Daily Links Archives: April, 2018

Barron's writes "No Volatility Here: Cash Makes a Comeback." The article tells us, "Rising interest rates are punishing bonds and causing stocks to teeter. But cash investments -- a misnomer until recently -- haven't looked so good in years. Yields on money-market funds and other cash sanctuaries are approaching 2%, levels not seen in almost a decade." Barron's quotes Federated Investors' Deborah Cunningham, "Cash is an asset class once again." The piece explains, "Cash's comeback has been a long time coming. From 2009-2016, the Fed held short-term rates near zero, forcing money funds to waive management fees just to maintain yields of 1/100th of one percent (0.01%). Online banks, hungry for deposits, filled the void with higher yields on savings. That left money funds touting safety and liquidity as their only selling points. But as the Fed has hiked rates -- five times since late 2016 -- money-market yields have rebounded. The average is 1.5%, almost a point above the level a year ago, according to Crane Data. Taxable funds now have a 0.50 percentage point yield edge over bank deposits, reports iMoneyNet. Investors have noticed -- money-fund assets went from $2.6 trillion to $2.8 trillion over the past year." They quote Crane Data's Peter Crane, "Money funds were on a starvation diet with yields at zero percent.... Rate increases have given them a stay of execution." Barron's adds, "Yet yields on money-market mutual funds (which aren't insured) should catch up to online banks' soon. The funds hold debt maturing in a few days or weeks, enabling them to harvest higher yields rapidly as rates rise. With two rate hikes on tap -- likely in June and September or December -- yields should reach 2%, says Crane. Some institutional-class funds (which have high minimum investments and floating net asset values) already have hit that mark.... Perhaps the best argument for bolstering liquid, short-term savings and bond accounts now: The stock-market rally is extremely aged. When the bear strides back onto Wall Street, bargain hunters with cash will be king."

Federated Investors released its "First Quarter Earnings late yesterday, and the money fund manager hosts its earnings call this morning at 9am. (Watch for highlights in Crane Data's News on Monday, and click here for info on the call.) The earnings release says, "Federated Investors, Inc. (NYSE: FII), one of the nation's largest investment managers, today reported earnings per diluted share (EPS) of $0.60 for Q1 2018, up 22 percent from $0.49 for the same quarter last year on net income of $60.3 million for Q1 2018, compared to $49.6 million for Q1 2017. Federated's total managed assets were $392.2 billion at March 31, 2018, up $30.5 billion or 8 percent from $361.7 billion at March 31, 2017 and down $5.4 billion or 1 percent from $397.6 billion at Dec. 31, 2017." President & CEO J. Christopher Donahue, who will keynote Crane' Money Fund Symposium June 25 in Pittsburgh, says, "In fixed-income, investors sought a variety of investment solutions that ranged from our stalwart Total Return Bond Fund to shorter-duration strategies, in which investments' interest rates can reset as benchmark rates continue to rise." The release adds, "Federated's fixed-income assets were $62.3 billion at March 31, 2018, up $10.5 billion or 20 percent from $51.8 billion at March 31, 2017 and down $1.9 billion or 3 percent from $64.2 billion at Dec. 31, 2017. Top-selling fixed-income funds during Q1 2018 on a net basis included Federated Ultrashort Bond Fund, Federated Total Return Bond Fund, Federated Short-Term Income Fund, Federated Floating Rate Strategic Income Fund and Federated U.S. Government Securities Fund: 1-3 Years. Money market assets were $265.9 billion at March 31, 2018, up $20.7 billion or 8 percent from $245.2 billion at March 31, 2017 and up $0.7 billion from $265.2 billion at Dec. 31, 2017. Money market fund assets were $182.4 billion at March 31, 2018, up $7.2 billion or 4 percent from $175.2 billion at March 31, 2017 and down $3.1 billion or 2 percent from $185.5 billion at Dec. 31, 2017. Federated's money market separate account assets were $83.5 billion at March 31, 2018, up $13.5 billion or 19 percent from $70.0 billion at March 31, 2017 and up $3.8 billion or 5 percent from $79.7 billion at Dec. 31, 2017."

Charles Schwab's Colin Martin recently posted a blog entitled, "Short-Term Investment Options for a Rising-Rate, Volatile-Market Environment." He tells us, "Now that short-term interest rates have moved up, investors can get better returns on money invested for near-term needs than they could during the era of zero interest rates from 2008-2015. Moreover, the recent increase in stock market volatility may make these relatively stable investments even more attractive to investors seeking to avoid sharp ups and downs. We'll discuss some investments that allow investors to take advantage of higher interest rates without taking on too much interest rate risk or credit risk." The piece explains, "Most bond yields have risen -- but have you been rewarded with higher income payments? Just because short-term bond yields have risen over the past few years doesn't mean that all short-term investments have rewarded investors with a reciprocal rise in yield.... [T]he slope of the yield curve -- the difference between short- and long-term yields -- has flattened lately.... Short-term rates have risen by a lot more than long-term rates over the past year. To get a yield above 2% today, for example, investors can simply invest in a 1-year Treasury bill. Just one year ago, you'd need to invest in Treasury security with seven years to maturity to get a similar yield. We think this is important -- you don't need to take on as much risk to get higher yields today compared to the past few years." The blog adds, "Let's take a look at some investments that may offer higher yields today." These include: Ultrashort bonds, Short-term bonds, Short-term municipal bonds, and Investment-grade floating-rate notes.

Wells Fargo Securities writes in its "Daily Short Stuff," "Bill Paydowns in April, But Supply Remains Extremely Elevated." Author Garret Sloan says, "Despite the pay downs in the bills market, we are still in a period of elevated bill supply. March month-end showed that bills outstanding sat at $2.284 trillion, the highest outright level of bills on record. In November 2008 the total amount of bills outstanding reached a peak of $1.998 trillion. After accounting for the April bill paydowns, bill market supply will sit at $2.164 trillion, or $166 billion above the level of bills outstanding at the peak of the financial crisis. This should provide some context into why bill yields are trading so high relative to OIS and the Fed RRP, despite the recent paydowns. In fact, the current 3-month T-Bill/OIS basis has reversed course and is trading back in positive territory. The basis is currently trading at +5.5 basis points, which is 3.2 basis points shy of its March peak." He explains, "Typically the T-Bill/OIS basis trades negative, and until February of this year it had not traded positively since February 2009, right around the previous peak in T-Bill supply, so the current positive momentum in T-Bills vs. OIS may explain just how much of the LIBOR-OIS story is being directed by the Bills market. If the long-term average 3-month T-Bill/OIS basis is -10 basis points and the current basis is +5.5 basis points we might reasonably attribute approximately 15 basis points of the widening in LIBOR/OIS to T-bills. The crowding out effect of additional T-bill supply, coupled with the increase in CP supply and repatriation-related demand reductions from worldwide credit investors may be attributed with the remaining 15-20 basis points of widening."

Xinhua news writes that "China's largest money market fund Yu'ebao sees slowest asset growth in Q1." They tell us, "China's largest money market fund Yu'ebao had its slowest Q1 asset growth in the first quarter of this year. The online money market fund, managed by Tianhong Asset Management Co., Ltd, a subsidiary of Alibaba's Ant Financial Services Group, saw its assets grow 6.9 percent in the first three months of 2018, the slowest Q1 expansion since its establishment in 2013." The piece continues, "Yu'ebao had about 1.689 trillion yuan (about 268.2 billion U.S. dollars) under management by the end of March. The money market fund has introduced a string of purchase limits since the end of 2017 to guard against financial risks, which might be a major drag on its assets growth pace. Yu'ebao had 474 million users by the end of 2017, with more than 99 percent of them individual investors holding an average of 3,329.57 yuan in each account."

Invesco blogs "What's up with US dollar LIBOR?" They tell us, "The last time we wrote about the US dollar London lnterbank Offered Rate (LIBOR) was in 2016, when the spread between LIBOR and the Overnight Indexed Swap (OIS) rate increased due to market dislocations leading up to US money market fund reform. Now in early 2018, we have seen LIBOR rates rise and LIBOR-OIS spreads widen again, causing us to ask the same question -- what's up with LIBOR? In our opinion, there are three factors driving LIBOR rates higher: The US Federal Reserve (Fed) has continued to push monetary policy rates higher with its latest hike in March. Demand has fallen for short-term credit instruments due to potential corporate repatriation following last year's tax reform. Given projected budget deficits, markets expect an abundant supply of US Treasury bills (T-bills) through 2019." The piece asks, "What is LIBOR?" Author Rob Corner tells us, "LIBOR is a benchmark rate that some of the world's leading banks charge each other for short-term, unsecured loans. Globally, it is considered a primary benchmark for short-term interest rates. LIBOR is also used as a barometer to gauge market expectations of future central bank policy and for measuring the health of the banking system." He adds, "Invesco Fixed Income views the increase in LIBOR and the jump in the LIBOR-OIS spread as an opportunity. We believe short-term investment strategies may stand to benefit from higher LIBOR rates and a wider LIBOR-OIS spread. First, prime money market funds (which rely on short-term funding markets) have already benefited as yields of these types of funds have increased.... Second, ultrashort bond funds and exchange traded funds (ETFs) that invest in LIBOR-based floating-rate securities could benefit as coupons potentially reset higher. Additionally, short-term products such as securities lending cash reinvestment pools, local government investment pools, offshore US dollar money market funds and certain separate accounts could stand to benefit."

Cavanal Hill Investments' Senior Tax-Free Portfolio Manager Rich Williams talks in a new video about the manager's new Ultra Short Tax-Free Income Fund. He says, "[We're] excited to launch the ultra short tax free income fund for a couple of reasons: First, we're finally in the right environment where we are seeing some attractive yields in the short end of the maturity curve. We've been in a low rate environment for several years. But the Federal Reserve has raised rates 3 times in 2017, and they've indicated that they'd like to ... continue going into the next year. So it will be nice to have some yields there. Secondly, [there's been] a lot of talk around tax reform of late, and it looks like the main focus for tax reform is going to be on the corporate side. They're leaving the individual rates alone for the most part, with a little bit of tweaking. But what that means for municipal investors, especially those in the higher tax brackets, is municipal yields look very attractive on a tax equivalent basis. Based on the right environment and based on the tax reform situation, we think the timing is right to launch the Ultra Short Tax-Free Fund." He adds, "The basic concept for the new fund will be focusing on variable rate instruments, as well as fixed rate. The variable rate demand notes, the nice thing about those is that they have a reset every week, and they also have weekly liquidity. So those will be able to capture any rate increases if the Fed does raise rates in 2018. They'll be able to capture the incremental yield there, and then on the fixed rate side we'll be looking for opportunities in the 6 to 9 to 12 month range where we can lock in some really nice yields and that would take some of the cyclicality out that the variable rate demand notes have.... We're very excited about the new fund, and we think it's especially attractive for those investors not only in the higher tax brackets but also for those concerned about a rising rate environment."

Bloomberg writes the odd, "Money-Market Roller Coaster Must Contend With Stock Trades." It says, "Thank the U.S. stock swoon for easing pressure on a key corner of besieged global money markets -- the cross-currency basis. It may even help flip the axis for dollar premiums around the world, pushing them into positive territory. A drop in investor demand for equities may have been a catalyst for the recent narrowing in cross-currency basis -- a part of the cost of hedging for foreign investors buying U.S. assets. That dynamic has helped offer some relief as short-term dollar interest rates have risen to crisis-era highs, according to one Wall Street money-market guru." The piece quotes Credit Suisse's Zoltan Pozsar, "We are witnessing the first major example of how an equity selloff impacts basis markets [since global bank-capital rules were tightened].... `Every segment of the global dollar funding market is in flux." Bloomberg adds, "Expecting strong client interest for stock exposure, investment banks had prepared sizable funding for their equity desks, the strategist explained. Yet demand slumped after the February selloff and the glut of cash was quickly shunted to currency desks and out into the market. That accentuated the tightening in the cross-currency basis, the premium investors pay to procure dollars, he said. "`When equity markets fall and client interest to go long equity futures wanes, banks' equity futures desks get overfunded on the margin, which spills over into FX swap market," wrote Pozsar."

As we first reported in our latest Bond Fund Intelligence newsletter, a press release called "PGIM Investments enters the active ETF market with fixed income strategy" announces, "PGIM Investments has entered the exchange-traded fund space with the launch of the PGIM Ultra Short Bond ETF (NYSE ARCA:PULS). The fund is a diversified, fixed income, actively managed ETF that aims to deliver current income and capital appreciation with a focus on managing risk. PGIM Investments is the worldwide distributor of retail products for PGIM, Inc., the $1 trillion global investment management businesses of Prudential Financial, Inc. (NYSE:PRU) -- a top 10 asset manager globally." The release explains, "The first fund on the platform, the PGIM Ultra Short Bond ETF, is priced at 15 bps, making it among the most competitively priced active fixed income ETFs currently available, according to Morningstar data as of Feb. 28. Its risk-managed and short duration approach is designed to help investors hedge against rising rates and enhance or diversify a cash management strategy.... The fund will invest primarily in a portfolio of investment grade, U.S. dollar-denominated short-term fixed, variable and floating-rate debt instruments. PGIM Ultra Short Bond ETF is sub-advised by PGIM Fixed Income, one of the largest global fixed income managers in the world, with more than $700 billion in assets under management as of Dec. 31, 2017. The fund's senior portfolio managers, Joseph Dā€™Angelo and Douglas G. Smith."

A press release entitled, "Fitch Assigns First-Time Rating to PFM Funds Government Select Series," tells us, "Fitch Ratings has assigned a 'AAAmmf' rating to the PFM Funds Government Select Series, managed by PFM Asset Management LLC.... The 'AAAmmf' rating assignment reflects: The fund's overall credit quality and diversification; Low exposure to interest rate and spread risks. Holdings of daily and weekly liquid assets consistent with shareholder profile and concentration; Maturity profile consistent with Fitch's 'AAAmmf' rating criteria; and, The capabilities and resources of PFM Asset Management LLC." The release says, "The fund seeks to maintain a diversified, high credit quality portfolio consistent with Fitch's criteria for 'AAAmmf' rated money market funds (MMFs), by investing in highly rated securities with limited exposure to individual issuers. The fund has a policy of investing at least 99.5% of its assets in cash, U.S. government securities (including securities issued or guaranteed by the U.S. government or its agencies or instrumentalities) and/or repurchase agreements that are collateralized fully.... The investment objective for this fund is to provide high current income consistent with stability, safety of principal, and liquidity, and to maintain a stable net asset value of $1.00 per share." Fitch adds, "The fund's investment adviser is PFM Asset Management LLC, based in Harrisburg, PA. PFM Asset Management LLC specializes in high quality short- and intermediate-duration investment strategies within the institutional public sector. As of Dec. 31, 2017, the firm had approximately $123 billion in total assets, including $81 billion discretionary assets under management and $42 billion in assets under advisement.... Fitch views PFM Asset Management LLC's investment advisory capabilities, financial and resource commitments, operational controls, corporate governance and compliance procedures as consistent with the 'AAAmmf' rating assigned to the funds."

On Wednesday, the New England Association for Financial Professionals (AFP) starts its 33rd Annual Sources of Education Conference at the Seaport World Trade Center in Boston (April 18-20). Crane Data's Peter Crane will speak Wednesday morning on "Money Market Funds: Past, Present & Future." This session will be "geared towards corporate cash managers, and other professionals dealing with money markets. Money fund expert Peter Crane will review past problems in money market investments, the current state of yields, asset flows and cash options, and the outlook for money fund products and investments going forward. Attendees will learn how to maximize their yield and avoid potential risks in a rising rate environment, whether prime money funds are still (or again) a valid investment alternative for cash, and what higher-yielding (and higher risk) products and strategies investors are exploring in 2018." NEAFP will also feature a number of other sessions involving money funds and cash investments. These include: "Comparing New Investment Alternatives: Products and Strategies," with Anthony Carfang of Treasury Strategies and Ian Rasmussen of Fitch Ratings, "Navigating the New Treasury Investing Environment" with Kirk Black of BNY Mellon, "Seeking to Optimize Corporate Liquidity," with Jamie Cortas of Dell and Kerry Pope of Fidelity Investments, "How Exchange Traded Funds Work & Why Treasurers Should Care," with Will Goldthwait of State Street Global Advisors, and "Short Corporate Ladders as an Effective Alternative for Corporate Treasurers," with Andrew Goodall of Eaton Vance. Crane Data will also be exhibiting along with a number of money fund providers. We hope to see some of you in Boston later this week at the show! Note: We'll also be speaking, exhibiting and/or attending the following upcoming shows: SIFMA's AMA Roundtable (Phoeniz, May 6-8), the ICI General Membership Meeting (Washington, May 23), the New York Cash Exchange (New York City, May 30-31), and of course our big Money Fund Symposium (Pittsburgh, June 25-27). (Contact us if you'd like more details on any of these.)

Money market mutual fund assets dipped after inching higher for 3 weeks in a row. The Investment Company Institute's latest "Money Market Fund Assets" report shows that year-to-date, MMF assets have decreased by $15 billion, or -0.5%. Over 52 weeks they've increased by $183 billion, or 6.9%. ICI's numbers also show Prime money market fund assets increasing; they've risen in 4 out of the past 5 weeks, while Govt MMF assets fell. ICI writes, "Total money market fund assets decreased by $5.29 billion to $2.83 trillion for the week ended Wednesday, April 11, the Investment Company Institute reported today. Among taxable money market funds, government funds decreased by $7.86 billion and prime funds increased by $3.50 billion. Tax-exempt money market funds decreased by $934 million." Total Government MMF assets, which include Treasury funds too, stand at $2.236 trillion (79.1% of all money funds), while Total Prime MMFs stand at $458.1 billion (16.2%). Tax Exempt MMFs total $132.4 billion, or 4.7%. They explain, "Assets of retail money market funds decreased by $2.89 billion to $1.01 trillion. Among retail funds, government money market fund assets decreased by $811 million to $623.54 billion, prime money market fund assets decreased by $1.04 billion to $262.06 billion, and tax-exempt fund assets decreased by $1.04 billion to $125.69 billion." Retail assets account for over a third of total assets, or 35.8%, and Government Retail assets make up 61.7% of all Retail MMFs. ICI's release adds, "Assets of institutional money market funds decreased by $2.40 billion to $1.82 trillion. Among institutional funds, government money market fund assets decreased by $7.05 billion to $1.61 trillion, prime money market fund assets increased by $4.54 billion to $196.01 billion, and tax-exempt fund assets increased by $105 million to $6.72 billion." Institutional assets account for 64.2% of all MMF assets, with Government Inst assets making up 89.8% of all Institutional MMFs.

Wells Fargo Money Market Funds' latest "Portfolio Manager Commentary" tells us, "Even as the FOMC confirmed market expectations for a steeper path for future rates, the London Interbank Offered Rate and Overnight Index Swap (LIBOR-OIS) rate spread widened to levels not seen since 2016, indicating possible stresses in the money markets. `The LIBOR-OIS spread is the difference between LIBOR and the OIS rate. It represents the difference between an interest rate with some credit risk built in (LIBOR) and one that is relatively risk free (OIS) over a certain time period and reflects not only credit risk but also term premiums. Typically the LIBOR-OIS spread widens as a result of credit stresses in the banking sector or a decline in demand from investors. For example, in 2008, this spread widened to 3.64 (3.64% or 364 bps) on October 10 as the full impact of the deterioration of creditworthiness hit the financial markets in the wake of Lehman Brothers' bankruptcy on September 15." But it adds, "The current LIBOR-OIS spread widening likely is due to a smorgasbord of supply/demand reasons and not due to credit stress. On the supply side, we see elevated Treasury bill (T-bill) and repo supply (discussed in greater detail in the government section) and an increase in the amount of commercial paper outstanding. On the demand side, yields are being influenced by the reduction of excess reserves, a decline in prime fund assets during the first quarter, and reduced demand from other short-term investors -- likely a result of tax reform and possibly repatriation effects. This combined increase in supply and reduction in demand is causing unsecured bank funding levels to rise. In fact, March is going out like a lion, too, with no abatement to the widening: LIBOR-OIS spreads started March at 0.41, close to the reform-related wides, and ended March at 0.59 with the pace of increase slowing toward month-end."

Citi's Steve Kang writes in a brief entitled, "SOFR So Good," "On Tuesday the NY Fed started publishing the Secured Overnight Financing Rate (SOFR), which is now published near 8am each morning for the previous day. SOFR is an overnight Treasury repo rate based a volume weighted median of tri-party, GCF, and bilateral rates. Going forward, the goal is for SOFR to be LIBOR's replacement, in the far future, as the benchmark for interest rate derivatives.... The Fed also introduced BGCR, which excludes FICC bilateral trades from SOFR, and also TGCR, which further excludes GCF repo (i.e. just tri-party). Large dealers tend to be net borrowers in Tri-party and net lenders in bilateral repo and GCF. Tri-party repo rates (TGCR) serve the market in being about the lowest o/n wholesale money rate ā€“ and it is where the money market funds tend to lend to a select group of large dealers." The update adds, "SOFR made its debut this Tuesday trading around flat to IOER and TGCR traded around 5bp below them.... It was an interesting time to debut SOFR, as repo rates are trading in a different regime with a dramatic increase in T-bill supply. There has been a +$320bn net increase in supply from early-February (when the debt ceiling was suspended), which was the largest 2-month change in T-bills outstanding since the crisis.... So far the upward pressure from bill yields is felt on all market-based o/n rates with investors, with RRP as an alternative investment vehicle (such as tri-party and by extension GC repo and fed funds rates). With other MMF o/n offering more value, the usage of the Fed's RRP facility plummeted to paltry 5bn this month."

WealthManagement.com writes "Cashing in on Ultra-Short Bond Funds." The website asks, "With yields on sweep accounts, money-market funds and savings accounts stuck near historical lows, what's an adviser to do in trying to garner more income for clients out of their cash reserves?" They explain, "Ultra-short-term bond funds -- those with bonds of maturities three years or less -- are one option." The piece comments, "The average sweep account yield was only 0.14 percent as of March 23 for accounts of $100,000, according to Crane Data, with money-market yields averaging 1.24 percent. And savings accounts averaged a yield of only 0.09 percent as of March 30, according to Bankrate. Meanwhile, ultra-short-term bond funds had an average yield to maturity of 2.2 percent, as of March 27, according to Morningstar Direct. Morningstar counts 91 ultra-short-term bond funds (including ETFs) in total, with combined assets of $162 billion." The article adds, "But you and your clients must understand that while ultra-short bond funds are less risky than their longer-term brethren, they are riskier than money-market funds. That's because when short-term interest rates rise, such as now, the share price of an ultra-short bond fund falls, potentially wiping out the yield."

Late last week, The Wall Street Journal wrote "Cashing In: Why Cash Should Be in Your Portfolio Again." It says, "Holding cash is investment heresy after a decade of the lowest interest rates in history. It is time to consider the sacrilegious and add cash back into portfolios. The value of cash was demonstrated in the first quarter: Both stocks and bonds lost money -- the first quarter that has happened since the aftermath of Lehman's failure in 2008. Cash turned out to be the safe asset. The past three months highlighted the lack of risk, at least in nominal terms, of holding cash. But cash and near-cash products have three properties that ought to be appealing at the moment: a yield above inflation, a guaranteed value to cushion a portfolio and the firepower to buy back in after a dip. The combination of the Federal Reserve's rate increases and the Trump administration's fiscal profligacy has pushed up the yield on cash and cash-like instruments to the highest level since October 2008. A bank deposit still pays next to nothing, but money-market funds are offering as much as 1.75%." The Journal piece adds, "There are good reasons to worry that both the short-term cushion provided by bonds when equities drop and the longer-run gains from falling yields could be coming to an end. If they do, cash will be a better way to shield a portfolio against stock price falls than bonds.... Finally, a cash cushion gives investors the freedom to take advantage of selloffs. Last year this optionality was worthless, as the market went up almost in a straight line. With the return of volatility, the firepower a cash pile gives to enter the market after a selloff is valuable again -- at least for those brave enough to buy when everyone else wants to sell." See also, the Journal's "Goldman's Latest Push: Managing Cash for Big Companies."

Money market mutual fund assets rose slightly for the third week in a row, after falling sharply in mid-March (and intra-week at month-end). The Investment Company Institute's latest "Money Market Fund Assets" report shows that year-to-date, MMF assets have decreased by $10 billion, or -0.4%. Over 52 weeks they've increased by $184 billion, or 7.0%. ICI's numbers also show Prime money market fund assets increased for the third week in the past 4, while Govt MMF assets rose for the third week in a row. ICI writes, "Total money market fund assets increased by $3.12 billion to $2.83 trillion for the week ended Wednesday, April 4, the Investment Company Institute reported today. Among taxable money market funds, government funds increased by $2.21 billion and prime funds increased by $1.31 billion. Tax-exempt money market funds decreased by $410 million." Total Government MMF assets, which include Treasury funds too, stand at $2.244 trillion (79.2% of all money funds), while Total Prime MMFs stand at $454.6 billion (16.1%). Tax Exempt MMFs total $133.3 billion, or 4.7%. They explain, "Assets of retail money market funds increased by $5.94 billion to $1.01 trillion. Among retail funds, government money market fund assets increased by $5.53 billion to $624.35 billion, prime money market fund assets increased by $782 million to $263.10 billion, and tax-exempt fund assets decreased by $364 million to $126.73 billion." Retail assets account for over a third of total assets, or 35.8%, and Government Retail assets make up 61.6% of all Retail MMFs. ICI's release adds, "Assets of institutional money market funds decreased by $2.83 billion to $1.82 trillion. Among institutional funds, government money market fund assets decreased by $3.31 billion to $1.62 trillion, prime money market fund assets increased by $531 million to $191.47 billion, and tax-exempt fund assets decreased by $45 million to $6.61 billion." Institutional assets account for 64.2% of all MMF assets, with Government Inst assets making up 89.1% of all Institutional MMFs.

Kiplinger's Personal Finance writes "Money-Market Funds Offering Juicier Yields." The brief explains, "For years, money market mutual funds have paid practically nothing. But each time the Federal Reserve lifts short-term interest rates, yields on money market funds tend to rise in tandem. 'That's one of their most attractive qualities,' says Peter Crane, president of Crane Data, a money fund research company. Many money funds yield more than 1%, and Crane expects yields on some funds to surpass 2% this summer. Rates on savings accounts from banks have also been increasing but have not kept pace with Fed rate hikes." The piece adds, "Money market funds invest in high-quality, short-term securities, such as Treasury bills, commercial paper and certificates of deposit. Although they carry little risk, they are not protected from losses by the Federal Deposit Insurance Corp. Cash that must be in a safe place, such as an emergency fund, is best stashed in an FDIC-insured bank account. Money funds provide a convenient holding place for cash in, say, a linked brokerage account. You are more likely to get a higher payout if you invest in a money fund with low expenses. Vanguard Prime Money Market Investor (VMMXX) yielding 1.6%, has an expense ratio of 0.16%. Taxable money funds generally offer higher yields than tax-free municipal money funds. But if you're in one of the top federal income tax brackets and live in a state with high income taxes, you may come out ahead with a tax-free fund."

We'd like to remind those planning on attending Crane's Money Fund Symposium June 25-27 in Pittsburgh to register and make hotel reservations soon. Money Fund Symposium is the largest gathering of money market fund managers and cash investors in the world. This year's show will take place June 25-27, 2018 at The Westin Convention Center, in Pittsburgh, Pa. (See here for latest agenda.) Our previous MFS in Atlanta attracted over 550 attendees, and we expect another robust turnout for our 10th annual event in Pittsburgh this summer. Money Fund Symposium attracts money fund managers, marketers and servicers, cash investors, money market securities dealers, issuers, and regulators. Visit the MF Symposium website at www.moneyfundsymposium.com for more details. Registration is $750, and discounted hotel reservations are available (for now). Finally, mark your calendars for Crane's 6th annual "offshore" money fund event, European Money Fund Symposium, which will be held in London, England, September 20-21, 2018. This website (www.euromfs.com) will be updated with the 2018 information soon. (Contact us to inquire about sponsoring or speaking.) Our next Money Fund University "basic training" event is also tentatively scheduled for Jan. 24-25, 2019, in Stamford, Conn, and our 2019 Bond Fund Symposium is tentatively scheduled for March 21-22 in Philadelphia. Watch www.cranedata.com for more details on these events, and please let us know if you have any questions or feedback on our growing conference business. Note: Crane Data Subscribers have access to all our conference binder materials, including Powerpoints, recordings and attendee lists. See the bottom of our "Content Center" for a listing of available conference materials.

Federated Investors' latest "Money in Cash discusses the Federal Reserve and says, "For cash managers, it was particularly helpful that the March hike and the projections for two more this year and three in 2019 were in line with expectations because we have our hands full with the remarkable amount of short-term Treasury supply in the market. Ever since the suspension of the debt ceiling, the U.S. Treasury has been borrowing at an accelerated rate to fund increased government spending with less revenue from taxes and to build up a cash balance. In fact, short Treasury yields were so elevated that overnight repo rates didn't rise much following the announcement of the hike because they already were nearly there. Not that we, or anyone in the industry, is complaining; it's a wonderful problem to have. Our trading floor has a lot more smiling faces than two years ago. In fact, the excess supply -- furthered by the Fed's balance sheet roll off -- pushed yields so high they were attractive enough for portfolio managers around the country to add Treasuries to their prime products. Holding T-bills for liquidity is one thing; holding them for yield is another. It has been a long time, certainly before the crisis, since we have done that. Our prime products have benefitted from a spike in the London interbank offered rate (Libor), also due to the federal government tax overhaul (see sidebar). Libor's vault over the month had 1-month closing at 1.88%, from 1.65% at the end of February; 3-month at 2.31%, from 1.99%; and 6-month at 2.45%, from 2.20%." Money market CIO Deborah Cunningham adds in the sidebar, "There lately has been concern over the widening of spreads between the 3-month London interbank offered rate (Libor) and the Overnight Index Swap (OIS). Historically, these spreads range between 10-20 basis points, but they are around 60 now. The last time spreads were this wide was during the European bank crisis of 2011. But this time is entirely different. It's not credit related, but rather due to the new tax code requiring U.S.-based companies to repatriate overseas cash. These companies traditionally buy Treasury bills, commercial paper and bank CDs with that money. Now, they have to bring it here and pay taxes. This has slashed the demand for short-term securities, driving up their yields and overnight funding spreads. While the Treasury issuance may pull back as tax receipts stream in after April 15, repatriation likely is going to play out over the entirety of 2018."

Kiplinger's writes "4 High-Yield Spots to Park Your Savings." They ask, "How much is your savings account earning? It could be about $1 per year on an account worth $10,000. If so, take a moment to check rates for online options instead. You might be pleasantly surprised.... Now, while there is a lot of debate on how much a person should save, there shouldn't be as much deliberation on where to stash your savings. But you'd be surprised: Many smart savers are cheating themselves because they aren't putting their money where they should." The advisor-written piece explains, "Here is an easy way to maximize your return on your savings.... Most of the big banks (see Bank of America, Citibank, Chase) pay a paltry return, usually around 0.01%. For someone who has $10,000 in savings, that's a return of ONE DOLLAR per year. I'm guessing that 0.01% return doesn't even cover the cost of keeping your account open, let alone help offset inflation. The good news is you have other solutions for saving your money." The author cites "Online High-Yield Savings Accounts," writing, "In addition to the convenience of digital banking, the most appreciated benefit comes in the form of higher interest rates. The rates of a high-yield savings account can be as high as 1.55%. This may not sound like much, but when you consider that $1 you were earning per year on a $10,000 savings account, a rate of 1.55% bumps your yearly savings to $155. Remember, these online banks offer the same FDIC protections as your traditional brick-and-mortar big banks." They mention Ally Bank, Discover Bank, Synchrony Bank and Marcus by Goldman Sachs, adding, "Given these options, consider switching to a financial institution that can offer you the better yield when you park your money with them. After all, having readily-available cash is a good idea for just about anyone. You might as well let your good financial stewardship be rewarded."

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