Instruments of the Money Markets Intro" at our upcoming Money Fund University, which is Dec. 18-​19 in Jersey City, NJ.)

The 2024 Outlook explains, "2024 could prove slightly more interesting for the money markets. With the Fed expected to be on hold in 1H and cut in 2H, the demand for MMFs with 5% yields should persist. While investors might extend from cash into duration, we suspect overall flows will continue to keep MMF AUMs elevated. Meanwhile, money market supply is expected to grow meaningfully again, driven by T-​bills. Repo volumes are also biased higher as markets try to absorb an additional $​2tn of Treasury coupon issuance. Importantly, the combination of T-​bill and repo supply should help RRP continue to drain."

It says, "But while 2024 might look like a repeat of this year, it is another year of less liquidity, more T-​bills, more Treasury coupons, more repo. Markets' capacity to absorb additional supply is somewhat more limited now compared to a year ago. At the same time, there is a growing consensus that the SEC is looking to finalize its proposal to centrally clear Treasuries and Treasury repo soon, which should increase the overall costs of trading. Furthermore, a recent report from FHFA proposes to overhaul the FHLB system, which should not only reduce the amount of FHLB supply but also increase the demand for bank reserves and alternative sources of funding among domestic banks."

They continue, "All told, we see nearly $​875bn worth of T-​bills and repo supply in 2024, coming on the heels of over $​2.​1tn issued this year. While demand from money market investors should persist, prices might need to adjust to incentivize continued absorption of that supply, particularly as RRP liquidity continues to decline. As a result, we expect T-​bills/​OIS spreads to cheapen on the margin. CPCD/​OIS spreads will likely trade in a narrow range, with a cheapening bias. Both T-​bills/​OIS and CPCD/​OIS spread curves should flatten. Absent a liquidity shortage, we expect the EFFR/​IORB spread to remain at current levels, with a bias that it trends higher as we approach LCLoR in late 2H24. Increases to repo supply should bias SOFR higher, and especially if the Treasury clearing rule is finalized. Net, SOFR should trade higher relative to EFFR."

J.​P. Morgan comments, "​Against this backdrop, the Fed is likely done hiking for this cycle. We expect rates to be on hold through 2Q24, followed by 50bp of rate cuts per quarter beginning in 3Q24, until rates reach a terminal 3.​5% in 2Q25. This outlook largely reflects our view that the Fed is unlikely going to return the funds rate all the way down to their estimate of neutral if inflation stays above 2%. Instead, we see the Fed returning to the mid-​1990'​s strategy of '​opportunistic disinflation,' relying on modestly restrictive policy and external events like favorable supply-​side shocks to finish the job."

The Outlook states, "If we are right, rates should stay above 5% for the better part of next year, and as such, cash will likely remain an attractive asset class. This was certainly evident in the demand for MMFs this year, as taxable MMF AUMs increased by over $​900bn YTD and currently stand at nearly $​6.​0tn. This marks the greatest increase since 2012, as the regional banking crisis in March, alongside an inverted yield curve and negative returns in riskier assets, all contributed to the impressive rise in MMF balances this year."

It continues, "Arguably, there is some expectation that cash will rotate into longer-​duration fixed income next year. Asked whether market participants are looking to reduce, maintain, or add exposure to various asset classes, our client survey reveals that the majority of survey respondents intend to add duration next year. Meanwhile, survey respondents on net look to slightly reduce their cash/​money markets exposure."

J.​P. Morgan says, "We think a meaningful shift from cash to fixed income is unlikely and that MMF AUMs will remain elevated next year. Indeed, a look at MMF flows going back to 1995, spanning over three easing cycles, shows that MMFs continue to see inflows even as the Fed is on hold and/​or begins to cut rates. Intuitively, this makes sense, as MMF yields tend to lag yields of direct cash alternatives such as T-​bills when the Fed begins to cut rates, thus attracting flows from other liquidity alternatives. A look at MMF flows versus changes in the curve shape show similar results. That is, flows into MMFs tend to continue even as the curve begins to disinvert/​steepen; it'​s not until the curve more or less stabilizes that outflows begin to take place."

They state, "Furthermore, most market participants use MMFs for cash management/​liquidity purposes rather than as an investment asset class as part of one'​s overall investment portfolio. Accordingly, this should limit the amount of cash pivoting into riskier asset classes. Nor do we think the cash will pivot into bank deposits, even as banks raise their deposit betas. Banks still do not want non-​operational institutional deposits on their balance sheets. All told, we do not anticipate the relative value of MMFs versus deposits, short-​term bond funds, equities, etc. to change dramatically in the near future. While there might be some rotation out the curve, we suspect the magnitude will not be as meaningful as the inflows seen this year. Overall, MMF AUMs are likely flat with a slight bias lower next year. At a sector level, most of the cash will likely remain in government MMFs versus prime MMFs; if anything, MMF reform should continue to bias government MMF AUMs higher."

The article adds, "It'​s also worth noting that local government investment pools (​LGIPs) will likely remain large liquidity investors in the money markets. Over the past few years, this investor base has grown meaningfully as they benefited from Covid-​related fiscal packages. While the law mandates that the Covid-​related funds must be obligated by the end of 2024 and spent by the end of 2026, we suspect this is not on an immediate basis but rather will be spent over several quarters.... All told, the attractiveness of the front end, in combination with some of the Covid cash remaining in their portfolios, should help LGIPs maintain their presence in the money markets, even if the size of their investment portfolios likely peaked this year."

Finally, they comment, "We forecast total money market supply to increase by around $​1.​2tn or 7% in 2024, driven largely by T-​bills. Within that, credit supply should rise by ~$​350bn or 12% in 2024, driven by credit bonds rolling into the money markets and slightly higher CP/​CD net issuance. If we'​re right, total supply balances will be above their 3y averages, which will likely contribute to draining liquidity from the Fed'​s ON RRP facility."

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The Investment Company Institute published its latest weekly "Money Market Fund Assets" report Wednesday (​a day early due to the Thanksgiving Day Holiday), which shows MMF assets rising for the fifth week in a row and hitting yet another new record level. ICI'​s asset series rose $​29.​1 billion to $​5.​763 trillion and have risen $​155.​5 billion the past 5 weeks (​after a drop of $​98.​8 billion the week ended 10/​18). Assets are up by $​1.​028 trillion, or 21.​7%, year-​to-​date in 2023, with Institutional MMFs up $​462 billion, or 15.​1% and Retail MMFs up $​566 billion, or 33.​8%. Over the past 52 weeks, money funds have risen a massive $​1.​122 trillion, or 24.​2%, with Retail MMFs rising by $​633 billion (​39.​3%) and Inst MMFs rising by $​489 billion (​16.​1%). (Note: Please join us for our upcoming Money Fund University in Jersey City, Dec. 18-​19. We'​ll also be hosting our Crane Data Holiday Party alongside MFU, so feel free to drop by the Westin Jersey City on Monday, Dec. 18 from 5:​00-​7:​30pm.)

The weekly release says, "Total money market fund assets increased by $​29.​12 billion to $​5.​76 trillion for the six-​day period ended Tuesday, November 21, the Investment Company Institute reported.... Among taxable money market funds, government funds increased by $​22.​34 billion and prime funds increased by $​5.​99 billion. Tax-​exempt money market funds increased by $​796 million." ICI'​s stats show Institutional MMFs rising $​16.​3 billion and Retail MMFs rising $​12.​8 billion in the latest week. Total Government MMF assets, including Treasury funds, were $​4.​702 trillion (​81.​6% of all money funds), while Total Prime MMFs were $​938.​0 billion (​16.​3%). Tax Exempt MMFs totaled $​123.​3 billion (​2.​1%).

ICI explains, "Assets of retail money market funds increased by $​12.​83 billion to $​2.​24 trillion. Among retail funds, government money market fund assets increased by $​7.​90 billion to $​1.​46 trillion, prime money market fund assets increased by $​4.​01 billion to $​671.​58 billion, and tax-​exempt fund assets increased by $​925 million to $​112.​13 billion." Retail assets account for over a third of total assets, or 38.​9%, and Government Retail assets make up 65.​1% of all Retail MMFs.

They add, "Assets of institutional money market funds increased by $​16.​29 billion to $​3.​52 trillion. Among institutional funds, government money market fund assets increased by $​14.​43 billion to $​3.​24 trillion, prime money market fund assets increased by $​1.​98 billion to $​266.​37 billion, and tax-​exempt fund assets decreased by $​129 million to $​11.​16 billion." Institutional assets accounted for 61.​1% of all MMF assets, with Government Institutional assets making up 92.​1% of all Institutional MMF totals.

According to Crane Data'​s separate Money Fund Intelligence Daily series, money fund assets rose $​114.​8 billion in the first 21 days of November to a record $​6.​156 trillion. Assets fell by $​31.​9 billion in October after rising by $​93.​9 billion in September, $​98.​3 billion in August and $​34.​7 billion in July. Note that ICI'​s asset totals don'​t include a number of funds tracked by the SEC and Crane Data, so they'​re over $​400 billion lower than Crane'​s asset series.

In other news, State Street Global Advisors' recent update, "Monthly Cash Review," tells us, "​As '​higher for longer' starts to bite the economy, we are keeping a close eye on the Fed'​s Reverse Repo Program (​RRP), which is the best example of excess liquidity. The US Federal Reserve (​Fed) must '​drain' this liquidity in order to keep market rates in line with its policy rate range. The Fed has skipped. This outcome was expected -- real yields and term premiums have done much of the work for the Fed (​although it cautioned that it was too soon to tell if this was having an impact on economic growth and inflation)."

It explains, "​Higher long-​term interest rates are biting the economy, and the Fed is either being patient or risking a hard landing. Yes, the strength of growth (​the gross domestic product [​GDP] growth) and the consumer is worrisome, but if the Fed were just focused on the economic data, it might have hiked in September and November. The previous 525 bp of hikes allow the Fed to pause on further hikes, with the hope that nothing breaks under the current strain of higher funding costs --​like an 8% mortgage rate."

SSGA comments, "​Quantitative tightening (​QT) has been in the works since June 2022. The size of the Fed'​s System Open Market Account (​SOMA) peaked in May 2022 at USD 8.​4 trn. On average, about USD 18 bn of assets roll off each week. Fed'​s SOMA now stands at USD 7.​2 trn. As '​higher for longer' starts to bite the economy, we are keeping a close eye on a few metrics: the Fed'​s RRP, US T-​Bill supply and bank reserves held at the Fed."

The piece continues, "The decline in the Fed'​s RRP has been dramatic: Since 1 June, RRP balances have dropped by USD 1.​1 trn. The new supply of US Treasury Bills (​T-​Bills) has absorbed this cash. The relative value between T-​Bills and RRP has been positive and so money market funds (​MMFs) have been moving money out of RRP and into T-​Bills. This has had very little impact on reserves at the Fed. Recall during the previous tightening cycle (​2015–​2018) there was much discussion on what the lowest level of reserves would be before strains started to emerge."

It states, "Meanwhile, government and prime MMFs have been extending their durations. At the beginning of this year, the scars from 2022 were still fresh and durations were around 7–​14 days (​WAM). As 2023 rolled on, the urge to extend grew as the Fed hinted at a pause in their rate hike cycle. The extension we have seen throughout 2023 has been gradual, with MMF managers still exercising a good deal of caution."

State Street adds, "As market participants and the Fed become more confident it has reached a sufficiently restrictive policy rate, average WAMs have moved higher. Patience will be the hardest part of managing the next few quarters. The Fed has moved policy rates to be sufficiently restrictive. The excess liquidity in the system and the lingering fiscal and monetary stimulus will take some time to work through the economy. How long it takes is everyone'​s guess."

​

The U.​K.-​based publication TMI, or Treasury Management International, recently published the results of a survey sponsored by Northern Trust Asset Management entitled, "Through The Liquidity Lens: Corporate Treasury Trends In Short-​Term Investments." The piece summarizes, "​Rising rates were the number one concern impacting their short-​term investment decisions for 41% of survey respondents, while 15% selected inflation.... ESG and DEI (​Diversity, Equity, Inclusion)-​driven investments are on the rise. According to the survey findings, 21% currently invest in ESG-​focused MMFs and 38% plan to. An additional 22% currently invest in green/​sustainable deposits and 42% intend to over the coming 12 months.... Despite the clear benefits, 45% of survey respondents do not use an investment portal. The major reason for not harnessing portal technology is not investing in MMFs (​44%), but 13% say resources are also an issue. The most popular portal choice is that provided by banks – with 22% of treasurers leveraging this technology."

The summary tells us, "Forty-​nine respondents were completely unconcerned by MMF regulation – which is being revamped on both sides of the Atlantic to ensure resilience. Nevertheless, seven respondents chose regulatory uncertainty as their main investment concern for 2023. Recent regulatory updates show promise in terms of softening any unintended consequences of regulation, however.... Survey respondents not currently investing in MMFs explained that human resource constraints were a significant barrier to doing so (​for 9%). Similarly, a lack of time is impeding 9% of respondents from exploring sustainable and responsible investment options. Reviewing investment policies is also challenging for many overstretched treasurers, with 16% only managing to review their policy every few years."

The update explains, "​While respondents are split on how their interest rate views affect their investment strategy ..., what is clear cut is the shifting popularity of some traditional short-​term investment vehicles. Only 12% of respondents plan to invest (​more) in bank deposits over the coming 12 months. While, to some extent, this reflects the relative ubiquity of bank deposits already (​with 82% of respondents currently invested), there are other influences afoot. [​Northern'​s Dan] Farrell and [​Dan] LaRocco both point to the fact that interest rate rises are not always being reflected quickly in bank deposit rates. There may also be lingering concerns around counterparty risk, sparked by the Silicon Valley Bank crisis – leading treasury teams to seek greater diversification."

Farrell notes, "In early 2023, on the back of the banking crisis, we certainly witnessed a flight to quality as there is more focus among investors to really do their due diligence around where risks might lie in their cash investments. As a result, we saw significant inflows into Money Market Funds (​MMFs). And while the impact of the banking crisis has calmed down, many corporate investors have opted to stay in MMFs."

The survey says, "Indeed, 21% and 22% of respondents are looking to invest in stable and floating net asset value (​NAV) MMFs respectively over the coming year. Ultra-​short/​short-​term bond funds are also growing in popularity among the search for yield, with over one-​quarter (​26%) interested in using them. And according to Farrell, these instruments may be of increasing interest to treasurers as rates begin to fall. Sustainable investments, meanwhile, are poised to receive most attention from treasury teams over the coming year, with 38% looking to invest in ESG focused MMFs and 42% intending to enter green/​sustainable deposits."

On respondents' heavy concentrations in bank deposits, it comments, "Farrell and LaRocco both find this surprising and somewhat concerning, especially given the fact that elsewhere in the survey 47 respondents said rising credit/​default risk is their main concern in 2023. Nevertheless, Farrell understands where treasurers may be coming from. 'Often, corporate investors are more comfortable with what they know, especially if they do not have the time or resources to spend looking at investment options. So, bank deposits seem like a safe choice for them. But by being so concentrated in a single or small number of banks, investors can unintentionally create more risk. This is where diversified funds such as MMFs have a critical role to play in helping to mitigate those challenges.'"

LaRocco explains, "​MMFs can offer benefits to investors whether rates are rising or falling. '​In a rising rate environment, MMFs are beneficial because of their flexibility in portfolio construction. Fund managers actively refine their portfolios to optimise returns. One strategy they deploy is significantly shortening the weighted average maturity [​WAM] of the investment portfolio, within the permissible range of 0 to 60 days. This adjustment allows for cash to be reinvested every month, ensuring rate rises are captured and relayed to investors. And when rates are falling, fund managers can purchase securities with longer maturities to stagger the effects of the rate reduction. By retaining higher yields over an extended period, MMFs can provide more appealing returns compared with short-​term bank deposits in a falling rate environment."

The TMI paper states, "​While some investors may be hesitant to invest in MMFs in part due to regulatory concerns ..., Farrell says that fund providers have market experts who can guide investors through these changes. 'In addition, each MMF has a dedicated portfolio management team, which further reduces risks for investors – whether rates are rising or falling – since active management is constantly carried out. In other words, the wider potential benefits of diversifying away from bank deposits into MMFs are not to be overlooked."

Discussing "Investment policy restrictions," the study says, "​When talking about diversification, or lack thereof, there is a natural link to investment policies which – whether rightly or wrongly – prohibit the use of certain instruments. Many survey respondents have highly restrictive investment policies. For example: 27% are not permitted to invest in stable NAV MMFs; 34% cannot invest in floating NAV MMFs; 31% cannot invest in ultra-​short bond funds; and, 8% cannot invest in ESG instruments."

It explains, "​Often these restrictions stem from the fact that investment policies are outdated, says Farrell.... 'Many of the restrictions on MMFs stem from the last round of regulatory action several years ago – and things have moved on, so policies need to as well. As such, we recommend that investors review their policies at least every couple of years to ensure they remain suitable for the current environment and are not prohibiting the potential for greater returns."

TMI writes, "Despite the clear benefits on offer, 45% of survey respondents do not use an investment portal – not even one provided by a bank, although this is the most common tool among 22% of participants.... The major reason for not investing in portal technology is not investing in MMFs (​44%), but resources are also an issue for 13% and the same number believe their investable cash balance is not large enough to justify implementing a portal. Interestingly, just over one-​quarter of respondents (​26%) prefer to trade directly rather than use a portal.

Finally, LaRocco adds, "As the regulators have concluded, throughout the pandemic and the recent banking crisis, MMFs have proven themselves to be extremely resilient. In fact, when the SVB collapse was first reported, we saw significant outflows from bank deposits into MMFs, demonstrating that investors believe these funds to be a safe haven. This is in no small part thanks to the robust regulatory standards MMFs must adhere to."

​

The Securities and Exchange Commission'​s latest monthly "Money Market Fund Statistics" summary shows that total money fund assets decreased by $​41.​2 billion in October to $​6.​112 trillion. The SEC shows Prime MMFs jumping $​13.​9 billion in October to $​1.​287 trillion, Govt & Treasury funds decreased $​62.​4 billion to $​4.​695 trillion and Tax Exempt funds increased $​7.​3 billion to $​130.​7 billion. Taxable yields inched higher in October after rising in September. The SEC'​s Division of Investment Management summarizes monthly Form N-​MFP data and includes asset totals and averages for yields, liquidity levels, WAMs, WALs, holdings, and other money market fund trends. We review their latest numbers below. (Month-​to-​date in November through 11/​17, total money fund assets have increased by $​83.​2 billion to $​6.​124 trillion, according to our separate, and slightly smaller, MFI Daily series.)

October'​s overall asset decrease follows an increase of $​79.​7 billion in September, $​114.​2 billion in August, $​28.​8 billion in July, $​19.​6 billion in June, $​156.​6 billion in May, $​49.​9 billion in April, $​364.​4 billion in March, $​52.​1 billion in February, $​53.​2 billion in January, $​54.​8 billion in December and $​48.​5 billion last November. Over the 12 months through 10/​31/​23, total MMF assets have increased by $​980.​6 billion, or 19.​1%, according to the SEC'​s series.

The SEC'​s stats show that of the $​6.​112 trillion in assets, $​1.​287 trillion was in Prime funds, up $​13.​9 billion in October. Prime assets were up $​14.​3 billion in September, $​18.​5 billion in August, $​28.​9 billion in July, $​11.​0 billion in June, $​13.​7 billion in May and $​36.​0 billion in April. They were down $​22.​2 billion in March, but up $​35.​4 billion in February, $​86.​2 billion in January, $​10.​5 billion in December and $​28.​0 billion in November. Prime funds represented 21.​1% of total assets at the end of October. They'​ve increased by $​274.​2 billion, or 27.​1%, over the past 12 months. (Note that the SEC'​s series includes a number of internal money funds not tracked by ICI, though Crane Data includes most of these assets in its collections.)

Government & Treasury funds totaled $​4.​695 trillion, or 76.​8% of assets. They decreased $​62.​4 billion in October, increased $​64.​6 billion in September, $​92.​2 billion in August, $​3.​1 billion in July, $​4.​9 billion in June, $​137.​4 billion in May, $​19.​3 billion in April, $​387.​9 billion in March and $​16.​1 billion in February. They decreased $​33.​2 billion in January but increased $​41.​3 billion in December and $​23.​1 billion in November. Govt & Treasury MMFs are up $​694.​3 billion over 12 months, or 17.​4%. Tax Exempt Funds increased $​7.​3 billion to $​130.​7 billion, or 2.​1% of all assets. The number of money funds was 290 in October, down 2 from the previous month and down 10 funds from a year earlier.

Yields for Taxable MMFs inched higher while Tax Exempt MMFs fell in October. The Weighted Average Gross 7-​Day Yield for Prime Institutional Funds on Oct. 31 was 5.​50%, up 2 bps from the prior month. The Weighted Average Gross 7-​Day Yield for Prime Retail MMFs was 5.​56%, up 1 bp from the previous month. Gross yields were 5.​42% for Government Funds, up 2 basis points from last month. Gross yields for Treasury Funds were up 3 bps at 5.​43%. Gross Yields for Tax Exempt Institutional MMFs were down 22 basis points to 4.​05% in October. Gross Yields for Tax Exempt Retail funds were down 7 bps to 3.​93%.

The Weighted Average 7-​Day Net Yield for Prime Institutional MMFs was 5.​43%, up 2 basis points from the previous month and up 228 bps from 10/​31/​22. The Average Net Yield for Prime Retail Funds was 5.​30%, up 2 bps from the previous month, and up 223 bps since 10/​31/​22. Net yields were 5.​17% for Government Funds, up 1 bp from last month. Net yields for Treasury Funds were up 2 bps from the previous month at 5.​21%. Net Yields for Tax Exempt Institutional MMFs were down 22 bps from September to 3.​93%. Net Yields for Tax Exempt Retail funds were down 7 bps at 3.​69% in October. (​Note: These averages are asset-​weighted.)

WALs and WAMs were mostly up in October. The average Weighted Average Life, or WAL, was 43.​9 days (​up 0.​4 days) for Prime Institutional funds, and 47.​2 days for Prime Retail funds (​up 0.​8 days). Government fund WALs averaged 76.​9 days (​up 5.​5 days) while Treasury fund WALs averaged 67.​0 days (​up 7.​3 days). Tax Exempt Institutional fund WALs were 7.​4 days (​down 1.​9 days), and Tax Exempt Retail MMF WALs averaged 26.​4 days (​up 0.​9 days).

The Weighted Average Maturity, or WAM, was 26.​3 days (​up 1.​3 days from the previous month) for Prime Institutional funds, 30.​9 days (​up 3.​5 days from the previous month) for Prime Retail funds, 28.​9 days (​up 1.​6 days from previous month) for Government funds, and 31.​0 days (​up 6.​0 days from previous month) for Treasury funds. Tax Exempt Inst WAMs were down 1.​8 days to 7.​3 days, while Tax Exempt Retail WAMs were up 0.​3 days from previous month at 25.​1 days.

Total Daily Liquid Assets for Prime Institutional funds were 51.​0% in October (​up 0.​5% from the previous month), and DLA for Prime Retail funds was 42.​2% (​down 0.​3% from previous month) as a percent of total assets. The average DLA was 69.​8% for Govt MMFs and 96.​9% for Treasury MMFs. Total Weekly Liquid Assets was 67.​1% (​up 0.​4% from the previous month) for Prime Institutional MMFs, and 59.​7% (​down 0.​4% from the previous month) for Prime Retail funds. Average WLA was 81.​4% for Govt MMFs and 99.​4% for Treasury MMFs.

In the SEC'​s "Prime Holdings of Bank-​Related Securities by Country table for October 2023," the largest entries included: the U.​S. with $​145.​7B, Canada with $​136.​6 billion, Japan with $​126.​4 billion, France with $​98.​9 billion, the U.​K. with $​43.​0B, the Netherlands with $​41.​3B, Germany with $​37.​5B, Aust/​NZ with $​31.​8B and Switzerland with $​10.​3B. The gainers among the "Prime MMF Holdings by Country" included: France (​up $​13.​4B), Japan (​up $​7.​1B), Aust/​NZ (​up $​5.​6B), the U.​K. (​up $​4.​6B), Switzerland (​up $​1.​0B), Germany (​up $​0.​8B), and Canada (​up $​0.​1B). Decreases were shown by: Netherlands (​down $​1.​5B) and the U.​S. (​down $​0.​6B).

The SEC'​s "Prime Holdings of Bank-​Related Securities by Region" table shows The Americas had $​282.​3 billion (​down $​0.​5B), while Eurozone had $​202.​1B (​up $​24.​6B). Asia Pacific subset had $​179.​7B (​up $​10.​4B), while Europe (​non-​Eurozone) had $​111.​2B (​up $​15.​0B from last month).

The "​Prime MMF Aggregate Product Exposures" chart shows that of the $​1.​280 trillion in Prime MMF Portfolios as of Oct. 31, $​526.​4B (​41.​1%) was in Government & Treasury securities (​direct and repo) (​down from $​564.​5B), $​347.​0B (​27.​1%) was in CDs and Time Deposits (​up from $​303.​7B), $​195.​6B (​15.​3%) was in Financial Company CP (​up from $​187.​8B), $​149.​6B (​11.​7%) was held in Non-​Financial CP and Other securities (​up from $​143.​1B), and $​61.​1B (​4.​8%) was in ABCP (​up from $​59.​9B).

The SEC'​s "Government and Treasury Funds Bank Repo Counterparties by Country" table shows the U.​S. with $​334.​0 billion, Canada with $​174.​6 billion, France with $​159.​0 billion, the U.​K. with $​106.​7 billion, Germany with $​29.​2 billion, Japan with $​117.​8 billion and Other with $​51.​4 billion. All MMF Repo with the Federal Reserve was down $​399.​7 billion in October to $​1.​084 trillion.

Finally, a "Percent of Securities with Greater than 179 Days to Maturity" table shows Prime Inst MMFs 6.​3%, Prime Retail MMFs with 7.​0%, Tax Exempt Inst MMFs with 0.​5%, Tax Exempt Retail MMFs with 5.​8%, Govt MMFs with 14.​7% and Treasury MMFs with 10.​1%.

​

Crane Data is making plans and preparing the agenda for our seventh annual ultra-​short bond fund event, Bond Fund Symposium, which will take place March 25-​26, 2024 at the Loews Philadelphia Hotel. Crane'​s Bond Fund Symposium offers a concentrated and affordable educational experience, as well as an excellent networking venue, for bond fund and fixed-​income professionals. Registrations are now being accepted ($​1,​000) and sponsorship opportunities are available. We review the preliminary agenda and details below, and we also give the latest update on our upcoming "basic training" show, Money Fund University, which will be held next month in Jersey City, Dec. 18-​19. (​We'​ll also be hosting our Crane Data Holiday Party alongside MFU, so please join us Monday, Dec. 18 from 5:​00-​7:​30pm at the Westin Jeresey City.

Bond Fund Symposium'​s Day One (​3/​25) morning agenda includes: Keynote: State of the Bond Fund Marketplace with Shelly Antoniewicz of Investment Co. Institute and Peter Crane of Crane Data; Ultra-​Shorts: Staying Positive, Conservative with Teresa Ho of J.​P. Morgan Securities, Richard Mejzak of BlackRock and Julian Potenza of Fidelity Investments; and ETF & Near-​Cash ETF Trends, with Brian McMullen of Invesco and James Palmieri of State Street Global Advisors. (Note: The agenda is still a work in progress, so let us know if you'​re interested in speaking or have any requests.)

The Day One afternoon agenda includes: Senior Portfolio Manager Perspectives with Dave Martucci of J.​P. Morgan A.​M., Dave Rothweiler of UBS Asset Management and Jerome Schneider of PIMCO; Bond Index Funds & Longer-​Term BF Issues with Matthew Brill of Invesco (​and an additional speaker TBD); Money Funds & Conservative Ultra-​Shorts with Peter Crane, Kerry Pope of Fidelity Investments and Dan LaRocco of Northern Trust A.​M.; and, Bond Market Strategists: Rates & Risks featuring Jay Barry of JPM Securities, Michael Cloherty of UBS and Ira Jersey of Bloomberg Intelligence. Monday will close with a reception sponsored by Northern Trust.

Day Two'​s agenda includes: Major Issues in Fixed-​Income Investing with George Bory of Allspring Global (​and an additional speaker); Regulatory Update: Bond Fund Issues ‘​24 with Aaron Withrow of Dechert LLP; Ultra-​Shorts, LGIPs & Bond Fund Ratings with Peter Gargiulo of Fitch Ratings and Michael Masih of S&​P Global Ratings; European & Sustainable Bond Fund Update with David Callahan of Lombard Odier I.​M..

Portfolio managers, analysts, investors, issuers, service providers, and anyone interested in expanding their knowledge of bond funds and fixed-​income investing will benefit from our comprehensive program. A block of rooms has been reserved at the Loews Philadelphia. We'​d like to thank our past sponsors and exhibitors -- Wells Fargo Securities, Fitch Ratings, Fidelity Investments, J.​P. Morgan Asset Management, Allspring Global, S&​P Global Ratings, StoneX, Invesco, BofA Securities, Northern Trust, Bloomberg Intelligence, Goldman Sachs, Federated, Payden & Rygel, PIMCO and Dechert -- for their support. (​We'​d love to get some new ones!) E-​mail us for more details.

Also, our 13th Annual Crane'​s Money Fund University will be held December 18-​19, 2023 at The Westin Jersey City Newport. Crane'​s Money Fund University covers the history of money funds, interest rates, regulations (​Rule 2a-​7), ratings, rankings, money market instruments such as commercial paper, CDs and repo, and portfolio construction and credit analysis. We also include segments on offshore money funds and ultra-​short bond funds. (Note Too: Crane Data is hosting its Holiday cocktail party during MFU on Dec. 18 from 5-​7:​30pm, so please join us in Jersey City at The Westin Jersey City Newport!)

New portfolio managers, analysts, investors, issuers, service providers, and anyone interested in expanding their knowledge of "​cash" investing should benefit from our comprehensive program. Even experienced professionals may enjoy a refresher course and the opportunity to interact with peers in an informal setting. Attendee registration for Crane'​s Money Fund University is just $​750, exhibit space is $​2,​000, and sponsorship opportunities are $​3K (​Bronze), $​4K (​Silver), and $​5K (​Gold). A block of rooms has been reserved at the The Westin Jersey City Newport.

Money Fund University'​s comprehensive program is good for anyone -- beginners and experienced professionals looking for a refresher -- alike. The latest MFU agenda is available online and we are still accepting registrations. (​We'​re also willing to "​comp" tickets for large Crane Data or sponsor clients, so let us know if you'​re interested.)

We'​ll also soon be gearing up for our next "​big show," Money Fund Symposium, which will be held June 12-​14, 2024, at The Westin Convention Center in Pittsburgh, Pa. (​Let us know if you'​d like details on speaking or sponsoring.) Also, mark your calendars for next year'​s European Money Fund Symposium, which will be held Sept. 19-​20, 2024, in London. Watch for details on these shows in coming weeks and months.

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The Investment Company Institute published its latest weekly "Money Market Fund Assets" report Thursday, which shows MMF assets rising for the fourth week in a row and hitting yet another new record level. ICI'​s asset series rose $​21.​9 billion (​after rising $​16.​9 billion the prior week) to $​5.​73 trillion. Assets are up by $​999 billion, or 21.​1%, year-​to-​date in 2023, with Institutional MMFs up $​446 billion, or 15.​9% and Retail MMFs up $​553 billion, or 33.​0%. Over the past 52 weeks, money funds have risen a massive $​1.​109 trillion, or 24.​0%, with Retail MMFs rising by $​629 billion (​39.​3%) and Inst MMFs rising by $​480 billion (​15.​9%). (Note: Register and make hotel reservations soon for our upcoming Money Fund University, which takes place Dec. 18-​19, 2023 in Jersey City, NJ. We hope to see you in next month!)

The weekly release says, "Total money market fund assets increased by $​21.​91 billion to $​5.​73 trillion for the week ended Wednesday, November 15, the Investment Company Institute reported. Among taxable money market funds, government funds increased by $​18.​85 billion and prime funds increased by $​5.​64 billion. Tax-​exempt money market funds decreased by $​2.​57 billion." ICI'​s stats show Institutional MMFs rising $​11.​4 billion and Retail MMFs rising $​10.​5 billion in the latest week. Total Government MMF assets, including Treasury funds, were $​4.​680 trillion (​81.​6% of all money funds), while Total Prime MMFs were $​932.​0 billion (​16.​3%). Tax Exempt MMFs totaled $​122.​5 billion (​2.​2%).

ICI explains, "Assets of retail money market funds increased by $$​10.​52 billion to $​2.​23 trillion. Among retail funds, government money market fund assets increased by $​7.​50 billion to $​1.​45 trillion, prime money market fund assets increased by $​4.​75 billion to $​667.​57 billion, and tax-​exempt fund assets decreased by $​1.​73 billion to $​111.​21 billion." Retail assets account for over a third of total assets, or 38.​9%, and Government Retail assets make up 65.​1% of all Retail MMFs.

They add, "Assets of institutional money market funds increased by $​11.​39 billion to $​3.​50 trillion. Among institutional funds, government money market fund assets increased by $​11.​35 billion to $​3.​23 trillion, prime money market fund assets increased by $​887 million to $​264.​39 billion, and tax-​exempt fund assets decreased by $​840 million to $​11.​29 billion." Institutional assets accounted for 61.​1% of all MMF assets, with Government Institutional assets making up 92.​1% of all Institutional MMF totals.

According to Crane Data'​s separate Money Fund Intelligence Daily series, money fund assets rose $​84.​1 billion in the first 15 days of November to $​6.​125 trillion. (​This is just a hair shy of our record level on Nov. 8 of $​6.​126 trillion.) Assets fell by $​31.​9 billion in October after rising by $​93.​9 billion in September, $​98.​3 billion in August and $​34.​7 billion in July. Note that ICI'​s asset totals don'​t include a number of funds tracked by the SEC and Crane Data, so they'​re over $​400 billion lower than Crane'​s asset series.

ICI also released its latest monthly "Money Market Fund Holdings" summary, which reviews the aggregate daily and weekly liquid assets, regional exposure, and maturities (​WAM and WAL) for Prime and Government money market funds. This release says, "The Investment Company Institute (​ICI) reports that, as of the final Friday in October, prime money market funds held 39.​9 percent of their portfolios in daily liquid assets and 58.​5 percent in weekly liquid assets, while government money market funds held 81.​2 percent of their portfolios in daily liquid assets and 88.​7 percent in weekly liquid assets." Prime DLA was down from 40.​8% in September, and Prime WLA was up from 58.​2%. Govt MMFs' DLA was down from 81.​3% and Govt WLA decreased from 89.​2% the previous month.

ICI explains, "At the end of October, prime funds had a weighted average maturity (​WAM) of 32 days and a weighted average life (​WAL) of 51 days. Average WAMs and WALs are asset-​weighted. Government money market funds had a WAM of 30 days and a WAL of 74 days." Prime WAMs were 3 days longer and WALs were unchanged from the previous month. Govt WAMs were 3 days longer and WALs were 6 days longer from September.

Regarding Holdings by Region of Issuer, the release tells us, "Prime money market funds’ holdings attributable to the Americas declined from $​489.​15 billion in September to $​459.​97 billion in October. Government money market funds’ holdings attributable to the Americas declined from $​4,​312.​52 billion in September to $​4,​199.​91 billion in October."

The Prime Money Market Funds by Region of Issuer table shows Americas-​related holdings at $​460.​0 billion, or 50.​7%; Asia and Pacific at $​150.​3 billion, or 16.​5%; Europe at $​285.​0 billion, or 31.​4%; and, Other (​including Supranational) at $​12.​7 billion, or 1.​5%. The Government Money Market Funds by Region of Issuer table shows Americas at $​4.​200 trillion, or 90.​3%; Asia and Pacific at $​110.​6 billion, or 2.​4%; Europe at $​323.​1 billion, 6.​9%, and Other (​Including Supranational) at $​18.​0 billion, or 0.​4%.

​

A press release entitled, "CFTC Seeks Public Comment on a Proposal on Investment of Customer Funds" tells us, "The Commodity Futures Trading Commission ... issued, for public comment, a proposed rule on the Investment of Customer Funds by Futures Commission Merchants and Derivatives Clearing Organizations. The proposal would amend the Commission'​s regulations governing the safeguarding and investment by futures commission merchants (​FCMs) and derivatives clearing organizations of funds held for the benefit of customers engaging in futures, foreign futures, and cleared swaps transactions. The proposed amendments would specifically revise the list of permitted investments in Regulation 1.​25 and introduce certain related changes and specifications.... The comment period will be open for 75 days after publication on CFTC.​gov, with a closing date of January 17, 2024. Comments must be in writing and may be submitted electronically through the CFTC Comments online process. All comments received will be posted on CFTC.​gov."

The "Fact Sheet and Q&​A" explains on background, "Commission Regulation 1.​25 permits FCMs to invest funds deposited by customers to margin futures, foreign futures, and cleared swap transactions ('​Customer Funds') in specified categories of investments. Regulation 1.​25 further permits DCOs to invest Customer Funds that FCMs post with the DCOs as margin for their customers' positions in the same specified categories of investments. Regulation 1.​25(​a)(​1) currently lists seven specific investments that FCMs and DCOs may enter into with Customer Funds: (​i) obligations of the U.​S. and obligations fully guaranteed as to principal and interest by the U.​S.; (​ii) general obligations of any State or political subdivision of a State; (​iii) obligations of any U.​S. government corporation or enterprise sponsored by the U.​S.; (​iv) certificates of deposit issued by a bank; (​v) commercial paper fully guaranteed by the U.​S. under the Temporary Liquidity Guarantee Program ('​TLGP') as administered by the Federal Deposit Insurance Corporation ('​FDIC'); (​vi) corporate notes and bonds fully guaranteed as to principal and interest by the U.​S. under the TLGP; and (​vii) interests in money market funds ('​MMF')."

It continues, "Regulation 1.​25(​b) requires FCMs and DCOs to manage the permitted investments consistent with the objectives of preserving principal and maintaining liquidity. To this end, the permitted investments must be highly liquid such that the investments may be converted into cash within one business day without material discount in value.... The proposed revision of the scope of permitted MMFs seeks to address the impact of certain reforms to the Securities and Exchange Commission'​s ('​SEC') rules governing MMFs and ensure that permitted MMFs remain consistent with Regulation 1.​25'​s general principles of preserving principal and maintaining liquidity of Customer Funds."

The full CFTC Proposal, "Investment of Customer Funds by Future Commission Merchants and Derivatives Clearing Organizations" describes the "Interests in Money Market Funds," stating, "Regulation 1.​25(​a)(​1)(​vii) currently provides that FCMs and DCOs may invest Customer Funds in interests in MMFs, subject to specified terms and conditions. To qualify as a Permitted Investment, a MMF must: (​i) be an investment company that is registered with the SEC under the Investment Company Act of 1940 and hold itself out to investors as a MMF in accordance with SEC Rule 2a-​7; (​ii) be sponsored by a federally-​regulated financial institution, a Section 3(​a)(​6) bank, an investment adviser registered under the Investment Advisers Act of 1940, or a domestic branch of a foreign bank insured by the FDIC; and (​iii) compute the net asset value ('​NAV') of the fund by 9a.​m. of the business day following each business day and make the NAV available to MMF shareholders by that time."

It explains, "The Commission is proposing to amend Regulation 1.​25(​a)(​1)(​vii) to limit the scope of MMFs whose interests qualify as Permitted Investments to '​government money market funds,' as defined in SEC Rule 2a-​7, in response to two sets of amendments that the SEC adopted to its rules governing MMFs discussed below. A Government MMF is defined in SEC Rule 2a-​7 as a fund that invests 99.​5 percent or more of its total assets in cash, '​government securities,' and/​or Repurchase Transactions that are collateralized fully by cash or '​government securities'.... [​A] '​government security' encompasses '​U.​S. government securities' and '​U.​S. agency obligations' as defined under Regulation 1.​25(​a)(​1)(​i) and (​iii), respectively."

The Proposal continues, "As noted above, the Commission is proposing to amend Regulation 1.​25 to limit the scope of MMFs that qualify as Permitted Investments in response to SEC revisions to its MMF rules. In that regard, in 2014, the SEC amended Rule 2a-​7 to permit an MMF to impose liquidity fees on participant redemptions or to temporarily suspend participant redemptions if the MMF'​s investment portfolio triggered certain liquidity thresholds. The 2014 SEC MMF Final Rule was adopted to mitigate the adverse effects on fund liquidity resulting from increased participant redemptions during times of financial stress."

It says, "The SEC has recently adopted additional amendments to its MMF rules, including amendments revising the SEC Redemption Provisions discussed above. The SEC MMF Reforms are intended to address issues observed by the SEC with MMFs in connection with the economic shock from the onset of the COVID-​19 pandemic. Specifically, the SEC stated in March 2020, that concerns about the impact of COVID-​19 pandemic led investors to reallocate their assets into cash and short-​term government securities. Certain Prime MMFs, in particular, experienced significant outflows, contributing to stress on short-​term funding markets that resulted in government intervention to enhance the liquidity of such markets. The events of March 2020 led the SEC to re-​evaluate certain aspects of the regulatory framework applicable to MMFs."

The CFTC writes, "Accordingly, in an effort to improve the resilience of MMFs and address the issue of preemptive investor redemption behavior, particularly in times of stress, the SEC adopted changes to the fee and gate provisions in SEC Rule 2a-​7. The SEC MMF Reforms, among other things, amend the SEC Redemption Provisions by removing a Prime MMF'​s ability to temporarily suspend participant redemptions and by removing an Electing Government MMF'​s ability to voluntarily retain authority to suspend participant redemptions. The SEC MMF Reforms will also require Prime MMFs to impose a liquidity fee when the fund experiences net redemptions that exceed 5 percent of the fund'​s net assets, and will permit Prime MMFs to impose a discretionary liquidity fee if the fund'​s board of directors determines that a fee is in the best interest of the fund. Government MMFs will not be required to implement the mandatory liquidity fee but, consistent with the current SEC Redemption Provisions, may choose to rely on the ability to impose discretionary liquidity fees. Such fees, however, are no longer tied to the weekly liquid asset threshold."

They tell us, "The SEC'​s liquidity fee mechanism is designated to address shareholder dilution and the potential for first-​mover advantage by allocating liquidity costs to redeeming investors. Although the mechanism may contribute to decreasing outflows from certain MMFs, the Commission preliminarily believes that the potential imposition of a fee will nonetheless have the effect of reducing the liquidity of such funds and will reduce the principal of an FCM'​s or DCO'​s investment in MMF shares. Therefore, consistent with the positions taken in Staff Letter 16-​68 and Staff Letter 16-​69, the Commission is preliminarily of the view that FCMs and DCOs should be allowed to invest Customer Funds only in MMFs that will not be subject to a liquidity fee (​i.​e., Government MMFs that do not elect to apply a discretionary liquidity fee)."

The Proposal comments, "Thus, the proposed amendments would remove Prime MMFs and Electing Government MMFs, as participants in such funds may be subject to liquidity fees in certain circumstances. Therefore, the Commission is proposing amendments to Regulation 1.​25(​a)(​1)(​vii) that would limit the scope of MMFs whose interests qualify as Permitted Investments to Government MMFs that are not Electing Government MMFs ('​Permitted Government MMFs'). To qualify as a Permitted Government MMF, at least 99.​5 percent of the fund'​s investment portfolio must be comprised of cash, government securities (​i.​e., U.​S. Treasury securities, securities fully-​guaranteed as to principal and interest by the U.​S. Government, and U.​S. agency obligations), and/​or Repurchase Transactions that are fully collateralized by government securities as set forth in SEC Rule 2a-​7. The Commission preliminarily believes that the proposed amendment would ensure that FCMs and DCOs invest Customer Funds in instruments that are consistent with the objectives of Regulation 1.​25 of preserving principal and maintaining liquidity of the investments."

It adds, "The Commission also notes that the proposed amendments to remove from the scope of Permitted Investments the interests in MMFs whose redemptions may be subject to a liquidity fee would prohibit an FCM from depositing proprietary interests in such MMFs into Customer Funds accounts. Regulations 1.​23(​a)(​1), 22.​2(​e)(​3)(​i), and 30.​7(​g)(​1) permit FCMs to deposit proprietary cash and unencumbered securities into the accounts of futures customers, Cleared Swaps Customers, and 30.​7 customers, respectively, to help ensure that at all times the accounts maintain sufficient funds to cover the amounts due to all customers and prevent the accounts from becoming under segregated. The securities deposited by FCMs, however, must be Permitted Investments as set forth in Regulation 1.​25. Therefore, with respect to MMFs, FCMs would only be permitted to deposit proprietary interest in Permitted Government MMFs in the accounts of futures customers, Cleared Swaps Customers, and 30.​7 customers under the Proposal."

Finally, the Proposal says, "To eliminate MMFs whose redemptions may be subject to a liquidity fee from the scope of Permitted Investments under Regulation 1.​25, the Commission proposes to revise Regulation 1.​25(​a)(​1)(​vii), which would be redesignated Regulation 1.​25(​a)(​1)(​v) to accommodate other amendments to Regulation 1.​25(​a) discussed in this Proposal, by replacing the term '​money market mutual fund' with the term '​government money market funds as defined in S270.​2a-​7 of this title, provided that the funds do not elect to be subject to liquidity fees in accordance with S270.​2a-​7 of this title (​government money market fund).' The Commission also proposes to make further conforming changes throughout Regulation 1.​25 and the Appendix to Regulation 1.​25 by replacing all references to '​money market mutual fund' with '​government money market fund.'"

​

Crane Data'​s latest Money Fund Intelligence International shows that assets in European or "​offshore" money market mutual funds moved higher again over the past 30 days to a record $​1.​149 trillion, and yields also inched higher. Assets for USD, EUR and GBP MMFs all rose over the past month. Last month, European MMF assets broke above their previous record high of $​1.​101 trillion set in mid-​December 2021, and they'​ve now surpassed last month'​s record of $​1.​117 trillion. These U.​S.-​style money funds, domiciled in Ireland or Luxembourg and denominated in US Dollars, Pound Sterling and Euros, increased by $​32.​7 billion over the 30 days through 11/​13. The totals are up $​119.​1 billion (​11.​6%) year-​to-​date. (​Note that currency moves in the U.​S. dollar cause Euro and Sterling totals to shift when they'​re translated back into totals in U.​S. dollars. See our latest MFI International for more on the "​offshore" money fund marketplace. These funds are only available to qualified, non-​U.​S. investors.)

Offshore US Dollar money funds increased $​21.​2 billion over the last 30 days and are up $​84.​1 billion YTD to $​633.​6 billion. Euro funds increased E7.​3 billion over the past month. YTD, they'​re up E28.​3 billion to E208.​7 billion. GBP money funds increased L2.​9 billion over 30 days, and they'​re still down L31.​1 billion YTD at L232.​4B. U.​S. Dollar (​USD) money funds (​206) account for over half (​55.​1%) of the "​European" money fund total, while Euro (​EUR) money funds (​115) make up 19.​5% and Pound Sterling (​GBP) funds (​139) total 25.​4%. We summarize our latest "​offshore" money fund statistics and our Money Fund Intelligence International Portfolio Holdings (​which went out to subscribers Tuesday), below.

Offshore USD MMFs yield 5.​32% (​7-​Day) on average (​as of 11/​13/​23), up from 5.​30% a month earlier. Yields averaged 4.​20% on 12/​30/​22, 0.​03% on 12/​31/​21, 0.​05% on 12/​31/​20, 1.​59% on 12/​31/​19 and 2.​29% on 12/​31/​18. EUR MMFs finally left negative yield territory in the second half of 2022 but they should remain flat until the ECB moves rates again. They'​re yielding 3.​85% on average, up from 3.​83% a month ago and up from 1.​48% on 12/​30/​22, -​0.​80% on 12/​31/​21, -​0.​71% at year-​end 2020, -​0.​59% at year-​end 2019 and -​0.​49% at year-​end 2018. Meanwhile, GBP MMFs broke the 5.​0% barrier 4 months ago and now yield 5.​24%, up 2 bps from a month ago, and up from 3.​17% on 12/​30/​22. Sterling yields were 0.​01% on 12/​31/​21, 0.​00% on 12/​31/​20, 0.​64% on 12/​31/​19 and 0.​64% on 12/​31/​18.

Crane'​s November MFI International Portfolio Holdings, with data as of 10/​31/​23, show that European-​domiciled US Dollar MMFs, on average, consist of 23% in Commercial Paper (​CP), 16% in Certificates of Deposit (​CDs), 26% in Repo, 19% in Treasury securities, 15% in Other securities (​primarily Time Deposits) and 1% in Government Agency securities. USD funds have on average 50.​8% of their portfolios maturing Overnight, 7.​8% maturing in 2-​7 Days, 7.​2% maturing in 8-​30 Days, 8.​3% maturing in 31-​60 Days, 7.​2% maturing in 61-​90 Days, 13.​2% maturing in 91-​180 Days and 5.​5% maturing beyond 181 Days. USD holdings are affiliated with the following countries: the US (​39.​1%), France (​13.​2%), Canada (​9.​5%), Japan (​8.​7%), Sweden (​5.​4%), the U.​K. (​5.​0%), the Netherlands (​4.​4%), Australia (​3.​1%), Germany (​2.​2%), and Belgium (​1.​5%).

The 10 Largest Issuers to "​offshore" USD money funds include: the US Treasury with $​125.​1 billion (​19.​0% of total assets), Fixed Income Clearing Corp with $​36.​9B (​5.​6%), Credit Agricole with $​24.​0B (​3.​6%), BNP Paribas with $​21.​5B (​3.​3%), Barclays with $​20.​2B (​3.​1%), Mizuho Corporate Bank Ltd with $​17.​5B (​2.​6%), Bank of America with $​17.​0B (​2.​6%), RBC with $​17.​0B (​2.​6%), and Citi with $​16.​4B (​2.​5%) and JP Morgan with $​14.​6B (​2.​2%).

Euro MMFs tracked by Crane Data contain, on average 40% in CP, 20% in CDs, 20% in Other (​primarily Time Deposits), 15% in Repo, 5% in Treasuries and 0% in Agency securities. EUR funds have on average 37.​2% of their portfolios maturing Overnight, 10.​1% maturing in 2-​7 Days, 14.​3% maturing in 8-​30 Days, 7.​5% maturing in 31-​60 Days, 15.​3% maturing in 61-​90 Days, 9.​3% maturing in 91-​180 Days and 6.​3% maturing beyond 181 Days. EUR MMF holdings are affiliated with the following countries: France (​31.​3%), Japan (​12.​8%), the U.​S. (​10.​5%), the U.​K. (​6.​9%), Canada (​6.​9%), Germany (​5.​1%), Austria (​4.​8%), Sweden (​4.​3%), Belgium (​3.​5%) and the Netherlands (​3.​4%).

The 10 Largest Issuers to "​offshore" EUR money funds include: Credit Agricole with E11.​4B (​6.​1%), Republic of France with E11.​0B (​5.​9%), BNP Paribas with E9.​6B (​5.​1%), Credit Mutuel with E7.​0B (​3.​8%), Erste Group Bank AG with E6.​5B (​3.​5%), Mitsubishi UFJ Financial Group Inc with E6.​4B (​3.​4%), BPCE SA with E6.​4B (​3.​4%), Societe Generale with E5.​9B (​3.​2%), Banco Santander with E5.​2B (​2.​8%), and Bank of Nova Scotia with E4.​9B (​2.​6%).

The GBP funds tracked by MFI International contain, on average (​as of 10/​31/​23): 38% in CDs, 15% in CP, 24% in Other (​Time Deposits), 19% in Repo, 4% in Treasury and 0% in Agency. Sterling funds have on average 37.​7% of their portfolios maturing Overnight, 10.​7% maturing in 2-​7 Days, 9.​8% maturing in 8-​30 Days, 5.​0% maturing in 31-​60 Days, 13.​8% maturing in 61-​90 Days, 16.​0% maturing in 91-​180 Days and 7.​0% maturing beyond 181 Days. GBP MMF holdings are affiliated with the following countries: France (​17.​3%), Japan (​16.​6%), the U.​K. (​14.​6%), Canada (​14.​2%), the U.​S. (​8.​1%), Australia (​7.​4%), the Netherlands (​4.​4%), Sweden (​3.​6%), Spain (​3.​0%) and Singapore (​2.​6%).

The 10 Largest Issuers to "​offshore" GBP money funds include: Mizuho Corporate Bank Ltd with L9.​4B (​4.​4%), BNP Paribas with L9.​1B (​4.​2%), Toronto-​Dominion Bank with L9.​0B (​4.​2%), UK Treasury with L8.​8B (​4.​1%), Mitsubishi UFJ Financial Group Inc with L8.​7B (​4.​0%), Sumitomo Mitsui Trust Bank with L8.​2B (​3.​8%), Credit Agricole with L7.​9B (​3.​7%), BPCE SA with L7.​1B (​3.​3%), RBC with L6.​8B (​3.​2%) and Banco Santander with L6.​4B (​3.​0%).

​

The November issue of our Bond Fund Intelligence, which was sent to subscribers Tuesday morning, features the stories, "After Bad October, Bond Funds Bounce Back Big in November," which reviews the case for a bond market rebound and "Feeding Frenzy on iShares 20+ Year Treasury Bond ETF," which quotes from recent news coverage on flows into TLT. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund returns fell in October while yields rose again. We excerpt from the new issue below. (Contact us if you'​d like to see our latest Bond Fund Intelligence and BFI XLS spreadsheet, or our Bond Fund Portfolio Holdings data.)

Our "Bond Funds Bounce" piece states, "Bond fund assets declined by $​55.​8 billion in October, but have no doubt already recovered much of this loss in the first 13 days of November. The speed of U-​turn has been impressive, but the volatility in bond fund flows and returns continues to grow. But the debate continues on whether the recent rebound is real, or whether bonds’ latest upturn is merely a dead-​cat bounce."

It continues: "Barron'​s writes 'After the Fall: It'​s Time to Buy Bonds,' which says, '​They tell us, 'Rarely in American history has it been this bad for bonds -- and rarely has it been such an opportune time to buy. The bond rout has been brutal.... Treasuries are on track to lose money for three consecutive years, declining 42% over that period. Other bonds, whether mortgage-​backed securities or high-​quality corporates, have also taken a beating, leaving investors with losses from what are supposed to provide ballast in a portfolio. But consider what may come next: the end of the bond bear market.'"

Our "iShares" article states, "The manic-​depressive, meme-​stock momentum mindset appears to have moved to the bond fund space. Traders pushed yields up, then down at a breakneck pace the past month, which is most evidenced by the returns in, and the press coverage on, the iShares 20+ Year Treasury Bond ETF, or TLT."

It states: "A `​Wall Street Journal piece, 'Hard-​Hit Treasury-​Bond Fund Draws Buy-​the-​Dip Investors' tells us, '​One of the hottest investments on Wall Street is something of a surprise -- it'​s a battered long-​dated Treasury bond fund. Shares of the iShares 20+ Year Treasury Bond ETF are near a 16-​year low and have lost more than half their value from their 2020 peak, but investors are piling in.'"

Our first News brief, "Returns Fall, Yields Up Again in Oct.," states, "Bond fund returns fell and yields rose again last month. Our BFI Total Index decreased 0.​59% over 1-​month but is up 3.​01% over 12 months. The BFI 100 fell 0.​98% in Oct. but rose 2.​12% over 1-​year. Our BFI Conservative Ultra-​Short Index was up 0.​36% over 1-​month and is up 5.​05% for 1-​year; Ultra-​Shorts rose 0.​37% and are up 5.​37% over 12 mos. Short-​Term rose 0.​11% and rose 3.​86%, and Intm-​Term decreased 1.​16% and rose 0.​86% over 1-​year. BFI'​s Long-​Term Index fell 1.​81% and rose 0.​62%. High Yield fell 0.​54% in Oct. but is up 6.​14% over 1-​yr."

A second News brief, "WSJ on 'Bonds vs. Bond Funds: How Higher Rates Are Changing the Calculation.' The brief asks, 'Is it better for ordinary investors to buy individual bonds outright? Or shares of bond mutual funds? During the yearslong period of near-​zero interest rates, the answer seemed simple: Funds had low fees and were easy to buy and sell, and share values rose alongside bond prices. If any one bond defaulted, losses were minimal. The historic declines suffered by major bond funds last year highlighted the risks of that approach.'"

Our next News brief, "Reuters: 'Bond Fund Managers Head for Third Year of Losses.' They write, 'Many of the world'​s biggest bond funds are facing their third straight year of losses for the first time in roughly 40 years, as a relentless U.​S. economy sends bond yields to their highest levels in more than a decade. Yet far from being put off, investors are loading up on bonds again in 2023 after bailing out of the market last year, drawn in by the same run-​up in yields that has caused so much pain.'"

A BFI sidebar, "More Vanguard Muni ETFs," says, "​A release, 'Vanguard to Expand Municipal Bond ETF Lineup,' tells us, 'Vanguard today announced plans to launch Vanguard Intermediate-​Term Tax-​Exempt Bond ETF (​VTEI) and Vanguard California Tax-​Exempt Bond ETF (​VTEC), two index municipal bond ETFs. The ETFs will be managed by Vanguard’​s Fixed Income Group, which has overseen municipal bond portfolios for more than 40 years.'"

Finally, another sidebar, "Morningstar on Short BFs," comments, "Morningstar'​s '5 Short-​Term Bond Funds That Consistently Deliver' tells us, 'As 2023 winds down and stubbornly high bond yields remain, so does the allure of short-​term fixed-​income funds. The Federal Reserve has raised short-​term interest rates by 100 basis points so far in 2023 on top of 2022′​s unprecedented hikes. As high inflation and economic uncertainty persist, investors may seek refuge in shorter-​term bond funds to await a clearer path forward or look to enhance liquidity returns for cash not immediately needed.'"

​

The SEC released its latest quarterly "Private Funds Statistics" report recently, which summarizes Form PF reporting and includes some data on "Liquidity Funds," or pools which are similar to but not money market funds. The publication shows overall Liquidity fund assets were lower in the latest reported quarter (​Q1'​23) at $​313 billion (​down from $​318 billion in Q4'​22 and unchanged from $​313 billion in Q1'​22). We also again briefly review the part of the SEC'​s latest MMF Reforms which addresses "Amendments to Form PF Reporting Requirements for Large Liquidity Fund Advisers," below. (Note: Register and make hotel reservations soon for our upcoming Money Fund University, which takes place Dec. 18-​19, 2023 in Jersey City, NJ. We hope to see you in December!)

The SEC'​s "Introduction" tells us, "This report provides a summary of recent private fund industry statistics and trends, reflecting data collected through Form PF and Form ADV filings. Form PF information provided in this report is aggregated, rounded, and/​or masked to avoid potential disclosure of proprietary information of individual Form PF filers. This report reflects data from Second Calendar Quarter 2021 through First Calendar Quarter 2023 as reported by Form PF fi​lers." (Note: Crane Data believes the largest portion of these liquidity fund assets are securities lending reinvestment pools.)

The tables in the SEC'​s "Private Funds Statistics: First Calendar Quarter 2023," with the most recent data available, show 70 Liquidity Funds (​most of which are "Section 3 Liquidity Funds," which are Liquidity Funds from advisers with over $​1 billion total in cash), down 1 from last quarter and down 9 from a year ago. (​There are 50 Section 3 Liquidity Funds out of the 70 Liquidity Funds.) The SEC receives Form PF reports from 33 Liquidity Fund advisers (​21 of which are Section 3 Liquidity Fund advisers), down 1 from last quarter and down 6 from a year ago.

The SEC'​s table on "​Aggregate Private Fund Net Asset Value" shows total Liquidity Fund assets at $​313 billion, down $​5 billion from Q4'​22 and unchanged from a year ago (​Q1'​22). Of this total, $​311 billion is in Section 3 (​large manager) Liquidity Funds. The SEC'​s table on "​Aggregate Private Fund Gross Asset Value" shows total Liquidity Fund assets at $​320 billion, down $​1 billion from Q4'​22 and up $​2 billion from a year ago (​Q1'​22). Of this total, $​319 billion in is Section 3 (​large manager) Liquidity Funds.

A table on "Beneficial Ownership for Section 3 Liquidity Funds" shows $​106 billion is held by Other (​34.​1%), $​50 billion is held by Private Funds (​15.​9%), $​63 billion is held by Unknown Non-​U.​S. Investors (​20.​2%), $​17 billion is held by SEC-​Registered Investment Companies (​5.​4%), $​12 billion is held by Insurance Companies (​3.​9%) and $​3 billion is held by Non-​Profits (​0.​9%).

The tables also show that 71.​1% of Section 3 Liquidity Funds have a liquidation period of one day, $​294 billion of these funds may suspend redemptions, and $​266 billion of these funds may have gates. WAMs average a short 27 days (​26 days when weighted by assets), WALs are 43 days (​42 days when asset-​weighted), and 7-​Day Gross Yields average 4.​75% (​4.​50% asset-​weighted). Daily Liquid Assets average about 54% (​59% asset-​weighted) while Weekly Liquid Assets average about 62% (​70% asset-​weighted).

Overall, these portfolios appear shorter with a heavier Treasury exposure than money market funds in general; almost half of them (​36.​0%) are fully compliant with Rule 2a-​7. When calculating NAVs, 72.​0% are "Stable" and 28.​0% are "Floating."

As we'​ve mentioned before, this past July, when the SEC'​s Money Market Fund Reforms were passed, they also included "​Amendments to Form PF Reporting Requirements for Large Liquidity Fund Advisers." The release explains, "Separately, the amendments will also modify certain reporting forms that are applicable to money market funds and large private liquidity funds advisers."

The "Fact Sheet" explains, "In addition, the Commission adopted amendments to Form PF, the confidential reporting form for certain SEC-​registered investment advisers to private funds, to require additional information regarding the liquidity funds they advise that is generally aligned with the amended reporting for money market funds. These amendments were proposed by the Commission in January 2022."

The full final rules tell us, "The Commission is also amending Form PF, the confidential reporting form for certain SEC-​registered investment advisers to private funds to require additional information regarding the liquidity funds they advise. Liquidity funds are private funds that seek to maintain a stable NAV (​or minimize fluctuations in their NAVs) and thus can resemble money market funds. The amendments to section 3 of Form PF will provide a more complete picture of the short-​term financing markets in which liquidity funds invest and enhance the Commission'​s and the Financial Stability Oversight Council'​s ('​FSOC') ability to assess short-​term financing markets and facilitate our oversight of those markets and their participants. This, in turn, is designed to enhance investor protection efforts and systemic risk assessment. `​We have consulted with FSOC to gain input on these amendments to help ensure that Form PF continues to provide FSOC with information it can use to assess systemic risk."

It adds, "In a January 2022 release proposing amendments to Form PF, the Commission proposed changes to section 3 of Form PF that were intended to require large liquidity fund advisers to report substantially the same information that the Commission had proposed money market funds to report on Form N-​MFP. The proposed amendments to section 3 of Form PF included requirements for additional and more granular information regarding large liquidity fund operational information and assets, portfolio holdings, financing, and investor information as well as a new item concerning the disposition of portfolio securities. Consistent with the final amendments to Form N-​MFP, we are adopting largely as proposed the amendments to section 3 of Form PF, with some modifications to better tailor the reporting to private liquidity funds and remain consistent with the final requirements for money market funds under amended Form N-​MFP."

​

Crane Data'​s November Money Fund Portfolio Holdings, with data as of Oct. 31, 2023, show that Treasury holdings surged in October while Repo fell. Money market securities held by Taxable U.​S. money funds (​tracked by Crane Data) decreased by $​57.​9 billion to $​5.​917 trillion, after increasing $​56.​1 in September, $​106.​7 billion in August, $​78.​3 billion in July and $​46.​1 billion in June. Repo fell again, dropping $​329.​2 billion, but it remains the largest portfolio segment. Treasuries jumped by over $​175 billion, ranking in the No. 2 spot. The U.​S. Treasury surpassed the Federal Reserve Bank of New York as the largest Issuer to MMFs two months prior, in October that trend continued as the U.​S. Treasury jumped to $​1.​929 trillion vs. the Fed RRP'​s $​1.​077 trillion (​down $​400.​8 billion). Agencies were the third largest segment, CP remained fourth, ahead of CDs, Other/​Time Deposits and VRDNs. Below, we review our latest Money Fund Portfolio Holdings statistics.

Among taxable money funds, Repurchase Agreements (​repo) decreased $​329.​2 billion (-​11.​3%) to $​2.​592 trillion, or 43.​8% of holdings, in October, after decreasing $​84.​0 billion in September, $​96.​8 billion in August, $​99.​4 billion in July and $​146.​4 billion in June. Repo increased $​111.​8 billion in May and $​33.​1 billion in April. Treasury securities rose $​178.​1 billion (​10.​2%) to $​1.​929 trillion, or 32.​6% of holdings, after increasing $​164.​9 billion in September, $​163.​3 billion in August, $​185.​5 billion in July and $​355.​7 billion in June. They decreased $​116.​9 billion in May and $​32.​3 billion in April. Government Agency Debt was up $​36.​1 billion, or 5.​4%, to $​711.​6 billion, or 12.​0% of holdings. Agencies decreased $​8.​3 billion in September, increased $​16.​4 billion in August, but decreased $​66.​5 billion in July and $​119.​3 billion in June. They increased $​58.​8 billion in May and $​18.​5 billion in April. Repo, Treasuries and Agency holdings now total $​5.​232 trillion, representing a massive 88.​4% of all taxable holdings.

Money fund holdings of CP, CDs and Time Deposits all increased in October. Commercial Paper (​CP) increased $​17.​6 billion (​6.​2%) to $​300.​8 billion, or 5.​1% of holdings. CP holdings increased $​3.​0 billion in September, $​4.​8 billion in August, $​22.​0 billion in July, decreased $​2.​3 billion in June and increased $​6.​5 billion in May. Certificates of Deposit (​CDs) increased $​11.​2 billion (​5.​5%) to $​214.​2 billion, or 3.​6% of taxable assets. CDs increased $​0.​5 billion in September, $​14.​4 billion in August, $​7.​2 billion in July, $​7.​9 billion in June and $​2.​1 billion in May. Other holdings, primarily Time Deposits, increased $​28.​4 billion (​21.​7%) to $​159.​2 billion, or 2.​7% of holdings, after decreasing $​20.​4 billion in September, increasing $​4.​3 billion in August and $​29.​3 billion in July. TDs decreased $​49.​8 billion in June and increased $​30.​4 billion in May. VRDNs fell to $​10.​5 billion, or 0.​2% of assets. (​Note: This total is VRDNs for taxable funds only. We will post our Tax Exempt MMF holdings separately Thursday around noon.)

Prime money fund assets tracked by Crane Data rose to $​1.​264 trillion, or 21.​4% of taxable money funds' $​5.​917 trillion total. Among Prime money funds, CDs represent 16.​9% (​up from 16.​3% a month ago), while Commercial Paper accounted for 23.​8% (​up from 22.​7% in September). The CP totals are comprised of: Financial Company CP, which makes up 15.​4% of total holdings, Asset-​Backed CP, which accounts for 4.​7%, and Non-​Financial Company CP, which makes up 3.​7%. Prime funds also hold 4.​6% in US Govt Agency Debt, 8.​0% in US Treasury Debt, 21.​4% in US Treasury Repo, 0.​4% in Other Instruments, 10.​4% in Non-​Negotiable Time Deposits, 5.​4% in Other Repo, 6.​9% in US Government Agency Repo and 0.​6% in VRDNs.

Government money fund portfolios totaled $​3.​065 trillion (​51.​8% of all MMF assets), down from $​3.​126 trillion in September, while Treasury money fund assets totaled another $​1.​587 trillion (​26.​8%), down from $​1.​605 trillion the prior month. Government money fund portfolios were made up of 21.​3% US Govt Agency Debt, 18.​1% US Government Agency Repo, 26.​1% US Treasury Debt, 34.​4% in US Treasury Repo, 0.​0% in Other Instruments. Treasury money funds were comprised of 64.​8% US Treasury Debt and 35.​2% in US Treasury Repo. Government and Treasury funds combined now total $​4.​652 trillion, or 78.​6% of all taxable money fund assets.

European-​affiliated holdings (​including repo) increased by $​101.​8 billion in October to $​692.​7 billion; their share of holdings rose to 11.​7% from last month'​s 9.​9%. Eurozone-​affiliated holdings increased to $​468.​5 billion from last month'​s $​417.​0 billion; they account for 7.​9% of overall taxable money fund holdings. Asia & Pacific related holdings rose to $​270.​3 billion (​4.​6% of the total) from last month'​s $​261.​6 billion. Americas related holdings fell to $​4.​946 trillion from last month'​s $​5.​113 trillion, and now represent 83.​6% of holdings.

The overall taxable fund Repo totals were made up of: US Treasury Repurchase Agreements (​down $​329.​5 billion, or -​14.​9%, to $​1.​882 trillion, or 31.​8% of assets); US Government Agency Repurchase Agreements (​down $​0.​1 billion, or 0.​0%, to $​641.​2 billion, or 10.​8% of total holdings), and Other Repurchase Agreements (​up $​0.​3 billion, or 0.​4%, from last month to $​68.​3 billion, or 1.​2% of holdings). The Commercial Paper totals were comprised of Financial Company Commercial Paper (​up $​7.​5 billion to $​194.​3 billion, or 3.​3% of assets), Asset Backed Commercial Paper (​up $​1.​2 billion to $​60.​0 billion, or 1.​0%), and Non-​Financial Company Commercial Paper (​up $​8.​9 billion to $​46.​5 billion, or 0.​8%).

The 20 largest Issuers to taxable money market funds as of October 31, 2023, include: the US Treasury ($​1.​929T, 32.​6%), the Federal Reserve Bank of New York ($​1.​077 trillion, or 18.​2%), Federal Home Loan Bank ($​585.​4B, 9.​9%), Fixed Income Clearing Corp ($​368.​4B, 6.​2%), RBC ($​138.​3B, 2.​3%), Citi ($​113.​9B, 1.​9%), Bank of America ($​112.​2B, 1.​9%), JP Morgan ($​110.​7B, 1.​9%), Federal Farm Credit Bank ($​107.​0B, 1.​8%), BNP Paribas ($​101.​3B, 1.​7%), Barclays PLC ($​86.​3B, 1.​5%), Credit Agricole ($​65.​6B, 1.​1%), Goldman Sachs ($​63.​2B, 1.​1%), Wells Fargo ($​59.​0B, 1.​0%), Mitsubishi UFJ Financial Group Inc ($​58.​9B, 1.​0%), Sumitomo Mitsui Banking Corp ($​50.​3B, 0.​9%), Mizuho Corporate Bank Ltd ($​46.​7B, 0.​8%), Bank of Montreal ($​45.​2B, 0.​8%), ING Bank ($​42.​6B, 0.​7%), and Societe Generale ($​41.​7B, 0.​7%).

In the repo space, the 10 largest Repo counterparties (​dealers) with the amount of repo outstanding and market share (​among the money funds we track) include: Federal Reserve Bank of New York ($​1.​077T, 41.​6%), Fixed Income Clearing Corp ($​368.​4B, 14.​2%), RBC ($​114.​8B, 4.​4%), JP Morgan ($​100.​8B, 3.​9%), Citi ($​97.​9B, 3.​8%), Bank of America ($​88.​8B, 3.​4%), BNP Paribas ($​88.​0B, 3.​4%), Barclays PLC ($​68.​1B, 2.​6%), Goldman Sachs ($​62.​1B, 2.​4%) and Wells Fargo ($​48.​5B, 1.​9%). The largest users of the $​1.​077 trillion in Fed RRP include: Vanguard Federal Money Mkt Fund ($​76.​8B), JPMorgan US Govt MM ($​74.​5B), Fidelity Govt Money Market ($​56.​0B), Schwab Treasury Oblig MF ($​45.​4B), Fidelity Govt Cash Reserves ($​39.​8B), Fidelity Inv MM: MM Port ($​38.​7B), Fidelity Cash Central Fund ($​37.​0B), Fidelity Inv MM: Govt Port ($​36.​3B), Northern Instit Treasury MMkt ($​34.​0B) and Fidelity Money Market ($​33.​3B).

The 10 largest issuers of "​credit" -- CDs, CP and Other securities (​including Time Deposits and Notes) combined -- include: Mizuho Corporate Bank Ltd ($​32.​8B, 5.​5%), RBC ($​23.​5B, 3.​9%), Bank of America ($​23.​5B, 3.​9%), Credit Agricole ($​23.​4B, 3.​9%), Bank of Montreal ($​21.​4B, 3.​6%), Toronto-​Dominion Bank ($​20.​4B, 3.​4%), Mitsubishi UFJ Financial Group Inc ($​19.​2B, 3.​2%), Australia & New Zealand Banking Group Ltd ($​18.​4B, 3.​1%), Barclays PLC ($​18.​2B, 3.​1%) and Skandinaviska Enskilda Banken AB ($​17.​7B, 3.​0%).

The 10 largest CD issuers include: Bank of America ($​16.​5B, 7.​7%), Sumitomo Mitsui Banking Corp ($​14.​7B, 6.​9%), Toronto-​Dominion Bank ($​14.​3B, 6.​7%), Mitsubishi UFJ Trust and Banking Corporation ($​14.​2B, 6.​6%), Credit Agricole ($​12.​9B, 6.​0%), Mizuho Corporate Bank Ltd ($​11.​5B, 5.​4%), Mitsubishi UFJ Financial Group Inc ($​11.​5B, 5.​4%), Wells Fargo ($​10.​5B, 4.​9%), Sumitomo Mitsui Trust Bank ($​9.​7B, 4.​5%), and Citi ($​9.​1B, 4.​2%).

The 10 largest CP issuers (​we include affiliated ABCP programs) include: Bank of America ($​16.​5B, 7.​7%), Sumitomo Mitsui Banking Corp ($​14.​7B, 6.​9%), Toronto-​Dominion Bank ($​14.​3B, 6.​7%), Mitsubishi UFJ Trust and Banking Corporation ($​14.​2B, 6.​6%), Credit Agricole ($​12.​9B, 6.​0%), Mizuho Corporate Bank Ltd ($​11.​5B, 5.​4%), Mitsubishi UFJ Financial Group Inc ($​11.​5B, 5.​4%), Wells Fargo ($​10.​5B, 4.​9%), Sumitomo Mitsui Trust Bank ($​9.​7B, 4.​5%) and Citi ($​9.​1B, 4.​2%).

The largest increases among Issuers include: US Treasury (​up $​178.​5B to $​1.​929T), Federal Home Loan Bank (​up $​37.​0B to $​585.​4B), Credit Agricole (​up $​27.​0B to $​65.​6B), Barclays PLC (​up $​23.​9B to $​86.​3B), Citi (​up $​22.​6B to $​113.​9B), Bank of America (​up $​14.​3B to $​112.​2B), Deutsche Bank AG (​up $​9.​1B to $​29.​3B), JP Morgan (​up $​8.​9B to $​110.​7B), Erste Group Bank AG (​up $​8.​3B to $​9.​2B) and Bank of Montreal (​up $​7.​8B to $​45.​2B).

The largest decreases among Issuers of money market securities (​including Repo) in October were shown by: Federal Reserve Bank of New York (​down $​400.​8B to $​1.​077T), Goldman Sachs (​down $​29.​8B to $​63.​2B), RBC (​down $​11.​1B to $​138.​3B), Societe Generale (​down $​8.​5B to $​41.​7B), Sumitomo Mitsui Trust Bank (​down $​3.​3B to $​20.​7B), Sumitomo Mitsui Banking Corp (​down $​2.​8B to $​50.​3B), First Abu Dhabi Bank (​down $​1.​5B to $​7.​6B), Nomura (​down $​1.​5B to $​33.​0B), Credit Mutuel (​down $​1.​5B to $​10.​0B) and Federal Farm Credit Bank (​down $​1.​2B to $​107.​0B).

The United States remained the largest segment of country-​affiliations; it represents 78.​4% of holdings, or $​4.​638 trillion. Canada (​5.​2%, $​307.​9B) was in second place, while France (​4.​5%, $​265.​2B) was No. 3. Japan (​4.​2%, $​247.​1B) occupied fourth place. The United Kingdom (​2.​6%, $​152.​3B) remained in fifth place. Netherlands (​1.​2%, $​72.​6B) was in sixth place, followed by Germany (​1.​1%, $​66.​3B), Sweden (​0.​9%, $​50.​5B), Australia (​0.​7%, $​38.​5B), and Spain (​0.​4%, $​20.​7B). (​Note: Crane Data attributes Treasury and Government repo to the dealer'​s parent country of origin, though money funds themselves "​look-​through" and consider these U.​S. government securities. All money market securities must be U.​S. dollar-​denominated.)

As of Oct. 31, 2023, Taxable money funds held 54.​4% (​down from 58.​1%) of their assets in securities maturing Overnight, and another 9.​9% maturing in 2-​7 days (​unchanged). Thus, 64.​3% in total matures in 1-​7 days. Another 11.​2% matures in 8-​30 days, while 9.​0% matures in 31-​60 days. Note that over three-​quarters, or 84.​4% of securities, mature in 60 days or less, the dividing line for use of amortized cost accounting under SEC regulations. The next bucket, 61-​90 days, holds 4.​3% of taxable securities, while 7.​7% matures in 91-​180 days, and just 3.​6% matures beyond 181 days. (​Visit our Content center to download, or contact us to request our latest Portfolio Holdings reports.)

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Crane Data'​s latest monthly Money Fund Portfolio Holdings statistics will be sent out Thursday, and we'​ll be writing our regular monthly update on the new October 31 data for Friday'​s News. But we also uploaded a separate and broader Portfolio Holdings data set based on the SEC'​s Form N-​MFP filings yesterday. (​We continue to merge the two series, and the N-​MFP version is now available via our Portfolio Holdings file listings to Money Fund Wisdom subscribers.) Our new N-​MFP summary, with data as of Oct. 31, includes holdings information from 958 money funds (​unchanged from last month), representing assets of $​6.​119 trillion (​down from $​6.​145 trillion). Prime MMFs now total $​1.​278 trillion, or 20.​9% of the total. We review the new N-​MFP data, and we also look at our revised MMF expense data, which shows charged expenses flat and money fund revenues seeing their first decrease in months in October.

Our latest Form N-​MFP Summary for All Funds (​taxable and tax-​exempt) shows Repurchase Agreement (​Repo) holdings in money market funds totaling $​2.​627 trillion (​down from $​2.​939 trillion), or 42.​9% of all assets. Treasury holdings totaled $​1.​947 trillion (​up from $​1.​766 billion), or 31.​9% of all holdings, and Government Agency securities totaled $​725.​0 billion (​up from $​685.​6 billion), or 11.​8%. Holdings of Treasuries, Government agencies and Repo (​almost all of which is backed by Treasuries and agencies) combined total $​5.​283 trillion, or a massive 86.​6% of all holdings.

Commercial paper (​CP) totals $​309.​6 billion (​up from $​292.​6 billion), or 5.​1% of all holdings, and the Other category (​primarily Time Deposits) totals $​169.​1 billion (​up from $​137.​0 billion), or 2.​8%. Certificates of Deposit (​CDs) total $​214.​4 billion (​up from $​203.​4 billion), 3.​5%, and VRDNs account for $​126.​6 billion (​up from $​121.​4 billion last month), or 2.​1% of money fund securities.

Broken out into the SEC'​s more detailed categories, the CP totals were comprised of: $​195.​1 billion, or 3.​2%, in Financial Company Commercial Paper; $​60.​1 billion or 1.​0%, in Asset Backed Commercial Paper; and, $​54.​4 billion, or 0.​9%, in Non-​Financial Company Commercial Paper. The Repo totals were made up of: U.​S. Treasury Repo ($​1.​901 trillion, or 31.​1%), U.​S. Govt Agency Repo ($​641.​8B, or 10.​5%) and Other Repo ($​73.​0B, or 1.​2%).

The N-​MFP Holdings summary for the Prime Money Market Funds shows: CP holdings of $​303.​0 billion (​up from $​286.​3 billion), or 23.​7%; Repo holdings of $​429.​6 billion (​down from $​471.​3 billion), or 33.​6%; Treasury holdings of $​104.​8 billion (​down from $​104.​9 billion), or 8.​2%; CD holdings of $​214.​4 billion (​up from $​203.​4 billion), or 16.​8%; Other (​primarily Time Deposits) holdings of $​158.​5 billion (​up from $​127.​6 billion), or 12.​4%; Government Agency holdings of $​59.​8 billion (​up from $​56.​7 billion), or 4.​7% and VRDN holdings of $​8.​1 billion (​up from $​7.​8 billion), or 0.​6%.

The SEC'​s more detailed categories show CP in Prime MMFs made up of: $​195.​1 billion (​up from $​187.​6 billion), or 15.​3%, in Financial Company Commercial Paper; $​60.​1 billion (​up from $​59.​3 billion), or 4.​7%, in Asset Backed Commercial Paper; and $​47.​7 billion (​up from $​39.​4 billion), or 3.​7%, in Non-​Financial Company Commercial Paper. The Repo totals include: U.​S. Treasury Repo ($​274.​6 billion, or 21.​5%), U.​S. Govt Agency Repo ($​87.​1 billion, or 6.​8%), and Other Repo ($​68.​0 billion, or 5.​3%).

In related news, money fund charged expense ratios (​Exp%) were flat in October. Our Crane 100 Money Fund Index and Crane Money Fund Average were 0.​26% and 0.​37%, respectively, as of Oct. 31, 2023. Crane Data revises its monthly expense data and gross yield information after the SEC updates its latest Form N-​MFP data the morning of the 6th business day of the new month. (​They posted this info Wednesday morning, so we revised our monthly MFI XLS spreadsheet and historical craneindexes.​xlsx averages file to reflect the latest expenses, gross yields, portfolio composition and maturity breakout, yesterday.) Visit our "Content" page for the latest files.

Our Crane 100 Money Fund Index, a simple average of the 100 largest taxable money funds, shows an average charged expense ratio of 0.​26%, unchanged from last month'​s level (​but 18 bps higher than 12/​31/​21'​s 0.​08%). The average is now back around the level (​0.​27%) it was on Dec. 31, 2019, so we estimate that funds are charging normal expenses (​though they are waiving a minimal amount of fees for competitive purposes). The Crane Money Fund Average, a simple average of all taxable MMFs, showed a charged expense ratio of 0.​37% as of Oct. 31, 2023, unchanged from the month prior and slightly below the 0.​40% at year-​end 2019.

Prime Inst MFs expense ratios (​annualized) average 0.​28% (​unchanged from last month), Government Inst MFs expenses average 0.​27% (​unchanged from last month), Treasury Inst MFs expenses average 0.​29% (​unchanged from last month). Treasury Retail MFs expenses currently sit at 0.​52%, (​unchanged from last month), Government Retail MFs expenses yield 0.​54% (​unchanged from last month). Prime Retail MF expenses averaged 0.​48% (​unchanged from last month). Tax-​exempt expenses were also unchanged at 0.​40% on average.

Gross 7-​day yields were flat during the month ended Oct. 31, 2023. The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (​currently 752), shows a 7-​day gross yield of 5.​35%, unchanged from the prior month. The Crane Money Fund Average was 1.​72% at the end of 2019, 0.​15% at the end of 2020 and 0.​09% at the end of 2021. Our Crane 100'​s 7-​day gross yield was up 1 bp, ending the month at 5.​26%.

According to our revised MFI XLS and Crane Index numbers, we now estimate that annualized revenue for all money funds is $​15.​892 billion (​as of 10/​31/​23). Our estimated annualized revenue totals decreased from the record $​16.​020B last month and are down from $​15.​964B two months ago. But revenue levels are more than five times larger than May'​s 2021'​s record-​low $​2.​927B level. Charged expenses and gross yields are driven by a number of variables, but revenues should continue their climb higher as money funds see a resumption in inflows over the last two months of the year.

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Crane Data'​s latest monthly Money Fund Market Share rankings show assets were slightly lower among the largest U.​S. money fund complexes in October. Money market fund assets fell by $​39.​3 billion, or -​0.​6%, last month to $​6.​060 trillion, the first decline in 12 months. Total MMF assets have increased by $​158.​4 billion, or 2.​7%, over the past 3 months, and they'​ve increased by $​995.​8 billion, or 19.​7%, over the past 12 months. The largest increases among the 25 largest managers last month were seen by Schwab, Fidelity, Federated Hermes, DWS and Vanguard, which grew assets by $​18.​8 billion, $​17.​6B, $​7.​4B, $​3.​9B and $​2.​7B, respectively. Declines in October were seen by BlackRock, Goldman Sachs, Dreyfus, Morgan Stanley and Invesco, which decreased by $​23.​8 billion, $​16.​2B, $​15.​3B, $​13.​9B and $​11.​5B, respectively. Our domestic U.​S. "Family" rankings are available in our MFI XLS product, our global rankings are available in our MFI International product. The combined "Family & Global Rankings" are available to Money Fund Wisdom subscribers. We review the latest market share totals, and look at money fund yields, which inched higher in October.

Over the past year through Oct. 31, 2023, Fidelity (​up $​253.​8B, or 26.​8%), Schwab (​up $​221.​8B, or 95.​1%), JPMorgan (​up $​201.​0B, or 49.​2%), Vanguard (​up $​88.​8B, or 19.​7%) and Federated Hermes (​up $​88.​0B, or 26.​3%) were the `​largest gainers. Fidelity, Schwab, Federated Hermes, SSGA and JPMorgan had the largest asset increases over the past 3 months, rising by $​61.​0B, $​52.​6B, $​27.​3B, $​23.​7B and $​17.​9B, respectively. The largest declines over 12 months were seen by: American Funds (​down $​37.​8B), HSBC (​down $​18.​7B), Goldman Sachs (​down $​9.​4B), DFA (​down $​3.​7B), and T Rowe Price (​down $​2.​9B). The largest declines over 3 months included: Invesco (​down $​16.​8B), BlackRock (​down $​13.​9B) and Goldman Sachs (​down $​13.​5B).

Our latest domestic U.​S. Money Fund Family Rankings show that Fidelity Investments remains the largest money fund manager with $​1.​200 trillion, or 19.​8% of all assets. Fidelity was up $​17.​6B in October, up $​61.​0 billion over 3 mos., and up $​253.​8B over 12 months. JPMorgan ranked second with $​609.​8 billion, or 10.​1% market share (​down $​623M, up $​17.​9B and up $​201.​0B for the past 1-​month, 3-​mos. and 12-​mos., respectively). Vanguard ranked in third place with $​540.​2 billion, or 8.​9% of assets (​up $​2.​7B, up $​14.​3B and up $​88.​8B). BlackRock ranked fourth with $​481.​1 billion, or 7.​9% market share (​down $​23.​8B, down $​13.​9B and up $​8.​6B), while Schwab was the fifth largest MMF manager with $​455.​1 billion, or 7.​5% of assets (​up $​18.​8B, up $​52.​6B and up $​221.​8B for the past 1-​month, 3-​mos. and 12-​mos.).

Federated Hermes was in sixth place with $​422.​3 billion, or 7.​0% (​up $​7.​4B, up $​27.​3B and up $​88.​0B), while Goldman Sachs was in seventh place with $​406.​0 billion, or 6.​7% of assets (​down $​16.​2B, down $​13.​5B and down $​9.​4B). Dreyfus ($​249.​4B, or 4.​1%) was in eighth place (​down $​15.​3B, down $​3.​8B and up $​6.​5B), followed by Morgan Stanley ($​247.​4B, or 4.​1%; down $​13.​9B, down $​9.​9B and up $​8.​1B). SSGA was in 10th place ($​195.​3B, or 3.​2%; down $​7.​4B, up $​23.​7B and up $​23.​6B).

The 11th through 20th-​largest U.​S. money fund managers (​in order) include: Allspring (​formerly Wells Fargo) ($​189.​2B, or 3.​1%), American Funds ($​173.​6B, or 2.​9%), Northern ($​155.​7B, or 2.​6%), Invesco ($​140.​8B, or 2.​3%), First American ($​134.​3B, or 2.​2%), UBS ($​94.​0B, or 1.​6%), T. Rowe Price ($​47.​4B, or 0.​8%), HSBC ($​44.​1B, or 0.​7%), DWS ($​42.​3B, or 0.​7%) and Western ($​26.​1B, or 0.​4%). Crane Data currently tracks 60 U.​S. MMF managers, unchanged from last month.

When European and "​offshore" money fund assets -- those domiciled in places like Ireland, Luxembourg and the Cayman Islands -- are included, the top 10 managers are the same as the domestic list, except: BlackRock moves up to the No. 3 spot, Goldman Sachs moves up to No. 4 and Vanguard moves down to the No. 5 spot. Schwab moves down to the No. 6 spot, while Federated Hermes moves down to the No. 7 spot. Morgan Stanley moves up to the No. 8 spot while Dreyfus moves down to the No. 9 spot. Global Money Fund Manager Rankings include the combined market share assets of our MFI XLS (​domestic U.​S.) and our MFI International ("​offshore") products.

The largest Global money market fund families include: Fidelity ($​1.​211 trillion), JP Morgan ($​832.​7B), BlackRock ($​708.​7B), Goldman Sachs ($​544.​2B) and Vanguard ($​540.​2B). Schwab ($​455.​1B) was in sixth, Federated Hermes ($​434.​1B) was seventh, followed by Morgan Stanley ($​326.​6B), Dreyfus/​BNY Mellon ($​271.​5B) and SSGA ($​235.​9B), which round out the top 10. These totals include "​offshore" U.​S. Dollar money funds, as well as Euro and Pound Sterling (​GBP) funds converted into U.​S. dollar totals.

The November issue of our Money Fund Intelligence and MFI XLS, with data as of 10/​31/​23, shows that yields increased again in October across the Crane Money Fund Indexes. The Crane Money Fund Average, which includes all taxable funds covered by Crane Data (​currently 752), rose to 5.​08% (​up 1 bp) for the 7-​Day Yield (​annualized, net) Average, the 30-​Day Yield increased to 5.​07% (​up 1 bp). The MFA'​s Gross 7-​Day Yield rose to 5.​35% (​up 1 bps), and the Gross 30-​Day Yield also moved up to 5.​34% (​up 1 bp). (Gross yields will be revised Thursday at noon, though, once we download the SEC'​s Form N-​MFP data for 10/​31/​23.)

Our Crane 100 Money Fund Index shows an average 7-​Day (​Net) Yield of 5.​19% (​up 1 bp) and an average 30-​Day Yield at 5.​18% (​up 1 bp). The Crane 100 shows a Gross 7-​Day Yield of 5.​26% (​up 1 bp), and a Gross 30-​Day Yield of 5.​25% (​up 1 bp). Our Prime Institutional MF Index (​7-​day) yielded 5.​27% (​up 1 bp) as of Oct. 31. The Crane Govt Inst Index was at 5.​14% (​up 1 bp) and the Treasury Inst Index was at 5.​14% (​up 2 bps). Thus, the spread between Prime funds and Treasury funds is 13 basis points, and the spread between Prime funds and Govt funds is 13 basis points. The Crane Prime Retail Index yielded 5.​09% (​up 1 bp), while the Govt Retail Index was 4.​87% (​down 1 bp), the Treasury Retail Index was 4.​90% (​up 2 bp from the month prior). The Crane Tax Exempt MF Index yielded 3.​59% (​down 11 bps) as of October.

Gross 7-​Day Yields for these indexes to end October were: Prime Inst 5.​44% (​up 1 bp), Govt Inst 5.​37% (​up 1 bp), Treasury Inst 5.​36% (​up 2 bps), Prime Retail 5.​40% (​unchanged), Govt Retail 5.​33% (​down 1 bp) and Treasury Retail 5.​13% (​up 1 bp). The Crane Tax Exempt Index fell to 3.​99% (​down 11 bps). The Crane 100 MF Index returned on average 0.​44% over 1-​month, 1.​30% over 3-​months, 3.​98% YTD, 4.​65% over the past 1-​year, 1.​82% over 3-​years (​annualized), 1.​64% over 5-​years, and 1.​05% over 10-​years.

The total number of funds, including taxable and tax-​exempt, was down 2 in October to 881. There are currently 752 taxable funds, down 2 from the previous month, and 129 tax-​exempt money funds (​unchanged from last month). (Contact us if you'​d like to see our latest MFI XLS, Crane Indexes or Market Share report.)

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The November issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Tuesday morning, features the articles: "D&​I Share Classes All the Rage While ESG MMFs Liquidate," which reviews the "​Social" money fund space; "BNY Mellon Portal White Labels MS; ICD Upgrades," which covers recent MMF trading platform changes; and, "Fund Companies Prep for Liquidity Fees Via Filings," which reviews the changing in disclosures for funds in preparation for new regulations. We also sent out our MFI XLS spreadsheet Tuesday a.​m., and we'​ve updated our Money Fund Wisdom database with 10/​31/​23 data. Our November Money Fund Portfolio Holdings are scheduled to ship on Thursday, November 9, and our November Bond Fund Intelligence is scheduled to go out on Tuesday, November 14.

MFI'​s "D&​I Share Classes All the Rage But ESG MMFs Liquidating" article says, "We'​ve seen a lot of activity and interest in the D&​I or Social money fund space over the past month, including the launch of two new share classes from Allspring and one from HSBC. But it'​s been mostly bad news among ESG-​named Prime MMFs with yet another liquidation. We review the latest news and statistics on these sectors below."

It continues, "​Just yesterday, a press release stated, 'Wells Fargo & Company ... announced it is working with Allspring Global Investments, a global asset management firm, to launch a Tribal Inclusion share class for the Allspring Government Money Market Fund, which will be offered exclusively to Wells Fargo corporate clients. `​The Tribal Inclusion share class is the first money market product with a charitable donation feature focused on benefiting tribal communities in the United States.'"

We write in our Portal article, "There also was a flurry of news in the online money market fund trading or '​portal' space in recent weeks, including two announcements from the recent AFP corporate treasury conference. We learned from the first press release, entitled, 'BNY Mellon Launches White Labeling Service for LiquidityDirect Platform,' that, 'BNY Mellon announced ... the launch of LiquidityDirect'​s new White Labeling service offering, providing financial institutions a liquidity management solution for their end clients. Financial institutions seeking to include short-​term investments in their suite of offerings can now leverage LiquidityDirect'​s technology and services to provide a seamless user experience through a single sign-​on for their clients.'"

It tells us, "Morgan Stanley Investment Management will be the first financial institution to leverage BNY Mellon'​s new White Labeling service offering. The collaboration between BNY Mellon'​s robust platform combined with MSIM’​s extensive global client base is the first of its type and will set a new industry standard for delivering efficient cash management solutions to clients."

Our "Fund Filings" piece states, "Now that the previous regime of emergency gates and liquidity fees has been removed from money market mutual funds (​effective Oct. 2), advisors have begun changing disclosures and filing updates to prepare for the new round of pending regulations. As we mentioned in our Oct. 23 Link of the Day, 'Dreyfus Recaps 2a-​7 Changes for AFP,' discretionary liquidity fees will become live on April 2, 2024 and mandatory liquidity fees for Prime Institutional MMFs will become active on Oct. 2, 2024. Below, we excerpt from some recent SEC filings, which shed more light on the rules and how managers are handling disclosures. (​See filings with the term '​discretionary liquidity fee' here.)"

It explains, "​A Prospectus Supplement (​497) for DWS Money Market Prime Series and DWS Tax-​Exempt Portfolio explains, 'In July 2023, changes to the federal regulations that govern money market funds were adopted. The changes will be effective at various times in 2023 and 2024. Among the changes are: (​i) an increase in the minimum investment percentages in securities offering daily and weekly liquidity, (​ii) making any liquidity fees fully discretionary and not tied to minimum liquidity requirements, and (​iii) the removal of the ability to temporarily suspend (​gate) redemptions."

MFI also includes the News brief, "WSJ: Cash Is Hot But Could Cost. The Wall Street Journal writes on its front page, 'How This Year'​s Hottest Investment Could End Up Costing You.' They say, 'Cash has rarely been this hot on Wall Street. Financial advisers warn holding too much can burn a hole in your portfolio. With markets rocky and cash earning 5% or more, investors have boosted their holdings of money- market funds.'"

Another News brief, "MMF Assets Dip in October," explains, "Our MFI XLS shows assets declining by $​39.​3 billion in October to $​6.​061 trillion, the first decline in 12 months. ICI'​s latest weekly 'Money Market Fund Assets' report shows MMFs jumping for the second week in a row after plunging the prior week. ICI'​s series jumped $​62.​7 billion the past week to $​5.​695 trillion. Assets are up by $​960 billion, or 20.​3%, year-​to-​date in 2023, with Institutional MMFs up $​423 billion, or 13.​8% and Retail MMFs up $​537 billion, or 32.​0%. Over the past 52 weeks, money funds have risen a massive $​1.​063 trillion, or 23.​0%, with Retail MMFs rising by $​627 billion (​39.​5%) and Inst MMFs rising by $​436B (​14.​3%)."

A third News brief, "BlackRock, Schwab Earnings Show Shift to MMFs Still Going," says, "​Asset managers, brokerages and banks discussed money funds and bank deposit trends during their latest earnings calls. They show that '​cash sorting,' or the shift into money funds from bank deposits, is alive and well. On BlackRock'​s call, CFO Martin Small tells us, 'Rate hikes over the last 18 months mean that for the first time in nearly 20 years, clients can earn a real return in cash. In the short term, this has benefited many portfolios.... [​C]​ash management net inflows were $​15 billion in the quarter. Money market funds have returned to earning yields not seen in nearly two decades. We'​re leveraging our scale and integrated cash offerings to engage with clients who are using cash not only to manage liquidity, but also to earn attractive returns.'"

A sidebar, "Federated Q3 Earnings Call," says, "Federated Hermes, the 7th largest manager of money funds, reported Q3'​23 earnings and hosted its Q3'​23 earnings call recently. The release quotes CEO J. Christopher Donahue, 'Record assets under management at the end of the third quarter were again driven by money market asset increases, particularly investor demand for our prime money market offerings in the current interest rate environment, where general market volatility made the improved yields of our cash offerings an appealing haven for investors.'"

Our November MFI XLS, with October 31 data, shows total assets decreased $​39.​3 billion to $​6.​061 trillion, after increasing $​77.​8 billion in September, $​104.​2 billion in August, $​21.​0 billion in July, $​20.​3 billion in June, $​152.​7 billion in May, $​56.​5 billion in April, $​345.​1 billion in March, $​56.​0 billion in February, $​22.​5 billion in January, $​70.​2 billion in December and $​55.​4 billion in November. MMFs rose $​42.​2 billion last October."

Our broad Crane Money Fund Average 7-​Day Yield was up 1 bp to 5.​08%, and our Crane 100 Money Fund Index (​the 100 largest taxable funds) was up 1 bp to 5.​19% in October. On a Gross Yield Basis (​7-​Day) (​before expenses are taken out), the Crane MFA and the Crane 100 both were both higher at 5.​35% and 5.​26%, respectively. Charged Expenses averaged 0.​37% 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 10/​31/​23.) The average WAM (​weighted average maturity) for the Crane MFA was 31 days (​up 4 days from previous month) and the Crane 100 WAM was also up 3 at 30 days. (​See our Crane Index or craneindexes.​xlsx history file for more on our averages.)

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The podcast "Money Life with Chuck Jaffe" interviewed our Peter Crane in a segment titled "In today'​s rocky markets, cash is an asset-​allocation choice." Their description states, "Peter Crane, president of Crane Data -- which publishes the Money Fund Intelligence newsletter tracking the performance of money market mutual funds -- says that high interest rates should have investors thinking about where to park and protect their cash, and to treat their cash holdings as an asset rather than an after-​thought in the investment plan. He also discusses the likely path of money fund rates based on the Fed'​s moves."

Jaffe comments, "Welcome to the Big interview on the November 1st edition of Money Life. Joining me now, Peter Crane. He'​s president of Crane Data, publisher of Money Fund Intelligence. You want learn about money market funds? There'​s just no other source. Nobody even comes close. Cranedata.​com is the preeminent source for information on the field. And when money funds were paying nothing, Pete was so dedicated to the craft that he kept things going and kept the best work out there in the business on it. So if you'​re looking for money funds because you want to figure out what the top yields are and figure out how to surf to the top of the charts, www.​CraneData.​com. Pete Crane, great to have you back on Money Life."

Asked about rates after last week'​s Fed meeting, Crane responds, "The money funds still follow the Fed, and they follow them very quickly. So if they do nothing, they'​ll stay where they are.... Yields have been really inching up the last several weeks, just like a basis point a week, so there'​s still a little bit of climb just because the odds of a hike later this year or ... the odds of a cut have gone down. The odds of another hike are still there, but they'​ll stay flat in the main. So you'​ll see 5% or so ... is here to stay for at least the near future."

He explains, "Money funds are really competing with bank deposits at this point, both on the bank savings side and as far as the stock market goes. So they'​re not really competing with each other because rates have jumped so far so fast that they'​re all good.... I tell people, money funds are really like ... glorified index funds.... They'​re all buying from the same limited pool of triple-​A double-​A rated banks and Treasury bills, and what'​s called repo or repurchase agreements. So ... there is a little bit of differentiation between them in the services and in the expense ratio. But even the lowest money fund is paying over 4 1/​2% [​and] the highest is almost touching 5 1/​2%."

Crane continues, "​But all the big money is clustered [​around] 5.​19%, which is what our Crane 100 Money Fund Index is currently.... You'​re going to get a little over 5% no matter which money fund you pick, most likely. So why bother moving around or switching? It'​s all about the convenience, unless you'​re a real big investor and you know you have relationships with big banks and want to get credit for using their other products, etc."

When asked about competitive fee waivers, he answers, "​In the late 1990'​s and early 2000'​s, you used to have new money funds come in and waive all their fees. I used to joke that money funds are the only place where you can buy a number one ranking by doing that. You do have a little bit [​of fee waiving] around the edges, competitive shifts and stuff. Now, you have these D&​I, these diversity and inclusion, share classes where some of the fees go to minority brokers or women-​owned brokers, but that'​s mainly in the institutional side. [​Y]​ou'​ll see Fee waiving there so they can keep the fees at the lowest level. But you haven'​t seen big retail come in mainly because they haven'​t had to -- the retail flows have been so big and so heavy that nobody needs to go out and sort of advertise and get extra assets because they'​re happy dealing with the deluge they'​re already seeing."

Crane tells Jaffe, "It'​s usually a pretty good bet that, the number-​one ranked anything is sort of tweaking the expenses and doing a little extra. Allspring, because they were rolled off from Wells Fargo, is probably trying a little extra hard to get recognized because they'​ve got to sell the new name. It used to be Wells Fargo Funds. Wells Fargo still owns a big chunk of them and does business with them. But yeah, there'​s probably some of that going on."

He comments, "But in general, it'​s because for money funds, what they invest in has been tightened and restricted over the years.... They'​re about to see another round of new reforms passed in July that are being implemented over the next 6 months plus which are going into effect. Each time regulators change something, they'​ve gotten shorter, they'​ve gotten more restrictive, they'​ve gotten more government-​oriented. So, there'​s just not a whole lot where you can compete. But fee waving certainly around the edges [​is still a thing, though] nobody'​s waiving everything. If you'​re charging 14 basis points instead of 17, or 20 instead of 25, even that can give you an edge in this environment."

Crane then comments, "Convenience should be the number one concern as far as cash goes, because you'​re there because you'​re moving it somewhere else, or you might move it somewhere else tomorrow. So depending on where the money'​s going -- if it'​s going back and forth to your checking account, a bank savings account that pays a competitive rate makes more sense. If it'​s an investment account ... money market mutual funds usually have the edge because they'​re closer to that brokerage or investment account. Then, of course, if you'​re moving blocks of big savings, you can do either if you don'​t have to worry about a lot of transactions or wiring or debit cards, and if you'​re moving just big blocks on your own."

He states, "​But, as a reminder, the banks can tell you what you'​re going to make today, but they have no idea what they'​re going to pay a month from now. The money funds can tell you what you made yesterday, but what you make today is based on what the market pays it. And so, money fund yields follow the Fed. Bank deposits have just gotten the reputation of underperforming because the banks ... in general have to make money and this is true more today than ever. They'​re dependent on that net interest margin and the spreads, and a lot of the brokerages are today as well. So even the internet banks and high yield savings that'​ll pay a competitive rate, over time, they tend to lag. They'​ll try to '​boil the frog slowly,' show you a real heavy, high rate and hope you'​re not going to do the maintenance and watch that rate."

Crane adds, "For a lot of investors, ... you want to be competitive, but having that market rate [​allows you to] '​set it and forget it'.... Taking what the Fed gives you has made money funds real attractive now ... because they'​re up. If rates start going down at some point later next year, or who knows when they'​re going to go down, of course you'​re going to follow the Fed lower. But, you know, you shouldn'​t be depressed about that. You'​ve got to take what the market gives you."

He says, "You shouldn'​t time '​cash' more than you should time any other markets. If you might need the money, you should be in money market funds or bank deposits, in cash. If you don'​t need the money, you should still be investing for the longer term. But markets in general, ... I don'​t want to time them. But the odds of the stock market doing well, and the odds of the bond market -- it'​s been hammered so it'​s seen some of a correction -- but they'​ve had decades and decades of overperformance. It wouldn'​t shock me if you saw underperformance and even a nasty downturn in those markets.... So I'​d hold a little more cash, but don'​t get crazy and move everything to cash."

Asked about market timers, Crane replies, "The 5% yields are certainly bringing in assets, but the vast majority of the trillion dollars that'​s come in the money market mutual funds over the past year is from bank deposits. One of my mantras is 'cash competes with cash' and money funds versus bank deposits is the big show.... How much is moving in and out of the stock market is a sideshow. Market strategist telling you that there'​s this giant wall of cash [​is incorrect]. I mean if you sell stock in a brokerage account, it normally goes into a bank account, so what money funds hold normally isn'​t indicative that investors are raising tons of cash."

Finally, he adds, "​I'​m biased towards cash. I love the space and have been doing this forever. But I look longer-​term, and I still think cash is underweighted, not overweighted. I laugh when I hear talk of the 60-​40 model.... It used to be the 60-​30-​10 model, right?! You'​ll know cash is back when people start saying 60-​30-​10, because you used to have a 10% cash allocation. People call you crazy for having 10% in cash. So I listen to that and say, '​Yeah, we'​re nowhere near peaking as far as interest in cash.'"

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The Investment Company Institute'​s latest weekly "Money Market Fund Assets" report shows MMF assets jumping for the second week in a row after plunging the prior week. ICI'​s asset series jumped $​62.​7 billion the past week to $​5.​695 trillion. Assets are up by $​960 billion, or 20.​3%, year-​to-​date in 2023, with Institutional MMFs up $​423 billion, or 13.​8% and Retail MMFs up $​537 billion, or 32.​0%. Over the past 52 weeks, money funds have risen a massive $​1.​063 trillion, or 23.​0%, with Retail MMFs rising by $​627 billion (​39.​5%) and Inst MMFs rising by $​436 billion (​14.​3%). (Note: Start making plans for our upcoming Money Fund University, which will take place Dec. 18-​19, 2023 in Jersey City, NJ. We hope to see you in December!)

The weekly release says, "Total money market fund assets increased by $​62.​68 billion to $​5.​70 trillion for the week ended Wednesday, November 1, the Investment Company Institute reported. Among taxable money market funds, government funds increased by $​53.​91 billion and prime funds increased by $​4.​80 billion. Tax-​exempt money market funds increased by $​3.​97 billion." ICI'​s stats show Institutional MMFs rising $​38.​2 billion and Retail MMFs rising $​24.​5 billion in the latest week. Total Government MMF assets, including Treasury funds, were $​4.​651 trillion (​81.​7% of all money funds), while Total Prime MMFs were $​920.​0 billion (​16.​2%). Tax Exempt MMFs totaled $​124.​2 billion (​2.​2%).

ICI explains, "Assets of retail money market funds increased by $​24.​47 billion to $​2.​21 trillion. Among retail funds, government money market fund assets increased by $​14.​30 billion to $​1.​44 trillion, prime money market fund assets increased by $​6.​53 billion to $​658.​35 billion, and tax-​exempt fund assets increased by $​3.​64 billion to $​111.​16 billion." Retail assets account for over a third of total assets, or 38.​9%, and Government Retail assets make up 65.​3% of all Retail MMFs.

They add, "Assets of institutional money market funds increased by $​38.​22 billion to $​3.​48 trillion. Among institutional funds, government money market fund assets increased by $​39.​61 billion to $​3.​21 trillion, prime money market fund assets decreased by $​1.​72 billion to $​261.​62 billion, and tax-​exempt fund assets increased by $​331 million to $​13.​02 billion." Institutional assets accounted for 61.​1% of all MMF assets, with Government Institutional assets making up 92.​1% of all Institutional MMF totals.

According to Crane Data'​s separate Money Fund Intelligence Daily series, money fund assets rose $​62.​4 billion over the past week to $​6.​074 trillion. Assets fell by $​31.​9 billion in October after rising by $​93.​9 billion in September, $​98.​3 billion in August and $​34.​7 billion in July. Note that ICI'​s asset totals don'​t include a number of funds tracked by the SEC and Crane Data, so they'​re over $​400 billion lower than Crane'​s asset series.

In related news, a new "ICI Research Perspective" entitled, "Characteristics of Mutual Fund Investors, 2023," tells us, "Mutual fund holdings represented a significant portion of owning households' financial assets. In 2023, 67 percent of mutual fund–​owning households had more than half of their household financial assets invested in mutual funds."

It explains, "Equity funds were the most commonly owned type of mutual fund, held by 79 percent of mutual fund–​owning households.... In addition, 33 percent owned balanced funds, 34 percent owned bond funds, and 50 percent owned money market funds. Forty-​six percent of mutual fund–​owning households owned equity index funds, and 30 percent owned global or international equity mutual funds."

ICI writes, "Mutual fund–​owning households typically have other types of savings and investments. In 2023, these households also reach for additional equities and diversification through individual stocks (​38 percent of mutual fund–​owning households owning), exchange-​traded funds (​ETFs) (​19 percent owning), and closed-​end funds (​4 percent owning). Mutual fund–​owning households had additional fixed-​income investing through US savings bonds (​21 percent owning), individual bonds other than US savings bonds (​10 percent owning), and certificates of deposit (​22 percent owning). Additionally, 13 percent owned fixed or variable annuities, 17 percent owned investment real estate, and 10 percent owned cryptocurrency."

In other news, a publication named, "Financial Accounting" published a piece entitled, "Wash Sale Rules Have Now Eased for Money Market Funds." Subtitled, "Charles Schwab'​s Hayden Adams shares how new IRS guidance will make money market fund tax preparation easier and will get rid of enforcement on wash sale rules," it tells us, "The IRS'​s recently issued Rev. Proc. 2023-​35 states that wash sale rules will no longer apply to the sale of shares in money market funds. The new guidance, effective Oct. 2, makes these investments an easier decision by simplifying the tax preparation of MMF transactions and eliminating IRS enforcement of wash sale rules on MMF sales."

The article explains, "​A wash sale happens when a security is sold at a loss and an identical purchase is then made within 30 days. Though losses in MMFs are generally rare, this change means investors will be able to use sale losses to offset other capital gains and/​or up to $​3,​000 of ordinary income, in the year the loss is realized. This new guidance extends the wash sale relief from the previous Rev. Proc. 2014-​45 to MMFs with stable net asset values, where the prior guidance provided wash sale relief to investors in MMFs with a floating NAV."

It continues, "Traditionally, MMFs have a NAV per share price of $​1, which means investors can normally buy and sell those funds and not be concerned about creating a taxable event. Because the purchase price of these funds generally match the selling price, having a loss in these funds hasn'​t been an issue for most investors, and the wash sale rules were of no real concern. However, an investor can actually see a loss in a MMF. Though rare, '​breaking the buck' sometimes happens when the NAV per share price goes below $​1. This can trigger a mad rush of investors out of a fund, causing liquidity issues for the fund manager."

Financial Accounting says, "To alleviate the problem of MMF investors having to face the complexity of the wash sale rules, the IRS issued Revenue Procedure 2023-​35 to '​reduce undue tax compliance burdens' and '​because of the constant value of shares in stable-​NAV MMFs, the frequency with which many taxpayers continuously acquire and redeem shares in these MMFs, and the administrative and compliance burdens that would flow from applying section 1091 to these transactions.'"

They add, "Though the likelihood of losses from a MMF transaction is still very low, the latest IRS guidance helps remove some potential complications and concerns investors could face if a fund did break the buck or charged a liquidity fee for a redemption. It also means that tax professionals and financial advisers won’​t need to worry about telling clients about the complexities of the wash sale rules when it comes to investments in MMFs."

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HSBC Global Asset Management launched new '​P' share classes for its HSBC US Government Money Market Fund (​HGPXX) and US Treasury Money Market Fund (​HTPXX), adding them to a growing list of "​D&​I" or "​Social" money market fund share class options. A brochure for the funds, entitled, "Diversity, Equity and Inclusion - The '​P' Share Class," tells us, "Our '​P' Share Class is designed with Purpose in mind -- to enable your firm'​s greater Purpose." It states, "​Investors face ever greater pressures from shareholders, customers, and from within their organizations, to use their position to make a positive impact on the world. We all want to make sure the work we do is making a difference, and to ensure everything we do aligns with this Purpose. Our '​P' share class is designed to help investors align their day-​to-​day cash investment activities with their social ambitions. The share class is dedicated to charitable giving, with a focus on addressing issues at the intersection of gender, racial, and ethnic inequality in our societies. We allocate a proportion of the share class fee to go to select non-​profit partners on your behalf."

The document explains, "You will be supporting charities that focus on addressing issues at the intersection of gender, racial, and ethnic inequality in our societies. We choose our Partners with Purpose based on a number of criteria, including their proven track record, the impact they make, and their strong governance and transparency. We recognize the need for transparency to ensure that your donations have a meaningful impact."

It says, "​Our non-​profit partners have been chosen for their ambitious goals but also their proven results reaching them. We work closely with the HSBC Group Corporate Sustainability Team to evaluate potential partners for their social impacts in our communities. We will form new partnerships with charities reflecting the markets in which you operate as the program grows. Once a partner has been identified and selected, we donate a proportion of the fee on the '​P' share class in our MMFs to support the continuation of their important work.... Feeding America is a Partner with Purpose in the USA."

HSBC will be hosting a webinar, "Aligning your cash investment strategy with your corporate purpose on Thursday November 9th, from 2:​00-​3:​00pm EST. Speakers include Barry Harbison, Head of US Liquidity Investment Specialists, Kelly Fisher, Head of Corporate Sustainability, Kristin Lloyd, Global Director of Treasury at Velocity Global, and Jerry Jones, Vice President, Innovative Initiatives & Partnerships, Research & Innovation, Feeding America. The description says, "Learn how you can contribute to tackling such issues by embedding DE&​I in the heart of your treasury organization with our new P Share Class, available in our US Treasury and Government Money Market Funds. Our experts will discuss: Our approach to delivering a credible DE&​I solution for treasurers; Feeding America'​s innovative workforce development program; and, How you can seamlessly integrate the philosophy into everyday treasury activities."

In related news, CAVU Securities recently published, "DEI Money Funds: Advancing DEI Goals and Impact Objectives by Investing in Institutional Money Market Funds." They state, "As organizations look to advance Diversity, Equity, and Inclusion (​DEI) goals, an impactful and quite frankly '​too easy to sound true solution' is becoming more popular: investing the organization'​s cash into Institutional Money Funds that have a DEI/​ESG framework. The goal of this whitepaper is to analyze the current options available and to clarify the impact each offers as organizations increasingly want to ensure the solution(​s) they utilize are measurable and make a meaningful difference. This paper will focus on the impact based upon the easiest definable metric -- the money fund'​s expense ratio.... Notably, there are differences in each impact strategy."

Cavu Securities continues, "This whitepaper addresses three main points: How is an Impact created? The types of options will be identified and discussed. Based on the type of option utilized, how impact is generated will vary. What amount of Impact is being created? The amount of ERI generated from the various options. The details of payments made from the fund'​s expense ratio will often drive the level of impact created. Where is the Impact felt? Where and for whom the impact is realized.... In looking at the options available for investors, we believe there are three '​categories' that emerge: Diverse Dealers Trading Funds (​DDT), Fund Sponsor Donation Funds (​FSD) and Diversity Firm Share Classes (​DFSC)."

On DDTs, CAVU says, "​It is the fund'​s intention to trade with Diverse Dealers. [​But there is no expense ratio] impact since no portion of a fund'​s expense ratio is paid to the DD. The DD earns revenue like any dealer would on a fixed income trade; the difference between bid and ask (​the spread) or if a new issue, the underwriting fee.... These funds are not generally a popular option because impact is unknown and likely to be minimal. Short term trades earn dealers very little (​which money funds primarily transact) especially after subtracting items like commission, ticket charges and other expenses."

On "Fund Sponsor Donation Funds," they tell us, "The Fund Sponsor states that a certain percentage of the income earned by the fund sponsor from managing the portfolio or share class will be donated to a specific organization with a mission that has a DEI impact. [​But the] ERI Impact varies and is often unknown.... FSD is a welcome addition to the DEI money fund space as Fund Sponsors help to advance DEI. The difficulty here is that an investor will likely have little knowledge of the amount of impact they are making."

Then on "Diversity Firm Share Classes," Cavu writes, "Share Classes (​not the entire fund) are created by a Diverse Financial Firm and a Fund Sponsor partnership. The classes reside within a specific fund and are typically branded with the Diverse Dealer'​s name and [​are] actively marketed by the Diverse Dealer. [​Expense ratio impact] varies, and likely offers the greatest impact of the options. The ERI is dependent on the agreement between the Fund Sponsor and the Diverse Dealer. Amounts generally range from as low as 10% of the share class'​s expense ratio to as high as 50%.... The DFSC has the greatest potential ERI and is becoming the most popular solution being used today."

Finally, they add, "As the title states, the focus of this paper has been on DEI impact. We have not covered Money Market Funds that address the '​E' or '​G' in ESG. These funds typically fall into the prime fund segment of money market funds and are managed with screens to determine what can and cannot be invested in (​much like an ESG equity mutual fund or ETF). These funds tend to be smaller and hence large organizations may find it difficult to invest in a meaningful way.... Organizations and the professionals who are responsible for investing cash now have real options in which they can carry out the fiduciary responsibility of the organization while having a meaningful and measurable impact on advancing and achieving DEI goals. As investors, you have the opportunity to navigate your options and obtain the clarity around the level of your impact."

For more on ESG see these Crane Data News stories: "Allspring Launches Roberts & Ryan Class; ICD'​s New Portfolio Analytics" (​10/​24/​23), "UBS Latest to Abandon ESG Money Funds; JNL Liquidates Money Fund" (​10/​13/​23), "Morgan Stanley Latest to Abandon ESG MMFs" (​8/​16/​23), "ESMA, FSB Push European Money Fund Reforms; New HSBC ESG Euro MF" (​3/​27/​23), "Morgan Stanley Names OFN Beneficiary of Impact Shares; ESG to Retail" (​10/​27/​22), "SSGA to Liquidate State Street ESG Liquid Reserves" (​9/​19/​22), "ESG Cash Investments Still Minor Says AFP Liquidity Survey, 6% Over 10%" (​6/​29/​22), "SEC Names Rule Proposal Could Impact or Ban ESG, Social Money Funds" (​6/​3/​22), "Dreyfus Announces New BOLD D&​I Share Class with Howard University" (​3/​1/​22), "SSGA Debuts Opportunity Class; BlackRock Bancroft, Cabrera Shares Live" (​11/​17/​21); "More D&​I: State Street Files for Blaylock Van Shares; WSJ Hits Tether" (​10/​27/​21); "BlackRock Expands ESG Lineup; Files for New Bancroft, Cabrera Shares" (​8/​19/​21); "Northern Renames Diversity Shares Siebert Williams; Safened Platform" (​4/​20/​21); "Morgan Stanley Files for CastleOak Shares; Bond Fund Symposium Today" (​3/​25/​21); "JP Morgan Launches '​Empower' Share Class to Support Minority Banks" (​2/​24/​21); "Mischler Financial Joins '​Impact' or Social Money Market Investing Wave" (​12/​5/​19); and "Dreyfus Launches '​Impact' or Diversity Government Money Market Fund" (​11/​21/​19). Click here to see the Federal Home Loan Bank Office of Finance'​s list of D&​I or diversity and inclusion, dealers.

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The Wall Street Journal writes on money market mutual funds in "How This Year'​s Hottest Investment Could End Up Costing You." They say, "Cash has rarely been this hot on Wall Street. Financial advisers warn holding too much can burn a hole in your portfolio. With markets rocky and cash earning 5% or more, investors have boosted their holdings of money-​market funds to a near-​record $​5.​6 trillion, according to the Investment Company Institute. Both individuals and institutional investors are piling in -- asset managers now have roughly one-​fifth of their portfolios in money-​market funds, State Street data show."

The piece explains, "​Cash was trash for years on Wall Street, where low interest rates left investors buying every dip, saying there was no alternative to stocks. The prospect of a prolonged period of higher rates has upended that thinking, buffeting both stocks and bonds while increasing the returns offered by some of the safest, shortest-​term investments such as money markets. Yet many advisers caution that fees, taxes and inflation all undermine those returns. And one of the biggest costs is opportunity: By pouring money into cash, investors miss out on potential gains from holding a broad portfolio of stocks, bonds and other riskier investments."

They quote a Wylie Tollette, chief investment officer for Franklin Templeton Investment Solutions, "Money-​market funds are a rational place to be for the next six months. But over the long term, taking risks pays you more. Keeping any more than a small allocation to cash in your portfolio, for any longer than the short-​term, will ultimately cost you thousands or millions of dollars."

The Journal piece states, "Though often treated as akin to a bank account, the funds differ from normal savings accounts and other cash-​like investments, such as CDs. They typically lend cash to banks overnight (​backed by Treasurys), park it at the Fed or invest in Treasury bills maturing in a few months. Still, they are considered equivalent to cash because investors generally expect to get their money back whenever they ask. To that end, the funds try to maintain a net asset value of $​1 a share."

It tells us, "Yields fluctuate with benchmark rates set by the Federal Reserve. Right now, the $​265 billion Vanguard Federal Money Market Fund yields 5.​3%, earnings that are distributed via dividends. The popular Fidelity Government Money Market Fund yields 4.​99%, though requires no minimum amount to invest in the fund. Vanguard asks for at least $​3,​000."

The Journal warns, "Though considered to be among the safest of all investments, deposits in the funds aren'​t insured and they have occasionally gone haywire in times of stress. Shares of one fund fell below $​1 a piece when Lehman Brothers failed in 2008, prompting a federal backstop. Regulators also stepped in to backstop the funds during the market turmoil of the pandemic'​s early days. That episode prompted a rewriting of the rules guiding money-​market funds for the third time in 15 years."

They add, "Those considerations haven'​t driven away investors. The Fed'​s most aggressive interest-​rate campaign in decades has lifted rates near the returns many investors would expect from their portfolio on an average year. With the central bank expected to hold rates near this level for some time, money-​market funds are now considered a viable investment rather than just a place to stuff cash. The influx into money markets also accelerated this year after the failure of Silicon Valley Bank left depositors worried about how protected their money was in banks."

Finally, the article quotes Dreyfus CIO John Tobin, "​The fed-​funds rate is likely to be between 3% to 4% for the long run, stock valuations are lofty and bond volatility doesn'​t look like it'​s abating anytime soon.... If we are delivering 4% returns in a world of two-​and-​change percent inflation, I think cash becomes a real asset class and we hold on to a lot of the assets under management we'​ve accumulated."

In other news Barron'​s also writes about "cash" in "Fidelity Takes a Page Out of Schwab'​s Playbook on Low-​Paying Sweep Accounts. They state, "​One of Fidelity Investments' advantages over rival Charles Schwab could be eroded soon for an important base of clients. Fidelity plans to end the ability of independent financial advisors to use high-​yielding Fidelity money-​market funds as the core sweep account for new nonretirement accounts that they manage."

The article explains, "Starting later this year, Fidelity'​s own core cash option known as FCash will be the only sweep account option for new nonretirement brokerage accounts opened for custody clients. Existing nonretirement accounts in the custody channel are grandfathered in and can keep the money-​market fund option. The change also won'​t affect Fidelity'​s new or existing retail brokerage clients. The FCash rate is now 2.​26%, higher than the Charles Schwab Corp. sweep rate of 0.​45% but half the 5% rate on Fidelity money market funds like Fidelity Government Money Market fund (​SPAXX) that now can be used as a sweep account."

They quote a statement from Fidelity, "We offer a competitive rate through FCash as the default option that many of our clients use today. Fidelity continues to offer an overall best in class experience for custody clients through the combination of our industry leading platform, dedicated client service teams, and comprehensive suite of investment products."

Barron'​s piece comments, "The new Fidelity setup will more closely resemble the situation at Schwab, where clients receive proceeds from trades or income from investments directly into the low-​yielding bank sweep account and then need to make trades to move assets to other investments. This forces Schwab clients to shift money into money-​market funds to earn a higher yield and then back to the sweep account to trade, a cumbersome process."

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