Daily Links Archives: December, 2017

Wells Fargo Securities' Garret Sloan and Vanessa Hubbard write in their latest "Daily Short Stuff," "Last week we commented on the significant week-over-week jump in the SIFMA index.... This week there has been another dramatic increase as the index reset 31 basis points higher yesterday, beating last week's move as the largest weekly climb since the end of 2008. All of the reasons we gave last week for the recent rise are still relevant, most notably end of year supply and liquidity dynamics. In the month of December, the weekly SIFMA index has gained 71 basis points over four short weeks. To put this move into perspective, from January 2017 to the first week in December, the index has climbed just 32 basis points. This 32 basis point move over 49 weeks withstood three Fed fund rate hikes of 25 basis points each. Year-end liquidity constraints are exasperating the upward trajectory in the weekly SIFMA index." They add, "Similarly, but not as dramatic, commercial paper rates have risen quickly over the past few weeks as well mostly attributed to end of year liquidity dynamics. The 5-day moving average for 30 day Tier-1 nonfinancial CP according to Fed data has risen by about 27 basis points in the month of December and the index for Tier-1 financial CP has risen by 24 basis points. Tier-2 CP rates have climbed in aggregate an average of 35 basis points over this same timeframe. Supply has also increased over this period with commercial paper outstanding on a seasonally adjusted basis growing from $1.05 trillion at the beginning of December to $1.08 trillion last week."

Crane Data would like to thank the speakers, sponsors and attendees that supported our conferences in 2017, and we'd like to remind you to mark your calendars and consider attending one (or more) of our 2018 events -- Money Fund University, Bond Fund Symposium, Money Fund Symposium and European Money Fund Symposium. Money market professionals new to the space should take note of next month's "basic training" event, Crane's Money Fund University. Our 8th annual MFU returns to the Boston Hyatt Regency in Boston, Mass., January 18-19, 2018, and is designed for those new to the money market fund industry or those in need of a concentrated refresher on the basics. The event also focuses on hot topics like money market regulations, money fund alternatives, offshore markets, and other recent industry trends. The affordable educational conference (see the agenda here or e-mail us to request our brochure) features a faculty of the money fund industry's top lawyers, strategists, and portfolio managers. Money Fund University offers attendees a 2-day course on money market mutual funds, educating attendees on the history of money funds, the Fed, Rule 2a-7, ratings, rankings, money market instruments such as commercial paper, CDs, CP, ABC, repo, plus portfolio construction. At our upcoming Boston event, we will also take a look at ultra-short bond funds and Europeans MMF regulations. Attendee registration for Crane's Money Fund University is just $500, exhibit space is $2,000, and sponsorship opportunities are $3K, $4K, and $5K. A block of rooms has been reserved at the Hyatt Regency Boston. We'd like to thank our MFU sponsors –- Dreyfus/BNY Mellon CIS, Federated Investors, Fidelity Investments, Fitch Ratings, J.P. Morgan Asset Management, S&P Global, First American Funds/US Bank, J.M. Lummis & Co., and Dechert -- for their support, and we look forward to seeing you in Boston in 3 weeks. E-mail Pete Crane (pete@cranedata.com) for the latest brochure or visit www.moneyfunduniversity.com to register or for more details. We've also released the preliminary agendas for the next Crane's Bond Fund Symposium (March 22-23, 2018, at the Los Angeles Intercontinental), and our "big show," Crane's Money Fund Symposium, which will be held June 25-27, 2018, at the Pittsburgh Westin. Finally, we're also starting to make plans for Crane's European Money Fund Symposium, which will be Sept. 21-22, 2018 at the London Tower Bridge Hilton. We hope to see you in Boston, LA, Pittsburgh or London in 2018!

Last December, we also reviewed the Top 10 Stories of 2016. Today's "Link of the Day reprints the first paragraph of the story from one year ago. We wrote on Dec. 27, 2016, "This past year saw historic changes to money market mutual funds, including a massive shift of assets from Prime funds into Government MMFs, rates inching their way higher after almost a decade of zero yields, and the dawn of floating NAVs for Prime Inst money funds. Money fund managers continued to revamp their money fund lineups, convert funds to Government MMFs, and exit the business in 2016. It was also the second straight year that the Federal Reserve inched rates higher in the last month of the year. We've selected the most important news stories of the past year below, as well as those that represent some of the major trends. Crane Data's Top 10 Stories of 2016 include (in chronological order): "Rolling w/Reform Changes II: Recap of '15 Announcements, '16 Plans" (1/6/16); "Govt MMF Assets Surpass Prime for First Time Ever; Highest in 5 Yrs" (2/26/16); "More Exits: PNC Liquidates, PIMCO Goes Govt; First American Update" (3/1/16); "Money Fund Disclosure Reforms Go Live; Websites Add MNAVs, DLA, WLA" (4/14/16); "Prime Outflows, Spreads, and Liquidity Major Issues at MF Symposium" (6/30/16); "Morgan Stanley Pulls Plug on Prime, Muni Sweeps; ignites on Strikes" (8/15/16); "Big Shift Out of Prime and Muni MMFs Hits $1 Trillion" (9/30/16); "SEC's Money Fund Reforms Go Live; NAVs Float, Emergency Gates, Fees" (10/14/16); "Europe Agrees to Money Fund Reforms: VNAVs, CNAVs and New LVNAVs" (11/17/16); and "Fed Hikes! Second Time in 10 Years; Dec. BFI: End of Bull, USAA Profile (12/15/16).... For more 2016 News (and prior years going back to 2006), see Crane Data's News Archives. We'll continue to provide daily updates on the money fund marketplace in the coming year, so keep reading our News and Link of the Day commentaries."

Money market mutual fund yields surged last week, rising from 0.96% to 1.07%, according to our Crane 100 Money Fund Index, an average of the largest money funds. Our broader Crane Money Fund Average, which currently includes 653 funds, rose from 0.81% to 0.91%, while our Prime Institutional Money Fund Index rose from 1.04% to 1.15%, according to our Money Fund Intelligence Daily. The top-yielding money market funds (see the table on the www.cranedata.com homepage) are now at 1.44% and should break over 1.5% next week as funds continue to digest the latest interest rate hike from the Federal Reserve. (Contact us to see our latest MFI Daily.) Wells Fargo Strategists Garret Sloan and Vanessa Hubbard wrote Friday, "In terms of money market fund rates, we have seen 7-day yields rise across all three major asset categories. According to Crane Data, the average government fund yield is 99 basis points, eleven basis points higher than last week's level. Furthermore, prime funds are yielding an average 7-day yield of 1.15 percent, also eleven basis points higher than last week's level. Lastly, the average 7-day tax-exempt money market fund yield is 70 basis points, 13 basis points higher than last week's level."

A filing for Goldman Sachs Financial Square Tax-Exempt Money Market Fund says, "At a meeting held on December 13, 2017, upon the recommendation of Goldman Sachs Asset Management, L.P., the Board of Trustees (the "Board") of the Goldman Sachs Trust (the "Trust") approved a proposal to liquidate the Goldman Sachs Financial Square Tax-Exempt Money Market Fund (the "Fund"), a series of the Trust. After careful consideration of a number of factors, the Board concluded that it is advisable and in the best interest of the Fund and its shareholders to liquidate the Fund. The Fund will be liquidated on or about January 24, 2018 (the "Liquidation Date"), pursuant to a Plan of Liquidation approved by the Board.... Shares of the Fund will no longer be available for purchase as of the close of business on December 22, 2017, except that existing shareholders of the Fund may continue to purchase shares of the Fund until January 17, 2018.... On or after December 15, 2017, the Fund shall cease its business and may depart from its stated investment objective and policies as it prepares to liquidate and distribute its assets to shareholders. It is anticipated that the Fund's portfolio will be positioned into cash, cash equivalents or other liquid assets on or prior to the Liquidation Date."

Larry Elkin from Palisades Hudson Financial Group wrote a commentary entitled, "For Vanguard Money Fund, The Love Isn't Mutual." He says, "In the more than 30 years in which I have owned mutual fund shares from the Vanguard group, the company has always positioned itself as investor-friendly, and usually with good reason. `So it comes as a pretty big surprise that Vanguard has lined up against many of its biggest institutional customers, and its 'suppliers' of the investments that it purchases on their behalf as well, to protect its own position and investment in the money market fund business. The Securities and Exchange Commission set out to reform money market funds a few years ago. Though the changes the SEC imposed could have been worse, they were still pointless and counterproductive.... Vanguard was not shy about speaking against floating NAVs." But he tells us, "Lawmakers may now be ready to correct the SEC's mistake. The Wall Street Journal recently reported that Rep. Keith Rothfus, R-Pa., has introduced a bill to roll back the 2014 rule. The House Financial Services Committee is set to debate the proposed legislation.... It is less popular, however, with Vanguard and some other big asset-management firms. The offered reasoning: a reluctance to revisit the long fight over money market fund rules and the sunk cost of compliance with the SEC's requirements. As arguments go, it is not especially compelling." Elkin adds, "The motives of companies like Vanguard and BlackRock may be mixed, and they are certainly opaque. It's hard to believe that they think the floating share price is a net benefit to investors.... But they made big investments to comply.... That may explain the sotto-voice reversal. Or maybe it's just a crass way of protecting their large positions in the U.S. money fund market (which they share with traditional powerhouse Fidelity and the emerging leader JPMorgan Chase) because the costs of compliance - notably the mechanisms to constantly calculate prices on the many small positions money market funds must constantly hold and replace as they mature – represent a barrier to entry and growth by competitors. If I had to bet, I’d say both motivations are in play here to some degree." (See our Dec. 15 News, "WSJ on NAV Bill" and The Wall Street Journal's "Bringing Back the Money-Fund Buck?" See also our Dec. 12 Link of the Day, "BofA's Cabana on Bill H.R.2319" and our Nov. 17 News, "AFP Comments on Stable NAV Bill.")

The Wall Street Journal again writes about Chinese money funds and Yu'e Bao again in the new piece, "China Wants Raters to Keep Quiet on Money-Market Fund Sizes." They explain, "A Chinese quasi-regulator told the country's top raters of investment funds to stop publicizing the sizes of money-market mutual funds, in what is being seen as another attempt by Beijing to slow the industry's rapid pace of asset accumulation. The Asset Management Association of China, an industry group supervised by China's securities regulator, the China Securities Regulatory Commission, earlier this month held a meeting with about a dozen representatives from brokerage firms, fund-rating companies and several state-owned newspapers focusing on the securities industry. They were advised to de-emphasize their coverage of money-market mutual funds, according to an attendee." The article adds, "A copy of an internal directive reviewed by The Wall Street Journal told firms that rate and rank investment funds to avoid publishing the asset sizes for money-market funds, which could have the effect of drawing more investors to the largest funds.... Chinese regulators have grown concerned about potential risks from the country's swelling money-market mutual fund industry, whose total assets have surged 54% this year to nearly $1 trillion at the end of September. Many investors have been drawn to the funds's generous yields, which in some cases are close to 4% on an annualized basis.... In October, China’s securities regulator imposed stricter liquidity requirements on funds and deemed some large-scale money-market funds to be "systemically significant." It has also slowed down its approval of new funds. Since October, no new money-market fund has been launched, versus 22 in the third quarter, and 39 in the fourth quarter a year ago, according to data from Wind Information Co."

The Federal Reserve Bank of New York posted a statement entitled, "Reverse repo counterparties list updated." They tell us, "The following are no longer reverse repo counterparties, effective December 18: Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", New York Branch; HSBC Bank USA, National Association; Northern Funds - Money Market Fund; Svenska Handelsbanken AB (publ) New York Branch; and U.S. Bancorp Asset Management - First American Prime Obligations Fund." In other news, Federated Investors' Head of Govt MMFs, Susan Hill writes, "Fed Watch: Another December, another hike." She explains, "For the third December in a row, and amid virtual certainty for policy action, the Federal Reserve voted to raise the fed funds target range by 25 basis points at today's Federal Open Market Committee (FOMC) meeting. This time feels different, though. This time the Fed is no longer moving in spite of the surrounding data, but because of it. And unlike with previous actions, this time the market is a believer in the Fed in the magnitude of future policy moves." Federated's update adds, "The recent and expected strong economic performance kept the Fed's dot plot projections on track for three additional policy moves in 2018 and two in 2019 and nudged up its projections for 2020 to reflect an additional rate hike."

Capital Advisors Group writes "Demystifying Asset-Backed Commercial Paper." It says, "ABCP can still be a good investment choice in large corporate treasury accounts due to the liquidity, flexibility, and yield potential of the asset class. Most traditional multi-seller conduits persevered through the recent financial crisis. Despite low issuance and investor skepticism, the mechanism of ABCP structures improved due to new regulatory measures. Potential investors should carefully review the strength and type of the sponsor, external support, program type, and asset collateral quality prior to investing. The wide range of risks among different programs requires specialized credit knowledge and regular asset collateral monitoring to minimize risk." The piece adds, "Over the last decade, the ABCP market has evolved significantly. Flawed structures disappeared, and surviving programs are fully backed by stronger sponsors or participating liquidity providers. Regulations have enhanced market transparency and require explicit risk retention by sellers, resulting in a more stable market.... [T]he market make-up has tilted substantially toward the more traditional multi-seller structures." CAG concludes, "ABCP can be an appropriate investment vehicle in large corporate treasury accounts due to its liquidity, flexibility, and yield potential. Different risk concerns among programs require dedicated credit expertise and regular asset collateral monitoring. The financial crisis revealed shortcomings of the less creditworthy structures, while the more traditional multi-seller conduits persevered. Despite lower issuance and on-going investor skepticism, the mechanism of ABCP structures improved due to new regulatory measures. While the complexity of various programs may be intimidating, corporate cash investors may benefit from selecting some of the more traditional, conservative, and higher quality ABCP names for their portfolios. Specifically, investors may be well served by investing in traditional, multi-seller, receivables-backed programs associated with banks with strong credit ratings and track records of ABCP expertise."

Money market mutual fund assets, which broke above $2.8 trillion last week, continued to jump in the latest week, as assets of Retail MMFs broke above $1.0 trillion for the first time since April 2010. The Investment Company Institute's latest "Money Market Fund Assets" report shows that year-to-date, MMF assets have increased by $112 billion, or 4.1%. Money fund assets are showing their biggest annual increase since 2009. ICI's numbers also show Prime money market fund assets rose for their 9th week in a row and their 16th week in the past 19. They've now increased by $73.4 billion, or 19.5%, year-to-date. ICI writes, "Total money market fund assets increased by $33.75 billion to $2.84 trillion for the week ended Wednesday, December 13, the Investment Company Institute reported today. Among taxable money market funds, government funds increased by $31.31 billion and prime funds increased by $1.97 billion. Tax-exempt money market funds increased by $479 million." Total Government MMF assets, which include Treasury funds too, stand at $2.249 trillion (79.2% of all money funds), while Total Prime MMFs stand at $461.2 billion (16.2%). Tax Exempt MMFs total $130.6 billion, or 4.6%. They explain, "Assets of retail money market funds increased by $4.58 billion to $1.00 trillion. Among retail funds, government money market fund assets increased by $3.55 billion to $608.94 billion, prime money market fund assets increased by $586 million to $267.08 billion, and tax-exempt fund assets increased by $445 million to $124.69 billion." Retail assets account for over a third of total assets, or 35.2%, and Government Retail assets make up 60.9% of all Retail MMFs. ICI's release adds, "Assets of institutional money market funds increased by $29.17 billion to $1.84 trillion. Among institutional funds, government money market fund assets increased by $27.75 billion to $1.64 trillion, prime money market fund assets increased by $1.38 billion to $194.14 billion, and tax-exempt fund assets increased by $34 million to $5.90 billion." Institutional assets account for 64.8% of all MMF assets, with Government Inst assets making up 89.1% of all Institutional MMFs.

MetLife (which runs stable value funds but not money funds) published a press release entitled, "Post Money Market Fund Reform, Stable Value Viewed as More Attractive." It says, "One year after the U.S. Securities and Exchange Commission's (SEC) money market fund (MMF) reform rules went into effect, there has been meaningful movement away from money market funds as a capital preservation option in defined contribution (DC) plans, with just over half of plan sponsors now offering money market as a capital preservation option (52%), down from 62% in 2015, according to MetLife's 2017 Stable Value Study, released today. Additionally, there has been growth in stable value funds, with 9% of sponsors adding stable value funds to their plans in the past two years. A full report examining these findings is available at www.metlife.com/stablevaluestudy2017." The release explains, "Among plan sponsors who are reasonably familiar with MMF reform, a clear majority (83%) feel that stable value is a more attractive capital preservation option for plan participants than money market funds, as do nearly all DC plan advisors surveyed. Even among plan sponsors familiar with the rules whose plans offer only a money market option, a majority (55%) think stable value is a better option. Despite recognizing the attractiveness of stable value, the Study found that just three in ten plan sponsors overall (31%) evaluated their use of money market funds as their plan's capital preservation option in light of MMF reform. This indicates a continuing need for education about the rule changes and the role stable value funds can play as the capital preservation option within DC plans." It adds, "Indeed, advisors yield a great deal of influence in plan sponsors' selection of capital preservation options, with 73% of sponsors who offer stable value and 67% who offer money market saying their advisors recommended these options to them. However, there is a disconnect between the capital preservation recommendations advisors say they are providing and the actions plan sponsors are taking. According to the findings, 90% of advisors report recommending stable value very often, but 86% say they seldom or never recommend money market funds."

A press release entitled, "Reich & Tang Settles Litigation Dispute with Island Intellectual Property LLC and Double Rock Corporation," dated Dec. 6, says, "Reich & Tang announced today that they have settled all litigation related to their dispute with Island Intellectual Property, LLC and Double Rock Corporation. The parties reached an amicable resolution. While the details of the agreement remain confidential, Reich & Tang will receive a perpetual, non-exclusive license to access the Island IP's intellectual property relating to its FDIC-insured sweep products, including the Demand Deposit Marketplace program." The release adds, "Reich & Tang offers the Demand Deposit Marketplace program which is an automated, daily cash sweep solution that enables investors to achieve millions of dollars in FDIC insurance while maintaining daily liquidity. The program automatically allocates investor deposits among several banks participating in the program, wherein the deposits never exceed the maximum FDIC coverage of $250,000 per bank per tax identification number or other unique identifier." Double Rock Corporation is run by Bruce Bent and Bruce Bent II, former owners of Reserve Management Corp., which advised The Reserve Primary Fund. (See also our Oct. 2, 2015 News, "Schwab Shifting MMF Sweeps to Bank; Double Rock vs. Reich and Tang.")

Bank of America Merrill Lynch published "Legislation Overturning Money Fund Reform Rules in the Works." Written by Mark Cabana and Ralph Axel, it says, "This Tuesday the House Financial Services Committee will consider marking up a bill that could overturn key aspects of last year's money market mutual fund reform.... The bill H.R. 2319 would allow any 2a-7 money market mutual fund to elect the option of using amortized cost or the penny rounding accounting method to maintain a stable $1 per share value. Under the bill, stable value funds would also be exempt from default liquidity fee requirements established by through rule 2a-7, though it is unclear if this would also apply to redemption gate provisions for prime and municipal funds instituted last year. Finally, the legislation would explicitly prohibit any federal government bailout of money market mutual funds." The piece explains, "The legislation is unique in that it has considerable bi-partisan support. The House bill was introduced in May and is sponsored by Keith Rothfus, a Pennsylvania Republican; it has 60 co-sponsors, 36 Republicans and 24 Democrats. A similar bill was introduced in the Senate slightly later in May by Pennsylvania Republican Pat Toomey and it has 4 co-sponsors, three of which are Democrats.... Although the bill's sizeable bi-partisan support and markup this week suggest potential for it to move forward, it is far from certain the bill will ultimately become law. Similar legislation with fewer co-sponsors was put forward in 2015 prior to the implementation of the SEC's 2a-7 rules (H.R. 4216, S.1802) but ultimately didn't go anywhere." BofA adds, "Industry support for the current legislation also appears mixed. A small number of large fund complexes have reportedly been pushing for the legislation likely in hopes of retaining larger management fees while corporations and municipalities have advocated for the bill since they could see lower short-term borrowing costs.... However, other fund complexes appear less supportive of the bill due to regulatory exhaustion and are weary of too much change for end investors. Indeed, the Investment Company Institute testified this November that there are "strongly differing member views" on the bill and could not take a position on the proposed legislation as a result.... If the bill passes, we believe it should lead to tighter LIBOR-OIS spreads, a flatter FRA-OIS curve, and narrower front-end swap spreads. Cash should return to prime funds and accelerate the 55% increase in prime institutional assets over the course of this year."

A press release entitled, "Moody's: Outlook for money market funds is stable as regulatory uncertainty fades" tells us, "The outlook for money market funds globally remains stable, reflecting a settled regulatory backdrop after policy makers in Europe agreed on far-reaching regulations for the industry, says Moody's Investors Service in a report published today. Moody's expects assets under management to remain stable in both Europe and the US. In Europe, many market participants regard the final version of the new EU regulation as workable, dispelling earlier concerns that the new regime might limit managers' ability to offer stable net asset value. In the US, sweeping regulatory reform was met with an effective response in 2017. Government funds will continue to be preferred by institutional cash investors in the new regulatory regime despite growing investor confidence in variable net asset value (VNAV) prime funds. The report, "Money Market Funds -- Global: 2018 outlook stable on fading regulatory uncertainty, supportive credit conditions" is now available on www.moodys.com." Vanessa Robert, VP and Senior Credit Officer, comments, "In Europe, managers will likely hold more liquid assets to avoid triggering new redemption restrictions imposed as part of the new regime." The release adds, "US money market funds will maintain strong credit quality and keep portfolio durations short against a backdrop of tightening monetary policy. Moody's expects risk exposure to be range-bound in 2018 as US prime fund managers refrain from excessive risk trades while institutional investors assess net asset value volatility. US money market funds will also be supported by a strong US economy in 2018, with consumer and business confidence remaining high, industrial activity continuing to broaden and unemployment remaining low. This will cultivate a supportive short-term funding environment."

The Wall Street Journal writes "World's Largest Money-Market Fund Caps Daily Investment." The article tells us, "The world's largest money-market fund will limit the daily amount individuals can invest in it, taking further steps to slow inflows after Chinese regulators raised concerns about its rapid growth. Yu'e Bao, a $235 billion online money-market fund run by an affiliate of Alibaba Group Holding Ltd., will cap daily investments by individuals to 20,000 yuan ($3,022) starting Friday, its manager said in a statement Thursday. The manager, Beijing-based Tianhong Asset Management Co., this past summer imposed a 100,000 yuan limit on the size of new individual accounts." The piece adds, "Tianhong said Thursday it aims to maintain stable operations at the money-market fund and adhere to its purpose as a cash-management vehicle.... Yu'e Bao, whose name means 'leftover treasure' in Chinese, was started four years ago and draws funds from users of Alipay, a popular online and mobile payments network used by scores of Chinese citizens. Thanks in large part to the fund's generous investment yields -- which were 3.99% Thursday on an annualized basis -- its assets have doubled over the past year.... The fund's rapid asset growth has sparked concerns from China's securities regulator, which oversees the country's $1 trillion money-market fund industry. The China Securities Regulatory Commission responded this past fall by tightening liquidity rules and investment guidelines for money-market funds to tame what it called 'unruly growth' in the industry."

A press release entitled, "COR Clearing Selects StoneCastle to Provide Integrated, Insured Cash Sweep Technology Solution," tells us, "StoneCastle Insured Cash Sweep, LLC, a subsidiary of StoneCastle Cash Management, LLC announced today that it has been selected to be the sole provider of cash sweep services for COR Clearing, LLC, an Omaha-based independent full-service settlement clearing firm for correspondent introducing broker-dealers and registered investment advisors (RIAs). The deal, which commenced in early November, expands COR's value to its clients through StoneCastle's nationally recognized FDIC insured cash sweep solution. COR is one of the top seven largest clearing firms in the U.S. ranked by number of broker-dealer correspondents according to InvestmentNews." Jeffory Sime, President & CFO of COR, says, "With StoneCastle, our firm is now equipped with a flexible, open platform supported by superior sweep solutions that can meet our unique business requirements for today and in the future." StoneCastle Cash Management Vice Chairman Steve Rotella adds, "We are proud to be selected by COR to be their cash management partner. The privilege of working with COR underscores our commitment and ability to deliver differentiated solutions that satisfy their clients' demands for safety and yield while providing the relevant tools and support model to profitably attract new business."

A Prospectus Supplement for AB Government Exchange Reserves, Class A, Class B, Class C, Class R, Class K, Class I and Advisor Class shares, and the "Prospectus for AB Government Reserves Portfolio says, "On August 2, 2017, the Board of Directors of AB Bond Fund, Inc. (the "Company") and the Board of Trustees of Exchange Reserves approved the acquisition of the respective assets and assumption of the respective liabilities of each of Government Reserves, a series of the Company, and Exchange Reserves (each, an "Acquired Fund" and together, the "Acquired Funds") by AB Government Money Market Portfolio (the "Acquiring Fund", and together with the Acquired Funds, the "Funds"), a series of AB Fixed-Income Shares, Inc. The Funds pursue identical investment objectives and strategies. At the time of the acquisitions, all of the Acquired Funds' assets and liabilities will be transferred to the Acquiring Fund, and shareholders of the Acquired Funds will receive shares of the same class of the Acquiring Fund, except that Class R shareholders of Exchange Reserves will receive Class I shares of the Acquiring Fund, in exchange for their shares of the Acquired Funds. The Acquired Funds will distribute to shareholders information about the Acquired Funds' acquisitions. The acquisitions do not require approval of either the Acquired Funds' or the Acquiring Fund's shareholders. The acquisitions are expected to occur on or about November 10, 2017." Look for these changes on the pending December issue of our Money Fund Intelligence and MFI XLS.

Today our Link of the Day features Federated Investors' latest "Month in Cash." Deborah Cunningham, Money Markets CIO writes about "Unknowns at the Fed. She says, "Recent headlines about the Federal Reserve describe a central bank with little drama and much consensus. It's a near certainty it will raise rates at its next policy meeting ending on Dec. 13. And most think the economic philosophy of the soon-to-be confirmed new chair, Jerome Powell, toes the line with that of the departing Janet Yellen. He agrees with her outlook and has voted with her every time. The narrative, then, is of a smooth transition: The Fed will look and act just like it has in the last few years. As with an economic report, however, you need to look past the headline into the details.... The other uncertainty is how the tapering of the Fed's massive balance sheet will affect the yield curve -- especially, for cash managers, its short end." The piece adds, "The London interbank offered rate (Libor) rose at a good clip in November, so we know that it is possible to maintain normal operations during the taper. I say normal because it is expected that Libor rises ahead of expectations for a Fed rate hike and in anticipation of year-end trading/supply pressure. We've also had pretty good economic news of late, especially the all-important retail sales for this holiday shopping season, and that can push rates higher. One-month Libor rose from 1.24% to 1.35% and 3-month from 1.38% to 1.48%, both approximately 10 basis-point increases. If as expected the FOMC takes rates to a target range of 1.25% to 1.50% at the coming meeting, cash rates on the money market yield curve should continue to rise. So we have slightly shortened the weighted average maturity (WAM) for our government, municipal and prime funds, but they remain in their target ranges of 30-40 days for govies and munis and 40-50 for prime." See also, The Wall Street Journal's "What to Consider Before You Dash Into Cash."

The Wall Street Journal wrote, "The Return of the Repo: A Market's Postcrisis Comeback." They tell us, "An obscure but vital corner of financial markets that was at the center of the financial crisis is making a comeback. Investors and banks use repurchase agreements, or repos, to borrow large amounts of short-term cash safely, by selling a security and pledging to buy it back at a slightly higher price in the near future. On the other side of that trade, it provides cash-rich asset managers with a safe place to put money. This market played a central role in the crisis, when it froze as investors questioned the safety of the securities being lent. Post-2008 regulations made it more expensive for banks to get involved, further denting a market that relies on these institutions to act as middlemen. Now banks are beginning to return to that role while investors need safe places to store their cash." See also the New York Fed's Liberty Street Economics blog, which wrote, "How Much Is Priced In? Market Expectations for FOMC Rate Hikes from Different Angles." It says, "In contrast to previous posts, our main focus is on analyzing market participants' perceived probability of an increase in the federal funds target range leading up to individual upcoming FOMC meetings rather than expectations for the entire expected path for future policy rates. We focus on the current monetary policy normalization cycle that started with "liftoff" in December 2015 and has included three further rate hikes so far (in December 2016, March 2017, and June 2017)."

The Investment Company Institute's latest "Money Market Fund Assets" report shows that overall money fund assets jumped again in the latest week, showing their biggest increase of the year and reaching their highest level since March 2016. (They are poised to reach their highest levels since December 2010 too with another week or two of gains.) Prime money market funds continued their rebound, rising for the 4th week in a row. Prime MMFs have risen by $37.5 billion, or 8.9%, over the past 19 weeks, and they've risen by $88.7 billion, or 24.0%, year-to-date. ICI writes, "Total money market fund assets increased by $38.12 billion to $2.80 trillion for the eight-day period ended Wednesday, November 29, the Investment Company Institute reported today. Among taxable money market funds, government funds increased by $35.97 billion and prime funds increased by $2.36 billion. Tax-exempt money market funds decreased by $215 million." Total Government MMF assets, which include Treasury funds too, stand at $2.211 trillion (79.0% of all money funds), while Total Prime MMFs stand at $458.4 billion (16.4% of total MMFs). Tax Exempt MMFs total $129.1 billion, or 4.6%. They explain, "Assets of retail money market funds decreased by $1.51 billion to $988.61 billion. Among retail funds, government money market fund assets decreased by $1.93 billion to $599.17 billion, prime money market fund assets increased by $648 million to $266.03 billion, and tax-exempt fund assets decreased by $226 million to $123.41 billion." `Retail assets account for over a third of total assets, or 35.3%, and Government Retail assets make up 60.6% of all Retail MMFs. ICI's release adds, "Assets of institutional money market funds increased by $39.63 billion to $1.81 trillion. Among institutional funds, government money market fund assets increased by $37.90 billion to $1.61 trillion, prime money market fund assets increased by $1.72 billion to $192.38 billion, and tax-exempt fund assets increased by $12 million to $5.69 billion." Institutional assets account for 64.7% of all MMF assets, with Government Inst assets making up 89.1% of all Institutional MMFs.

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