Federated Investors' Deborah Cunningham writes in her latest "Month in Cash: Finally able to catch our breath, "Political brinkmanship dominated the news cycle and impacted stocks and bonds in April, but it was in many ways the first calm month in some time for cash managers. After two Federal Reserve rate hikes in three months, the aftermath of money market fund reform and the always interesting year-​end and quarter-​end, it seemed even the occasional April shower was gentle and warm." She adds on all the political and economic activity, "​It'​s enough to make your head spin, but the Treasury yield curve has had none of that, flattening over April. That led us in the middle of month to shorten our weighted average maturity (​WAM) by five days for our prime funds, bringing it in line with our government funds' WAM of 35-​45 days. There was simply no reason to go further out the curve as relative value just wasn'​t there and spreads had tightened. We still think floaters are attractive, though not as much as in the first quarter of this year. Our purchases of fixed-​rate paper in April were on the short side, as well, mostly in the 2- and 3-​month space. We would rather keep some dry powder for when the curve steepens. And we hope it would be due to the economy, not politics. One final point: assets are slowly flowing back into institutional prime funds after the exodus that took place due to the reform in late 2016. From an industry perspective, total prime assets under management grew 5.​8% in the first-​quarter, according to iMoneyNet. Because of the relatively small asset base, the equivalent dollar growth of only $​21 billion is not terribly impressive. But the inflows show that more institutional investors are now considering prime'​s potential yield advantage over government funds and bank deposits."

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