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The Investment Company Institute released its latest weekly "Money Market Fund Assets" report Thursday, which shows MMFs decreasing in the latest week, following last week's surge. The week following quarter-end and including the long Holiday weekend marks just the 2nd decrease in the last 9 weeks. Money fund assets are up $187 billion, or 4.4%, year-to-date in 2021. Inst MMFs are up $226 billion (8.1%), while Retail MMFs are down $38 billion (-2.5%). Over the past 52 weeks, money fund assets have increased by $11 billion, or 0.3%, with Retail MMFs falling by $51 billion (-3.5%) and Inst MMFs rising by $62 billion (2.6%). We review the latest asset totals below. ICI's "Assets" release says, "Total money market fund assets decreased by $12.64 billion to $4.48 trillion for the week ended Wednesday, April 7.... Among taxable money market funds, government funds decreased by $13.81 billion and prime funds increased by $1.04 billion. Tax-exempt money market funds increased by $126 million." ICI's stats show Institutional MMFs decreasing $7.6 billion and Retail MMFs decreasing $5.1 billion. Total Government MMF assets, including Treasury funds, were $3.873 trillion (86.4% of all money funds), while Total Prime MMFs were $512.2 billion (11.4%). Tax Exempt MMFs totaled $99.4 billion (2.2%). (Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data, so they're almost $400 billion lower than our asset series.) It explains, "Assets of retail money market funds decreased by $5.09 billion to $1.49 trillion. Among retail funds, government money market fund assets decreased by $3.10 billion to $1.15 trillion, prime money market fund assets decreased by $1.80 billion to $250.17 billion, and tax-exempt fund assets decreased by $194 million to $88.07 billion." Retail assets account for just over a third of total assets, or 33.2%, and Government Retail assets make up 77.3% of all Retail MMFs. ICI adds, "Assets of institutional money market funds decreased by $7.56 billion to $3.00 trillion. Among institutional funds, government money market fund assets decreased by $10.71 billion to $2.72 trillion, prime money market fund assets increased by $2.84 billion to $261.99 billion, and tax-exempt fund assets increased by $319 million to $11.37 billion." Institutional assets accounted for 66.8% of all MMF assets, with Government Institutional assets making up 90.9% of all Institutional MMF totals.

A press release entitled, "Vanguard Launches Ultra-Short Bond ETF," tells us, "Vanguard today introduced its first actively managed bond ETF, managed by its in-house fixed income team. Vanguard Ultra-Short Bond ETF (VUSB) offers a low-cost, diversified option for investors seeking income and limited price volatility. The ETF, which is listed on the Chicago Board Options Exchange (Cboe), has an expense ratio of 0.10%, compared with the average expense ratio for ultra-short-term bond ETFs of 0.22%." Kaitlyn Caughlin, Head of Vanguard Portfolio Review Department, comments, "Vanguard Ultra-Short Bond ETF offers the features of an ETF structure for investors seeking an option for anticipated cash needs in the range of 6 to 18 months.... An ultra-short strategy bridges the gap between money market funds offering a stable share price and short-term bond funds, which are meant for longer investment time horizons." The release continues, "Vanguard Ultra-Short Bond ETF offers a similar strategy to that of the $17.5 billion actively managed Vanguard Ultra-Short-Term Bond Fund, which debuted in 2015. Both the fund and the new ETF invest in diversified portfolios consisting of high-quality and, to a lesser extent, medium-quality fixed income securities, including investment-grade credit and government bonds. The ETF provides investors and advisors the flexibility to trade at intraday market prices and invest by buying one share. Vanguard adds, "Like the existing Ultra-Short-Term Bond Fund, the new ETF is co-managed by Samuel C. Martinez, CFA, Arvind Narayanan, CFA, and Daniel Shaykevich."

Please join us for Crane Data's next webinar, "ESG & Social Money Fund Update," which will take place April 22 (Thursday) at 2:00pm Eastern. (Register here for this free event.) For this webinar, Crane Data's Peter Crane and Morgan Stanley Investment Management's Scott Wachs will review recent developments in the ESG and Social money market fund space. We'll cover the history, growth and various types of entrants in the space, including ESG Prime MMFs, Social or Impact Govt MMFs and private labelled share classes, and Wachs will review Morgan Stanley's move into this growing market. The session will last 45 minutes and include a brief update on other major money fund issues. Crane will also give a brief overview of the CraneData.com website and preview a new version of Crane Data's Money Fund Wisdom database query system and product suite. Crane Data recently hosted its Bond Fund Symposium event (online), and pushed back the dates for our next live event, Money Fund Symposium, to Sept. 21-23, 2021 (in Philadelphia). So we've scheduled some webinars over the next several months to keep conference-goers busy. Mark your calendars for another webinar on "Handicapping Money Fund Reforms," which we'll be hosting May 20 (Thurs.) at 2:00pm EDT, and our "Asian Money Fund Symposium," which is scheduled for June 17 (Thurs.) at 10:00am EDT. (Note: Attendees and Crane Data subscribers can access the Powerpoints, recordings and conference materials at the bottom of our "Content" page and see the recent BFS materials via our Bond Fund Symposium 2021 Download Center.)

Bankrate writes about the "Best cash management accounts in April 2021." The piece tells us, "Cash management accounts can often be overlooked as a way to deliver value. If you're on the hunt for a great robo-advisor or online broker, don't forget the extra tangible benefits a good cash management account can provide. As fees decline, brokers and robo-advisors are competing increasingly on feature-rich services to differentiate themselves -- and that means value for you! Many top cash management accounts (CMAs) offer a ton of features and benefits. Some of the most popular or desirable features include: A competitive annual percentage yield (APY); Fee-free ATMs; A checking account; Debit card; No monthly fee; No overdraft fees; Early paycheck direct deposit; 'Round-up' investing; [and] A portfolio line of credit." BankRate explains, "The distinction between a brokerage account and a traditional bank account continues to collapse. Increasingly there are more and more financial institutions that do it all. So in many cases you could actually use the cash management account as a primary bank account even if you don't take advantage of the related investing features at all. And that's a reason to check out brokers and robo-advisors to see how they compete against a traditional bank and whether it might make sense to move at least some of your business there." Bankrate lists the best cash management accounts for the upcoming month as: Wealthfront, Interactive Brokers and Fidelity. The article concludes, "While you might be looking for a traditional bank account or even a popular fintech app, don't overlook the benefits of using a broker or robo-advisor for your cash management account. You often won't have to use the investing features, but they'll be there as your financial life grows."

A new comment letter has been posted to the SEC's "Comments on Request for Comment on Potential Money Market Fund Reform Measures in President's Working Group Report" page. This one, "The Case For Prime Money Market Mutual Fund Liquidity Insurance," was written by Jonathan Hartley (not the FHLB's Jonathan Hartley), a master's student at Harvard's Kennedy School and Visiting Fellow at the Foundation For Research on Equal Opportunity. He writes, "A year after the COVID-19 market meltdown, the first major debate on financial regulation under the Biden administration is shaping up to be about prime-money-market mutual funds. While banks held up well during the pandemic (demonstrating the success of Dodd-Frank capital rules), prime-money-market mutual funds (which invest in short-term government bills and commercial paper) experienced massive redemptions in March 2020. The withdrawals mirrored those during the 2008 financial crisis, despite U.S. money-fund reforms that went into effect in 2016. As with the bank runs of the Great Depression, money-market funds tend to see major redemptions when their net asset values (NAV) 'break the buck' (falling below $1) and investors race to pull their money to avoid taking a hit. In fact, there is a growing consensus that not only did the previous money-market-fund reforms implemented in 2016 fail to prevent runs but they may have made the money-market runs worse by requiring fund companies to impose gates and fees on investors when a money fund's assets decline by 30 percent. The reforms also attempted to get investors more comfortable with small losses by creating a 'floating NAV' (extending NAV quotes to four decimal places instead of two to allow investors to see small fluctuations in returns), but that seems to have had no effect on preventing runs. Now, prime-money funds (which act very much like bank-deposit accounts for institutional cash) face the possibility of being banned altogether." The letter adds, "Of the reforms under consideration, money-fund liquidity insurance is the simplest path, with operational and regulatory ease of allowing prime money funds to function largely the same way they do today but simply requiring them to pay small insurance premiums into an insurance fund. Some may argue that the insurance premiums would make prime money funds less viable. It would be essential to find the happy medium that's sufficiently small not to be disruptive while still paying for potential liquidity insurance needs during times of financial stress. Others might also argue that FDIC-like insurance might create moral hazard, that is, To what degree are you incentivizing money-market funds to invest in riskier securities by insuring losses? I would argue that if there are any moral-hazard risks, they already exist in the sense that the Fed money-market fund-liquidity programs of 2008 and 2020 are already providing de facto insurance. Despite the growth of administrative bloat in Washington over the past hundred years, the FDIC has been one of the most effective regulatory agencies, preventing bank runs that were all too common before the Banking Act of 1933. Likewise, a money-fund insurance program could foster more financial stability by preventing money-fund runs (which seem to have become a decadal event) while preserving an effective vehicle to provide short-term lending that supports economic growth." (This comment also appeared as "Treat Money-Market Funds Like Banks" in the National Review recently.)

A Prospectus Supplement filing for Transamerica Government Money Market tells us, "Effective at the close of business on March 31, 2021, Transamerica Government Money Market will be closed to most new investors. The following investors may continue to purchase Fund shares after the close date: existing Fund investors, asset allocation funds and other investment products in which the Fund is currently an underlying investment option, retirement plans in which the Fund is a plan option, and any plan that is or becomes a part of a multiple plan exchange recordkeeping platform that includes the Fund as a plan option. The Fund will remain closed until further notice. The Fund reserves the right to modify the foregoing terms of the closure at any time and to accept or reject any investment for any reason." It's unclear whether this indicates that a liquidation is pending or whether it's a temporary measure due to extremely low interested rates.

Reuters writes, "Fed's Quarles says regulators to lay out money market fund reforms in July." The brief explains, "A group of financial regulators will lay out recommendations in July to improve the resilience of money market funds and minimize the chance they will need government support in the future, Federal Reserve Vice Chair Randal Quarles said on Tuesday. Quarles, in his capacity as head of the Financial Stability Board, said the group will focus on the relationship between money market funds and the short-term funding market, particularly the commercial paper market, after a liquidity crunch led to a run on those funds last March that necessitated government intervention." In a speech yesterday entitled, "The FSB in 2021: Addressing Financial Stability Challenges in an Age of Interconnectedness, Innovation and Change," Quarles says, "[A] holistic Review underscored how vulnerabilities in the financial system amplified the economic shocks of the COVID event. In particular, it highlighted the dependence of the system on readily available liquidity, and vulnerabilities if liquidity strains emerge -- in money market mutual funds (MMFs) and open-end funds, through margin calls and in core bond markets. Importantly, it provides a high-level view on how these parts of the financial ecosystem operate and transmit risk while under stress." He explains, "In my view, one of the most significant findings relates to MMFs. The Holistic Review documented how the extremely high demand for liquidity, combined with a flight-to-safety, triggered a 'dash for cash' that hit institutional prime money market funds particularly hard. In the US, prime MMFs publicly offered to institutional investors had outflows of roughly $100 billion, or 30 percent of the funds' assets, over two weeks in mid-March. This was a faster run, in terms of the percentage of fund assets redeemed, than during the turmoil in September 2008. Similar patterns were also seen in Europe, particularly for US dollar-denominated MMFs. Other funds that are active in short-term funding markets, such as ultrashort bond funds, also saw unprecedented outflows in March. The March market turmoil is the second time in roughly a decade that we have witnessed destabilizing runs on MMFs. More concerning this time, however, is that we had taken steps between these events precisely to reduce the likelihood of such runs." Quarles adds, "The FSB will publish a report in July for consultation that will set out consequential policy proposals to improve MMF resilience. The proposals should also reduce the likelihood that government interventions and taxpayer support will be needed to halt future MMF runs. This work will also consider the relationship between MMFs and short-term funding markets, with a particular focus on commercial paper and certificate of deposit markets and the impact of dealer behavior."

Money market fund yields continue to bottom out just above zero, as our flagship Crane 100 remained unchanged in the last week to 0.02%. The Crane 100 Money Fund Index fell below the 1.0% level roughly a year ago in mid-March, and below the 0.5% level in late March. It is down from 1.46% at the start of 2020 and down from 2.23% at the beginning of 2019. Three-quarters of all money funds and over half of MMF assets have since landed on the zero yield floor, though many continue to show some yield. According to our Money Fund Intelligence Daily, as of Friday, 3/26, 634 funds (out of 836 total) yield 0.00% or 0.01% with assets of $2.768 trillion, or 56.7% of the total $4.882 trillion. There are 194 funds yielding between 0.02% and 0.10%, totaling $2.018 trillion, or 41.3% of assets; 8 funds yielded between 0.11% and 0.20% with $96.0 billion, or 2.0% of assets. No funds yield over 0.18%. The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 672), shows a 7-day yield of 0.02%, unchanged in the week through Friday, 3/26. The Crane Money Fund Average is down 45 bps from 0.47%, a year ago at beginning of April. Prime Inst MFs were unchanged at 0.04% in the latest week, Government Inst MFs were flat at 0.02%, and Treasury Inst MFs were unchanged at 0.01%. Treasury Retail MFs currently yield 0.01%, (unchanged in the last week), Government Retail MFs also yield 0.01% (unchanged in the last week), and Prime Retail MFs yield 0.02% (unchanged). Tax-exempt MF 7-day yields were also unchanged at 0.01%. (Let us know if you'd like to see our latest MFI Daily.) The latest Brokerage Sweep Intelligence, with data as of March 26, showed no changes in the last week. All major brokerages, with the exception of RW Baird, offer rates of 0.01% for balances of $100K. No brokerage sweep rates or money fund yields have gone negative to date, but this could become a distinct possibility in coming weeks or months. Crane's Brokerage Sweep Index has been flat for the last 49 weeks at 0.01% (for balances of $100K). Ameriprise, E*Trade, Fidelity, Merrill Lynch, Morgan Stanley, Raymond James, Schwab, TD Ameritrade, UBS and Wells Fargo all currently have rates of 0.01% for balances at the $100K tier level (and almost every other tier too). RW Baird offers a rate of 0.02% for its balances of $100K.

A press release entitled, "ESMA Consults on the Framework for EU Money Market Funds," tells us, "The European Securities and Markets Authority (ESMA), the EU's securities markets regulator, today launches a consultation on potential reforms of the EU Money Market Funds Regulation (MMFR). ESMA aims to review the stress experienced by MMFs during the March 2020 crisis and assess the roles played by markets, investors and regulation, and proposes potential reforms." The release elaborates, "ESMA sets out four types of potential reforms for MMFs: Reforms targeting the liability side of MMFs -- such as decoupling regulatory thresholds from suspensions/gates to limit liquidity stress, and to require MMF managers to use liquidity management tools such as swing pricing; Reforms targeting the asset side of MMFs by e.g. reviewing requirements around liquidity buffers and their use; Reforms targeting both the liability and asset side of MMFs by reviewing the status of certain types of MMFs such as stable Net Asset Value (NAV) MMFs and Low Volatility Net Asset Value (LVNAV); and Reforms that are external to MMFs themselves by assessing whether the role of sponsor support should be modified. In addition, ESMA is also gathering feedback from stakeholders on other potential changes, particularly linked to ratings, disclosure and stress testing." Steven Maijoor, ESMA Chair, comments, "The COVID-19 crisis has been challenging for MMFs. A number of EU MMFs faced significant liquidity issues during March 2020, a period of acute stress, with large redemptions from investors and a severe deterioration in the liquidity of money market instruments.... ESMA is seeking input from stakeholders on potential reforms of the EU MMF regulatory framework, in light of the lessons learnt from the difficulties faced by MMFs last March, with the aim of providing feedback to the Commission ahead of the scheduled legislative review." The release explains, "Responses to this consultations are welcome by 30 June 2021. ESMA will consider the feedback it received to this consultation in Q2 2021 and expects to publish its opinion on the review of the MMF Regulation in the second half of 2021." Finally, it adds, "Article 46 of the MMF Regulation (MMFR), requires the EC to review, following consultations with ESMA, the adequacy of the MMFR from a prudential and economic point of view by 21 July 2022."

Mutual fund technology firm Calastone published a blog entitled, "Money Market Services in Person" featuring Paul Przybylski, Global Head of Product Strategy and Client Service at JP Morgan Asset Management. He comments, "The Covid-19 crisis was unprecedented, and the true global impact is still basically unknown. The speed of the markets' reaction was very rapid and the lessons we learned in 2008 were simply not applicable. The crisis wasn't due to a liquidity or credit event specifically tied to money market funds -- all assets were impacted as banks and investors alike focused on reducing risk. When that happens, they preserve liquidity, which leads to a drop in trading liquidity.... For funds, that meant they struggled to sell assets and raise cash for redemptions. We saw significant gaps between bid and offer prices -- if there was one to begin with -- and obviously the central banks intervened very quickly and put a floor under markets. For prime funds, the volatility began around March 12th and peaked in the week of March 16th. Once the Fed announced the Money Market Mutual Fund Liquidity Facility (MMLF) towards the end of that week we saw a very different dynamic. By April 1, prime MMFs all had neutral to positive flows, and they increased through April." On the topic of money market fund innovation, Przybylski explains, "I think after the Covid crisis treasury functions are being looked at even more as a value and revenue generating area. They need technology at their fingertips that gives them the ability to easily identify where all their liquidity resides and how to optimize that liquidity. Clients are looking for tools that give them instant access to their demand deposit accounts (DDAs) and allow them to optimize those DDAs, move money and segment the cash between three months, six months, nine months and 12 months usage. Tools that give them that level of efficiency are going to win out over those that are just traditional trading platforms." He comments, "The integrations are also key. These can't be standalone products any more -- they have to be integrated into the ecosystem of the treasurer, whether that's connected directly to the treasury management system (TMS) or through a deeper integration where they reside within the core TMS. Features like this are going to be standard in the next one to three years -- table-stakes, as we like to call them." Przybylski adds, "We do expect regulation to come to the credit space, specifically. You're seeing credit fund sponsors begin to phase out their offerings. Two retail players, Vanguard and Fidelity, are doing it possibly because they're looking at positioning those funds to hold more government-like securities. It's going to be interesting when it happens. Given we're about 30% of the market in the credit space, we do think it's a value-add offering for clients to have access to more than just government MMFs."

The Federal Reserve Bank of New York's Liberty Street Economics blog asks, "Did Dealers Fail to Make Markets during the Pandemic?" They write, "In March 2020, as the COVID-19 pandemic disrupted a range of financial markets, the ability of dealers to maintain liquid conditions in these markets was questioned. Reflecting these concerns, authorities took numerous steps, including providing regulatory relief to dealers. In this post, we examine liquidity provision by dealers in several financial markets during the pandemic: how much was provided, possible causes of any shortfalls, and the effects of the Federal Reserve's actions." The piece tells us, "Dealers support market liquidity by intermediating customer trades -- for example, by taking customer sell orders into inventory when buyers are absent. Hence, changes in the size of their inventory positions can indicate whether dealers are performing intermediation activities. The chart below shows that primary dealer net positions in commercial paper (CP) and investment-grade (IG) corporate bonds ... fall starting the week of February 26 and bottom out in the week of March 18 (for CP) and March 25 (for IG bonds) before recovering in April. By comparison, dealer net positions in U.S. Treasury bills, Treasury notes and bonds, and agency residential mortgage-backed securities (RMBS) ... are generally higher or similar in March as compared to their prior levels–although net positions in bills fell sharply in the week of March 25. Overall, dealers cut inventory in some markets but increased or maintained it in others in March." It adds, "In CP and corporate bond markets, limited dealer intermediation and heightened market illiquidity went hand in hand, and improved only after the Fed's actions. For example, the Commercial Paper Funding Facility (CPFF) was announced on March 17, and dealer net positions recovered the week of March 25. Similarly, two corporate bond facilities were announced on March 23 to support IG bonds. Liquidity in the corporate bond market improved on the announcement, and dealer net positions recovered in the week of April 1. In contrast, even as dealers maintained intermediation, market dysfunction continued apace in U.S. Treasury and agency MBS markets in March 2020. What accounts for this disjunction? One possibility is that the amount of liquidity provided by dealers was insufficient to meet the volume of customer selling, as shown for the agency MBS markets. Ultimately, the Fed's massive purchases of Treasury and agency MBS securities helped to accommodate the selling pressure."

A release from the Investment Company Institute tells us that, "Retirement Assets Total $34.9 Trillion in Fourth Quarter 2020." It includes data tables showing that money market funds held in retirement accounts jumped to $574 billion in total, or 13% of the total $4.333 trillion in money funds. MMFs represent 5.2% of the total $11.118 trillion of mutual funds in retirement accounts. The release says, "Total US retirement assets were $34.9 trillion as of December 31, 2020, up 7.5 percent from September and up 9.3 percent for the year. Retirement assets accounted for 33 percent of all household financial assets in the United States at the end of December 2020. Assets in individual retirement accounts (IRAs) totaled $12.2 trillion at the end of the fourth quarter of 2020, an increase of 9.1 percent from the end of the third quarter 2020. Defined contribution (DC) plan assets were $9.6 trillion at the end of the fourth quarter, up 6.8 percent from September 30, 2020. Government defined benefit (DB) plans—including federal, state, and local government plans—held $7.1 trillion in assets as of the end of December 2020, a 7.6 percent increase from the end of September 2020. Private-sector DB plans held $3.4 trillion in assets at the end of the fourth quarter of 2020, and annuity reserves outside of retirement accounts accounted for another $2.5 trillion." The ICI tables also show money funds accounting for $391 billion, or 7%, of the $5.454 trillion in IRA mutual fund assets and $282 billion, or 3%, of the $5.665 trillion in defined contribution plan holdings.

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