CNBC.com comments that, "Investors are holding near-record levels of cash," explaining, "Investor cash holdings are near record highs, and that could be good news for stocks since there is a wall of money ready to come right back into the market. But the question is this: Will those investors return any time soon, especially with sentiment still so sour and stocks at risk of a major selloff? Total net assets in money market funds rose to $4.814 trillion in the week ended Jan. 4, according to the Investment Company Institute. That eclipses the prior peak of $4.79 trillion during May 2020, back in the earlier months of Covid-19. These sums include money market fund assets held by retail and institutional investors."

The article explains, "The level of assets in these money market funds has come off the highs since the start of the year, but Wall Street has already noticed the cash pile. 'It's a mountain of money!' wrote Bank of America technical research strategist Stephen Suttmeier. 'While this seems contrarian bullish, higher interest rates have made holding cash more attractive.'"

CNBC says, "Investors, worried about earnings and interest rates, may be willing to wait before they put more money into stocks. At the same time, money market funds are actually generating a few percentage points of income for the first time in years. That means investors may be finding a safer way to generate some return while they wait for the right moment to invest. Consider that sweep accounts, where investors hold unused cash balances in their brokerage accounts, can park those amounts in money market mutual funds or money market deposit accounts."

They add, "Cresset Capital's Jack Ablin said the change in behavior toward money markets reflects a bigger shift in the investing environment. 'Cash is no longer trash. It's paying a reasonable interest and so it makes the hurdle higher over which the risky assets have to jump to generate an additional return,' Ablin said."

In other news, money fund yields inched higher again last week, with our Crane 100 Money Fund Index (7-Day Yield) rising two basis points to 4.12% for the week ended Friday, 1/20. Yields rose by 3 basis points the previous week. But they're up from 3.59% on Nov. 30, 2.88% on Oct. 31 and 2.66% on Sept. 30. Yields should jump again following an expected Feb. 1 Fed hike next week. The top-yielding money market funds have broken above 4.50% and should move towards 4.75% in coming weeks. (See our "Highest-Yielding Money Funds" table above).

The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 681), shows a 7-day yield of 4.01%, up 2 bps in the week through Friday. Prime Inst MFs were up 1 bp at 4.26% in the latest week. Government Inst MFs rose by 1 bp to 4.05%. Treasury Inst MFs up 3 bps for the week at 4.02%. Treasury Retail MFs currently yield 3.80%, Government Retail MFs yield 3.77%, and Prime Retail MFs yield 4.08%, Tax-exempt MF 7-day yields were down at 1.82%.

According to Monday's Money Fund Intelligence Daily, with data as of Friday (1/20), 66 funds (815 total) have fallen below the 2.0% yield mark this past week, and many continue to rise over 4.0%; 92 funds yield between 0.00% and 1.99% with $54.9 billion, or 1.1%; 47 funds yield between 2.00% and 2.99% with $76.4 billion, or 1.5%; 284 funds yield between 3.00% and 3.99% ($1.361 trillion, or 26.2%), and 392 funds yield 4.0% or more ($3.698 trillion, or 71.3%).

Our Brokerage Sweep Intelligence Index, an average of FDIC-insured cash options from major brokerages, was unchanged last week at 0.52%. The latest Brokerage Sweep Intelligence, with data as of Jan. 20, shows that there were no changes over the past week. Just 3 of 11 major brokerages still offer rates of 0.01% for balances of $100K (and lower tiers). These include: E*Trade, Merrill Lynch and Morgan Stanley.

Morgan Stanley's recent Q4 earnings discussed sweeps a little. They comment on the earnings call, "Our deposit franchise has grown significantly since 2019 and will continue to support future NII through various cycles. Approximately 90% of our deposits are sourced from our Wealth Management client base. And in the current rising rate environment, our cost of deposits is more efficient than that we experienced in the last rate hiking cycle. Sharon will discuss this important topic and our outlook around NII further in a few minutes."

The CFO explains, "Total deposits rose 6% sequentially to $351 billion driven by continued demand for our savings offering among our Wealth Management clients. We have seen success with our strategy to provide advisers with expanded tools needed to offer their clients choice in varied market environment."

She adds, "Further, the pace of sweep outflows also moderated in the quarter. As a result, we have a favorable deposit mix, largely sourced from our Wealth Management client base with attractive pricing and options to meet our clients' needs."

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