Daily Links Archives: August, 2020

We discussed the announcement last week that Vanguard Prime Money Market Fund would convert to a Government MMF. (See Friday's News.) We hadn't realized that Vanguard also filed for changes in its two remaining Prime MMFs too. These funds will remain "Prime" but will increase their holdings of Government securities. A Prospectus Supplement for the $94.1 billion Vanguard Market Liquidity Fund says, "The purpose of this supplement is to provide you with information regarding the investment strategy for Vanguard Market Liquidity Fund. The Fund invests primarily in high-quality, short-term money market instruments, including certificates of deposit, banker's acceptances, commercial paper, Eurodollar and Yankee obligations, and other money market securities, including securities issued by the U.S. government or its agencies and instrumentalities. The Fund invests more than 25% of its assets in the financial services industry (i.e., issuers principally engaged in providing financial services to consumers and industry), which includes securities issued by government-sponsored enterprises, such as the Federal National Mortgage Association ('Fannie Mae'), the Federal Home Loan Mortgage Corporation ('Freddie Mac'), and the Federal Home Loan Banks. The Fund has no limit on its ability to invest in cash, U.S. government securities, and/or repurchase agreements that are collateralized solely by U.S. government securities or cash ('government securities'). The Fund has been increasing its investments in government securities and expects to continue to do so." The same language is used in a filing for the $1.4 billion Vanguard Variable Insurance Money Market Fund. Website ignites.com also wrote about Vanguard's changes Friday in "Vanguard Retreats From Prime Money Funds." They tell us, "The king of retail prime money funds is abdicating the throne and retreating to the less risky confines of government liquid securities. Vanguard will remake its $125.3 billion Prime Money Market Fund into a government fund, and rename it the Vanguard Cash Reserves Federal Money Market Fund, the firm disclosed Thursday. The changes will take place on or around Sept. 29." They quote our Peter Crane, "From a product perspective, it's the wrong time to be exiting prime [money funds].... But Vanguard has considerations other than investor appetite to consider. `In the money fund business, deep pockets have been necessary on occasion, and Vanguard doesn't have any pockets."

Money market fund assets fell for the third week in a row, their 11th decrease over the past 14 weeks. ICI's latest weekly "Money Market Fund Assets" report says, "Total money market fund assets decreased by $4.06 billion to $4.54 trillion for the week ended Wednesday, August 26, the Investment Company Institute reported.... Among taxable money market funds, government funds decreased by $3.81 billion and prime funds increased by $477 million. Tax-exempt money market funds decreased by $729 million." ICI's stats show Institutional MMFs decreasing $238 million and Retail MMFs decreasing $3.8 billion. Total Government MMF assets, including Treasury funds, were $3.667 trillion (80.8% of all money funds), while Total Prime MMFs were $751.6 billion (16.6%). Tax Exempt MMFs totaled $121.0 billion (2.7%). ICI shows Money fund assets up a still massive $908 billion, or 25.0%, year-to-date in 2020, with Inst MMFs up $745 billion (32.9%) and Retail MMFs up $163 billion (11.9%). Over the past 52 weeks, ICI's money fund asset series has increased by $1.176 trillion, or 35.0%, with Retail MMFs rising by $254 billion (19.9%) and Inst MMFs rising by $922 billion (44.2%). They explain, "Assets of retail money market funds decreased by $3.82 billion to $1.53 trillion. Among retail funds, government money market fund assets decreased by $217 million to $985.30 billion, prime money market fund assets decreased by $3.08 billion to $439.13 billion, and tax-exempt fund assets decreased by $527 million to $108.40 billion." Retail assets account for just over a third of total assets, or 33.8%, and Government Retail assets make up 64.3% of all Retail MMFs. ICI adds, "Assets of institutional money market funds decreased by $238 million to $3.01 trillion. Among institutional funds, government money market fund assets decreased by $3.59 billion to $2.68 trillion, prime money market fund assets increased by $3.56 billion to $312.48 billion, and tax-exempt fund assets decreased by $202 million to $12.62 billion." Institutional assets accounted for 66.2% of all MMF assets, with Government Institutional assets making up 89.2% of all Institutional MMF totals.

The Financial Times writes "The transformation of Ant Financial," which says about money funds, "Ant introduced its Yu'E Bao fund in 2013, allowing customers to invest the piles of cash growing in their Alipay accounts. For years its Tianhong Asset Management subsidiary invested all of the money and it ranked as the world's largest money market fund. That is no longer the case today, with tighter regulations starting in 2017 gradually forcing Tianhong to shrink the amount each user could invest with the fund. Chloe Qu, an analyst at Morningstar, said regulators took action when they believed the Yu'E Bao fund had grown so large that a wave of withdrawals could cause systemic risk to the financial system." The piece adds, "Ant now offers competing funds in the Yu'E Bao slot and Ms Qu said most users have little idea which firm is actually managing their money. 'If you can get your product in the Yu'E Bao channel that's like a money making machine, people are just piling their money in,' she said. Ant earns a small commission on the money its more than 500m users invest with its asset management partners such as Invesco's China joint-venture and Bank of China Investment Management. It is the largest online investment services platform in China by assets under management, with a total of Rmb4.1tn invested through the platform as of June 30. Last year, the business line grew 22 per cent year-on-year and added Rmb17bn to Ant's top line."

Global Banking & Finance Review writes "The US liquidity landscape: Navigating uncertain times." They tell us, "The COVID-19 pandemic continues to have severe effects on the US economy, with historically low interest rates driving businesses to reconsider their cash management strategies. In this volatile liquidity landscape, how can businesses successfully navigate their operating cash goals? Tom Meiman, Product Line Manager for Liquidity Balances and Demand Deposit Account Services, BNY Mellon Treasury Services, and Sam Schwartzman, Head of the IMG Cash Solutions Group, BNY Mellon Markets, explore. Over the past decade, US liquidity has been significantly affected by short-term low interest rates, imposed following the 2008 global financial crisis. In 2015, the US dollar strengthened against other major world currencies and rates began to increase slowly through 2018, followed by some modest reductions in 2019." The piece continues, "Although the regulatory actions have provided valuable relief, market participants face considerable challenges, with the forecast for short-term market rates remaining uncertain. Following the initial phase of the crisis, T-bill rates were steadily rising, but have since flattened and have even begun to decline. If T-bill rates trend upwards again, and banks begin to move deposits away from the Fed into the T-bill market in search of yield, a near term cap could be put on these rates. Elsewhere, LIBOR rates have been somewhat flat of late after blowing out in March and April and then coming back down to (in some cases) historically low levels. We do expect them to remain relatively flat going forward, assuming a resurgence of the market volatility seen in March and April does not occur. MMF yields are still on a downward trajectory, and have generally not bottomed out yet, because the funds are somewhat benefitting from holding securities purchased in March – prior to when the two Fed interest rate cuts took effect. This lag effect will run its course shortly." It asks, "What tools can cash managers employ to effectively optimise their excess operating cash during these volatile times? Due to the recent turbulence in the market, there has been an influx of cash into the short-term market space, with a focus on bank deposits through several different options. Demand deposit accounts have been a cash management staple for decades.... Off-balance sheet investment options may be equally viable for some cash managers and can prove valuable to different clients at different times. Another popular option is the Fixed Income Clearing Corporation (FICC) SMP repo program, which has been heavily utilised in recent years."

The Federal Reserve Bank of New York recently published a Liberty Street Economics blog entitled, "Explaining the Puzzling Behavior of Short-Term Money Market Rates." They write, "Since 2008, the Federal Reserve has dramatically increased the supply of bank reserves, effectively adopting a floor system for monetary policy implementation. Since then, the behavior of short-term money market rates has been at times puzzling. In particular, short-term rates have been surprisingly firm in recent months, despite the large increase in reserves by the Fed as a part of its response to the coronavirus pandemic. In this post, we provide evidence that both the supply of reserves and the supply of short-term Treasury securities are important factors for explaining short-term rates." The blog explains, "In a Staff Report updated last year, we showed that the theory focusing solely on reserves and balance sheet costs isn't sufficient to explain the behavior of short-term rates. In reality, it is also important to consider how the supply of Treasury securities affects rates. Specifically, our model showed that short-term Treasury securities and reserves have opposing effects on short-term rates." It continues, "However, wholesale bank deposits are not the only investment option for institutions seeking to invest in short-term instruments. Money market mutual funds (MMFs) offer an investment alternative to bank deposits and hold a large amount of short-term Treasury securities as assets. When the supply of Treasury securities increases, everything else being equal, Treasury yields tend to increase to attract investors. MMF shares become more attractive than bank deposits and investors reduce the amount of such deposits they hold.... This reduces the size of banks' balance sheets (banks may reduce, on the asset side, their investments in repos, for example), and induces banks to raise their wholesale deposit rate to remain competitive." It adds, "In this post, we showed that the quantity of short-term Treasuries, in conjunction with the quantity of reserves, assists in explaining the evolution of short-term rates such as the fed funds rate. In particular, by enriching our understanding of how short-term rates are determined, we are able to explain why these rates have remained elevated in recent months, despite the Fed's very large increase in the supply of reserves. Put another way, whether reserves are scarce can only be judged in relation to the amount of short-term Treasuries. Because Treasury issuance of short-term securities is expected to remain high, upward pressures on the federal funds rate are likely to continue in the coming months, even in the face of a large supply of reserves."

A press release entitled, "Fitch Assigns The Sterling Conservative Ultra Short ESG Fund First-Time 'AAf'/'S1' Rating" tells us, "Fitch Ratings has assigned the Northern Trust Global Funds PLC - The Sterling Conservative Ultra Short ESG Fund a Fund Credit Quality Rating of 'AAf' and a Fund Market Risk Sensitivity Rating of 'S1'. The fund is managed by Northern Trust Asset Management, a subsidiary of Northern Trust Corporation (AA-/Stable/F1+). The 'AAf' Fund Credit Quality Rating is driven by the high credit quality of the fund as measured by its weighted average rating factor (WARF) and its investment guidelines. The 'S1' Fund Market Risk Sensitivity Rating is driven by the low sensitivity of the fund to interest rate and spread risks, as reflected in its short maturity profile. The fund pursues an ESG strategy. The manager applies certain ESG criteria to manage the fund and follows an exclusionary approach to define the investable universe. Specifically, the investable universe excludes weapon and tobacco producers, violators of the U.N Global Compact, and those involved in any notable ESG controversies. Northern Trust Asset management fully integrates MSCI's ESG issuer ratings in their investment process. The investment manager makes the security selection and constructs the portfolio while considering each issuer's ESG ratings in its fundamental research and relative-value analysis. The ESG framework is a neutral factor in Fitch's rating analysis." It adds, "The fund was launched on 6 August 2019 with a stated investment objective to provide moderate liquidity while maximising income and preserving capital via investing in investment-grade fixed-income securities. Fitch views the legal and regulatory framework of the fund satisfactory. The Sterling Conservative Ultra Short ESG Fund is a sub-fund of Northern Trust Global Funds Plc, a Dublin-domiciled ICVC fund pursuant to the UCITS regulation. As of end-June 2020, the fund's total assets stood at GBP50 million. The fund has daily dealing with T+2 day settlement period. The fund has a concentrated but stable investor base, with close scrutiny of the fund's inflows and outflows." In other "offshore" news, a shareholder notice tells us, "The Board of Directors of BNP Paribas InstiCash decides, in accordance with the provisions of Article 32 of the Articles of Association of the Company and the Chapter 8 of the Luxembourg Law of 17 December 2010 concerning UCI, to merge the Merging Sub-fund into the Receiving Sub-fund in accordance with Article 1, point 20), a) of the Law: BNP Paribas InstiCash Merging Sub-fund InstiCash GBP 1D Short Term VNAV into InstiCash GBP 1D LVNAV."

Money market fund assets fell for the second week in a row, their 10th decrease over the past 13 weeks. ICI's latest weekly "Money Market Fund Assets" report says, "Total money market fund assets decreased by $10.61 billion to $4.54 trillion for the week ended Wednesday, August 19, the Investment Company Institute reported.... Among taxable money market funds, government funds decreased by $5.55 billion and prime funds decreased by $5.21 billion. Tax-exempt money market funds increased by $157 million." ICI's stats show Institutional MMFs decreasing $11.7 billion and Retail MMFs increasing $1.1 billion. Total Government MMF assets, including Treasury funds, were $3.671 trillion (80.8% of all money funds), while Total Prime MMFs were $751.1 billion (16.5%). Tax Exempt MMFs totaled $121.8 billion (2.7%). ICI shows Money fund assets up a still massive $912 billion, or 25.1%, year-to-date in 2020, with Inst MMFs up $745 billion (33.0%) and Retail MMFs up $167 billion (12.2%). Over the past 52 weeks, ICI's money fund asset series has increased by $1.166 trillion, or 34.5%, with Retail MMFs rising by $262 billion (20.5%) and Inst MMFs rising by $904 billion (43.0%). They explain, "Assets of retail money market funds increased by $1.13 billion to $1.54 trillion. Among retail funds, government money market fund assets increased by $3.60 billion to $985.51 billion, prime money market fund assets decreased by $2.23 billion to $442.21 billion, and tax-exempt fund assets decreased by $240 million to $108.93 billion." Retail assets account for just over a third of total assets, or 33.8%, and Government Retail assets make up 64.1% of all Retail MMFs. ICI adds, "Assets of institutional money market funds decreased by $11.74 billion to $3.01 trillion. Among institutional funds, government money market fund assets decreased by $9.16 billion to $2.69 trillion, prime money market fund assets decreased by $2.98 billion to $308.92 billion, and tax-exempt fund assets increased by $397 million to $12.83 billion." Institutional assets accounted for 66.2% of all MMF assets, with Government Institutional assets making up 89.3% of all Institutional MMF totals.

A press release entitled, "Vanguard Consolidates Taxable Money Market Fund Management on Charles River IMS," tells us, "Charles River Development, a State Street company, today announced that Vanguard Group Inc. has consolidated management of taxable money market funds on the cloud-based Charles River Investment Management Solution (Charles River IMS). Vanguard is live on the platform, using Charles River IMS across the investment process, from pre-trade to post-trade and compliance. The Charles River Investment Book of Record (IBOR) provides portfolio managers and traders with real-time cash and positions and Charles River's Data Service delivers benchmark and pricing data. Charles River IMS also enables users to incorporate its proprietary data and configure workflows unique to their product offerings. Charles River IMS provides fixed income managers with streamlined workflows to access liquidity venues, identify investable cash, more easily manage counterparty limits and improve communication and collaboration between investment teams." Paul Malloy, Principal, Head of Municipals at The Vanguard Group, comments, "As one of the world's leading global fund providers, Vanguard is continuously enhancing our investment management function to help clients grow their wealth. The move to Charles River IMS is an example of how Vanguard employs sophisticated investment systems to achieve efficiencies and improve investor outcomes." The release continues, "Adopting Charles River IMS has enabled asset managers to streamline compliance with SEC Rule 2a-7 money market requirements and reduce operational risk by automating manual processes and retiring several legacy proprietary applications. Charles River's Software as a Service (SaaS)-based operating model supports operational resilience by delivering regular software upgrades, high quality data and on-demand scalability." Charles River's Matt Daly adds, "Increased market volatility and regulatory oversight are driving fund managers to reevaluate their technology footprint and operating model. By consolidating onto Charles River IMS, firms can gain greater visibility into their investment process, use proprietary content more effectively and scale to support their growing product offerings."

Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics Tuesday, which track a shifting subset of our monthly Portfolio Holdings collection. The most recent cut (with data as of August 14) includes Holdings information from 77 money funds (up 17 from two weeks ago), which represent $2.415 trillion (up from $2.017 trillion) of the $4.879 trillion (49.5%) in total money fund assets tracked by Crane Data. (Note that our Weekly MFPH are e-mail only and aren't available on the website. For our latest monthly Holdings, see our August 12 News, "August MF Portfolio Holdings: Treasury Bender Ends; Repo, TDs Jump.") Our latest Weekly MFPH Composition summary again shows Government assets dominating the holdings list with Treasury totaling $1.309 trillion (up from $1.123 trillion two weeks ago), or 54.2%, Repurchase Agreements (Repo) totaling $545.6 billion (up from $411.7 billion two weeks ago), or 22.6% and Government Agency securities totaling $350.3 billion (up from $299.8 billion), or 14.5%. Certificates of Deposit (CDs) totaled $75.3 billion (up from $67.6 billion), or 3.1%, and Commercial Paper (CP) totaled $65.7 billion (up from $58.2 billion), or 2.7%. The Other category accounted for $35.5 billion or 1.5%, while VRDNs accounted for $33.9 billion, or 1.4%. The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $1.309 trillion (54.2% of total holdings), Federal Home Loan Bank with $194.0B (8.0%), Fixed Income Clearing Corp with $74.7B (3.1%), BNP Paribas with $65.8B (2.7%), Federal Farm Credit Bank with $61.7B (2.6%), Federal National Mortgage Association with $53.4B (2.2%), RBC with $44.0B (1.8%), Federal Home Loan Mortgage Co with $38.9B (1.6%), JP Morgan with $34.0B (1.4%) and Mitsubishi UFJ Financial Group Inc with $30.9B (1.3%). The Ten Largest Funds tracked in our latest Weekly include: Goldman Sachs FS Govt ($263.5B), JP Morgan US Govt MM ($187.7B), Fidelity Inv MM: Govt Port ($160.8B), Wells Fargo Govt MM ($142.2B), BlackRock Lq FedFund ($138.2B), JP Morgan 100% US Treas MMkt ($114.8B), Goldman Sachs FS Treas Instruments ($96.4B), BlackRock Lq T-Fund ($89.9B), Morgan Stanley Inst Liq Govt ($88.3B) and JP Morgan Prime MM ($85.1B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary, or our Bond Fund Portfolio Holdings data series.)

The SEC published a press release entitled, "Advisory Firm Settles Charges of Defrauding Investors, Agrees to Refund Allegedly Ill-Gotten Gains to Harmed Clients," which says, "The Securities and Exchange Commission ... announced that SCF Investment Advisors, Inc. (SCF) has agreed to settle charges that it selected mutual funds and cash sweep money market funds for clients that provided undisclosed revenue to the firm's affiliated broker-dealer and were more expensive than other available options for the same funds. The settlement includes a distribution of money to harmed clients of the Fresno, California-based investment advisory firm. According to the SEC's order, SCF engaged in several practices that violated its fiduciary duty to its clients. First, the order finds that SCF purchased, recommended, or held certain mutual fund share classes for its advisory clients that charged 12b-1 fees, which were received by SCF's affiliated broker-dealer, SCF Securities, Inc. (SCFS), instead of lower-cost share classes of the same funds that were available to clients. Second, the order finds that SCF purchased or recommended for advisory clients certain money market funds for which SCFS received revenue sharing payments from its clearing broker, without disclosing receipt of this compensation to clients. The order finds that as a result, some SCF clients received lower performance on these investments than they would have otherwise received. As stated in the order, SCF failed to disclose these practices or related conflicts of interest to its clients. The order finds that SCF failed to adopt and implement policies and procedures designed to prevent violations of federal securities laws regarding its mutual fund and money market sweep fund share class selection practices, and that SCF violated its duty to seek best execution. The order also finds that SCF did not self-report to the SEC pursuant to the Division of Enforcement's Share Class Selection Disclosure Initiative, even though it was eligible to do so." It quotes C. Dabney O'Riordan, Co-Chief of the SEC Enforcement Division's Asset Management Unit, "An adviser must inform clients of its conflicts of interest when recommending investments, including when it or its affiliates are receiving financial benefits for those investment recommendations. For years SCF failed to disclose its financial conflicts even though it was advising clients to purchase more expensive share classes of mutual funds and money market funds that would hurt client long-term returns." See also Financial Advisor's piece, "SCF Investment Advisors To Pay $767K Over Fund Fee Abuses," and see our Feb. 4 Crane Data News, "Concerns Remain About Brokerage Cash Says Investment News; Sweeps.")

The Association for Financial Professionals will host a webinar entitled, "2020 AFP Liquidity Survey: Maintaining Course in Uncharted Waters" on Tuesday, August 18 from 2-3pmET. The event will feature AFP's Tom Hunt, Crane Data's Pete Crane, Invesco's Laurie Brignac and Marsh & McLennan's Ferdinand Jahnel. The description says, "The three main tenets of prudent investing for organizations has been: safety first, liquidity second, followed by yield. In the years AFP has been conducting the Liquidity survey, safety hasn't been tested as much as it is now since the financial crisis 10 years ago. This webinar looks at how organizations are maintaining their bearings while the Federal Reserve lowered rates to near zero, oil prices hit rock bottom, a pandemic spreads rampantly around the world, Brexit remains on the table and LIBOR expected to be replaced next year. What will these changes mean for you in terms of strategy and long term perspectives? Where have businesses shifted their investments when the waters get choppy? Key market participants will share their perspectives on how you can prepare for the storm. This webinar is a companion to the 2020 AFP Liquidity Survey." (See our June 23 News "AFP's 2020 Liquidity Survey Shows Safety, Bank Relationships Still Key," and our June 29 News, "More 2020 AFP Liquidity Survey: Ratings, Yield Important; ESG Not Yet.") Finally, as a reminder, we'll also be hosting our next event, "Crane's Money Fund Webinar: Mini Fund Symposium" on August 26, 2020, 1-4pm ET. Crane Data's Peter Crane will host a 3-hour series of sessions involving money market mutual funds and money market securities. Segments will include: "The State of the Money Fund Industry;" "Strategists Speak: Treasury, Fed & Repo," with BofA's Mark Cabana and Barclays' Joe Abate; "Regulatory & ESG Update" with Dechert's Stephen Cohen; and, "Major Issues in Money Funds," with BNY Mellon/Dreyfus' Tracy Hopkins and J.P. Morgan Asset Management's John Tobin. A virtual "cocktail party" will follow.

Money market fund assets fell in the latest week, their 9th decrease in the past 12 weeks. Since the last week in May, MMF assets have declined by $234.8 billion, after rising $1.155 trillion during March, April and the first half of May. ICI's latest weekly "Money Market Fund Assets" report says, "Total money market fund assets decreased by $20.82 billion to $4.55 trillion for the week ended Wednesday, August 12, the Investment Company Institute reported.... Among taxable money market funds, government funds decreased by $18.98 billion and prime funds decreased by $1.41 billion. Tax-exempt money market funds decreased by $428 million." ICI's stats show Institutional MMFs decreasing $17.2 billion and Retail MMFs decreasing $3.6 billion. Total Government MMF assets, including Treasury funds, were $3.677 trillion (80.7% of all money funds), while Total Prime MMFs were $756.3 billion (16.6%). Tax Exempt MMFs totaled $121.6 billion (2.7%). ICI shows Money fund assets up a still massive $923 billion, or 25.4%, year-to-date in 2020, with Inst MMFs up $757 billion (33.5%) and Retail MMFs up $165 billion (12.1%). Over the past 52 weeks, ICI's money fund asset series has increased by $1.2010trillion, or 35.8%, with Retail MMFs rising by $269 billion (21.2%) and Inst MMFs rising by $931 billion (44.6%). They explain, "Assets of retail money market funds decreased by $3.61 billion to $1.54 trillion. Among retail funds, government money market fund assets decreased by $597 million to $981.91 billion, prime money market fund assets decreased by $2.60 billion to $444.44 billion, and tax-exempt fund assets decreased by $415 million to $109.17 billion." Retail assets account for just over a third of total assets, or 33.7%, and Government Retail assets make up 63.9% of all Retail MMFs. ICI adds, "Assets of institutional money market funds decreased by $17.22 billion to $3.02 trillion. Among institutional funds, government money market fund assets decreased by $18.39 billion to $2.69 trillion, prime money market fund assets increased by $1.19 billion to $311.90 billion, and tax-exempt fund assets decreased by $13 million to $12.43 billion." Institutional assets accounted for 66.3% of all MMF assets, with Government Institutional assets making up 89.3% of all Institutional MMF totals.

Pensions & Investments writes, "Investors leaving money market safe havens." The piece claims, "As market volatility has eased, institutional investors are moving away from the safety of U.S. money market funds and moving back to more return-seeking investments. Data from Morningstar Inc. show that investors are taking initial steps away from money market funds, with assets in U.S.-domiciled funds dropping to $4.6 trillion at end of June from $4.75 trillion at the end of May. The trend is nascent. Money market balances remain higher than they were before the coronavirus pandemic took hold in the U.S. in mid-March. But industry sources said the decline shows that asset owners are growing more comfortable with risk. Meanwhile, money managers are waiving fees on their money market funds to maintain investors' yields above zero. The largest institutional money market funds in the U.S. are offering a seven-day yield in the 0.24% to 0.35% range, according to data provider Crane Data LLC." The article explains, "Sources said now some investors could be concerned about the possibility of negative rates in the U.S. and in the U.K. later this year with some investors rotating into higher-yielding fixed-income investments.... Investors said they are watching whether negative rates on money market funds could emerge later this year and whether any shift in rates would alter their cash management preferences.... Meanwhile, money market fund managers are trying to keep investors in their cash strategies. Dennis Gepp, managing director and CIO of cash at Federated Hermes Inc. in London said: 'I have to admit I was surprised — given where we stand with COVID — and the relatively long-term period of uncertainty ... how quickly a number of markets saw cash flow back to them.'"

We'll continue our nascent monthly webinar and virtual event series later this month with "Crane's Money Fund Webinar: Mini Fund Symposium, which will take place Wednesday, August 26 from 1-4pm Eastern. Please join us! Crane Data's Peter Crane will host a 3-hour series of sessions discussing money market mutual funds and money market securities. Segments will include: "The State of the Money Fund Industry," with Peter Crane; "Treasury Issuance, Fed & Repo Update," with BofA's Mark Cabana and Barclays' Joe Abate; "Regulatory & ESG Money Funds Update" with Dechert's Stephen Cohen; and "Major Money Fund Issues 2020" with Dreyfus/BNY Mellon's Tracy Hopkins, Fidelity's Michael Morin and J.P. Morgan A.M.'s John Tobin. A virtual "cocktail" party will follow. In late July, we hosted "Crane's Money Fund Webinar: Portfolio Manager Perspectives," which featured Federated Hermes' Sue Hill, Northern Trust Asset Management's Peter Yi and UBS Asset Management's David Walczak. (Click here to access the recording and click here to access the News coverage.) We also will be hosting a virtual event on "Alt-Cash" and Ultra-Short Bond Funds on Sept. 24 (1-4pm) and (likely) a virtual Money Fund Symposium on October 27 (1-4) (if we're forced to cancel our Minneapolis event). We're still holding out for our annual Crane's Money Fund Symposium, which is scheduled for October 26-28, 2020, at the Hyatt Regency Minneapolis. But we'll announce next week whether we're cancelling and moving this to June 28-29, 2021 or proceeding and doing a hybrid live and virtual event (we'll need some good news on the coronavirus real soon for this). The latest agenda is available and registrations are still being taken at: www.moneyfundsymposium.com, but we'll refund or credit for 2021 if we do indeed cancel. Finally, mark your calendars for our 2021 conferences (and keep your fingers crossed): Money Fund University, scheduled for Jan. 21-22, 2021 in Pittsburgh, Pa.; Bond Fund Symposium, scheduled for March 25-26, 2021, in Newport Beach, Calif.; and European Money Fund Symposium, scheduled for October 21-22, 2021 in Paris. We hope to see you on a webinar, or at a physical event, soon!

Money market fund yields continue to bottom out just above zero, as our flagship Crane 100 inched down another basis point in the last week to 0.07%. The Crane 100 Money Fund Index fell below the 1.0% level in mid-March and below the 0.5% level in late March. It is down from 1.46% at the start of the year and down from 2.23% at the beginning of 2019. Just under two-thirds of all money funds and just over a third 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, 8/7, 541 funds (out of 850 total) yield 0.00% or 0.01% with assets of $1.762 trillion, or 35.7% of the total $4.930 trillion. There are 201 funds yielding between 0.02% and 0.10%, totaling $2.322 trillion, or 47.1% of assets; 99 funds yielded between 0.11% and 0.25% with $751.4 billion, or 15.2% of assets; 9 funds yielded between 0.26% and 0.50% with $94.7 billion in assets, or 1.9%. No funds yield over 0.50%. The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 671), shows a 7-day yield of 0.04%, down a basis point in the week through Friday, 8/7. The Crane Money Fund Average is down 43 bps from 0.47% at the beginning of April. Prime Inst MFs were down a basis point to 0.10% in the latest week and Government Inst MFs were down a basis point at 0.04%. Treasury Inst MFs were also down a basis point at 0.03%. Treasury Retail MFs currently yield 0.01%, (unchanged in the last week), Government Retail MFs yield 0.01% (unchanged in the last week), and Prime Retail MFs yield 0.05% (unchanged), Tax-exempt MF 7-day yields were down a basis point at 0.03%. (Let us know if you'd like to see our latest MFI Daily.) Our Crane Brokerage Sweep Index, which hit the zero floor four months ago, remains at 0.01%. The latest Brokerage Sweep Intelligence, with data as of August 7, shows no changes in the last week. All of the major brokerages now 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 16 weeks at 0.01% (for balances of $100K). Ameriprise, E*Trade, Fidelity, Merrill Lynch, Morgan Stanley, Raymond James, RW Baird, 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).

The Wall Street Journal writes "After Stockpiling Cash, Some Companies Are Looking to Spend," which tells us, "Companies have been stockpiling cash to navigate the coronavirus pandemic, and some are getting eager to spend it. Cash holdings of U.S. public companies amounted to $2.54 trillion during the latest reported quarter, up from $1.96 trillion at the end of 2019 and $1.86 trillion from the second quarter in 2019, according to S&P Global Market Intelligence. While it can be reassuring for finance chiefs to have ample cash and liquidity amid the economic downturn, many executives feel they need to put their companies' capital to work, using it to seize growth opportunities and generate returns for shareholders." The Journal article explains, "Microsoft Corp., with $136.5 billion, topped the list of America's cash-rich companies as of June 30, according to S&P. The software company could find use for some of that as it is in advanced talks to purchase the U.S. operations of video app TikTok. Other companies with significant cash and short-term investments include Google parent Alphabet Inc., with $121.1 billion, and car maker Ford Motor Co., with nearly $40 billion in the latest-reported quarter, S&P data show. Most companies have held back from spending on share-buyback programs and dividends since the beginning of the pandemic. Some businesses with strong cash holdings, such as cereal maker Kellogg Co., said they plan to focus on investing in their brands, capital expenditures and repaying debt." The piece adds, "Average cash holdings in the tech sector increased roughly twofold over the decade through 2019 to $9.95 billion, according to Bain & Co., a management consulting firm. By contrast, average cash holdings for the total S&P 500 increased 35% to $3.65 billion over the same period. Still, tech companies aren't making aggressive plays yet in this recession like they did during the credit crisis. 'Executive focus is on Covid-19 and managing through Covid-19,' said Adam Haller, a partner at Bain. 'So finding the executive bandwidth and mind share to focus on acquisitions is a big part of why you're not seeing M&A happen in tech right now.'"

Money market fund assets inched higher in the latest week, just their 3rd increase in the past 11 weeks. ICI's latest weekly "Money Market Fund Assets" report says, "Total money market fund assets increased by $5.20 billion to $4.58 trillion for the week ended Wednesday, August 5, the Investment Company Institute reported.... Among taxable money market funds, government funds increased by $4.90 billion and prime funds increased by $470 million. Tax-exempt money market funds decreased by $174 million." ICI's stats show Institutional MMFs increasing $4.0 billion and Retail MMFs increasing $1.2 billion. Total Government MMF assets, including Treasury funds, were $3.696 trillion (80.8% of all money funds), while Total Prime MMFs were $757.8 billion (16.6%). Tax Exempt MMFs totaled $122.0 billion (2.7%). ICI shows Money fund assets up a still massive $944 billion, or 26.0%, year-to-date in 2020, with Inst MMFs up $774 billion (34.2%) and Retail MMFs up $169 billion (12.3%). Over the past 52 weeks, ICI's money fund asset series has increased by $1.239 trillion, or 37.1%, with Retail MMFs rising by $272 billion (21.5%) and Inst MMFs rising by $967 billion (46.7%). (Crane Data's separate Money Fund Intelligence Daily series shows MMF assets down by $54.2 billion in July to $4.957 trillion. They fell back below $5.0 trillion on July 14.) They explain, "Assets of retail money market funds increased by $1.15 billion to $1.54 trillion. Among retail funds, government money market fund assets increased by $2.77 billion to $982.51 billion, prime money market fund assets decreased by $1.70 billion to $447.04 billion, and tax-exempt fund assets increased by $76 million to $109.58 billion." Retail assets account for just over a third of total assets, or 33.6%, and Government Retail assets make up 63.8% of all Retail MMFs. ICI adds, "Assets of institutional money market funds increased by $4.04 billion to $3.04 trillion. Among institutional funds, government money market fund assets increased by $2.13 billion to $2.71 trillion, prime money market fund assets increased by $2.17 billion to $310.71 billion, and tax-exempt fund assets decreased by $249 million to $12.44 billion." Institutional assets accounted for 66.4% of all MMF assets, with Government Institutional assets making up 89.4% of all Institutional MMF totals.

Moody's Investors Service published the paper, "Most recent intervention could mark a turning point for institutional prime funds." It tells us, "The US institutional prime money market fund's viability has come under pressure again, but now the skepticism is coming from within the industry. For the second time in 12 years, the US government has had to provide liquidity to the sector following extreme market volatility and a surge in investor withdrawal requests in March. The 2020 rescue came despite 2016 reforms designed to strengthen the funds. In the past, sponsors were willing to ride out market instability, because prime funds were a larger portion of AUM, generating significantly more revenue than government funds. However, investor attrition and low interest rates and credit spreads have diminished the funds' revenue advantage. Large sponsors are now exiting the product rather than risking having to support prime funds, and at least two large sponsors have announced closures of their institutional prime funds." Moody's explains, "The assets of prime funds are higher-yielding than those of government money market funds, and prime funds have historically been a more profitable product for fund sponsors based on larger assets under management and higher gross portfolio yields. However, prime fund revenue as a percentage of overall money market fund revenue has diminished over time, making the decision to exit the prime fund product now less impactful on a sponsor's total revenue than in the past. Since 2014 when prime funds accounted for around 74% of total money market fund revenue, their contribution has steadily decreased to an estimated 21% as of June 2020. Secondly, the absolute yield of prime funds as well as the yield advantage of prime funds over government funds has been smaller in the last decade than was historically the case, given persistent low rates and narrow credit spreads. The lower yields have made the funds less attractive to investors, reducing the demand for prime funds and their associated revenue for fund sponsors." The piece adds, "Product revenue from prime funds is down not only because asset levels have fallen but also as a result of persistent low interest rates and narrow credit spreads in recent years. Given that these conditions are likely to remain in place and that the overall share of prime fund revenue within a sponsor's total revenue is likely to stay low, the prime fund product's revenue contribution may be less attractive to fund sponsors, especially after adjusting for the potential costs of having to support the funds' net asset value and its associated reputational risk in times of market stress. Fund sponsors that exit the prime fund business will have more robust operations knowing that they are not likely to have to deal with the question of whether to support or not to support a prime fund with their remaining liquidity product lineup during the next crisis. As sponsors review their liquidity fund offerings and consider the costs of potential sponsor support, institutional prime funds are likely to be less attractive to retain than retail prime funds and municipal funds."

Federated Hermes' Deborah Cunningham writes on "No shortage of smart" in her latest monthly commentary, saying, "The Fed keeps making good decisions to support the economy." She tells us, "The Federal Reserve continues to impress with how swiftly it addresses market needs in the coronavirus crisis. Emergency rate cut? Check. New facilities? Done. Quantitative easing? Of course. Shortage of coins in circulation? Somehow it got to that, too. Last week, the Fed even beat itself to the punch when it extended many of the new special purpose vehicles the day before its Federal Open Market Committee meeting concluded. End dates are now Dec. 31 for the Primary Dealer Credit Facility and Money Market Mutual Fund Liquidity Facility, and March 17, 2021, for the Commercial Paper Funding Facility. None of these programs have seen much use recently, but they give confidence to the markets simply by being there. I think all should stay in place until the pandemic is over or at least until we get a vaccine. The Fed also extended its dollar liquidity swap lines and repo facility for international monetary authorities through March 31, 2021. This is another good move as these have added support for the front end." Cunningham writes, "In mid-July, the Senate Banking Committee approved the nomination of Judy Shelton and Christopher Waller to the board of governors. If both are confirmed by Senate, the board would be full (seven governors) for the first time in several years. Waller, head of economic research at the St. Louis Fed, was always expected to make it through the committee, and is viewed as a dove. Shelton is another story. As a former advisor to President Trump, many are concerned she would ape his opinions, including supporting negative rates and limiting the central bank's independence." Finally, she adds, "The short end of the Treasury yield curve edged lower in July in response to the reduced supply. Already at historic levels, The Treasury Department's operating cash balance absorbed tax payments (both individual and corporate) on July 15, meaning it didn't need to issue much debt. That will change when Congress passes the new stimulus bill, whenever that happens. Even in this case, the Fed has alleviated the situation. Its increase of overnight and term repo rates in June has provided a floor above zero, leading the effective fed funds rate hovering around 9 basis points in July. Government fund asset levels were steady in July, while municipals experienced outflows typical around a tax day. Issuance of floaters and commercial paper went the opposite way as they continued their recovery from the barren days of March. Industry-wide, institutional prime fund assets essentially have returned to early January levels."

Money market fund yields continue to bottom out just above zero -- our flagship Crane 100 was down a basis point in the last week at 0.08%. The Crane 100 Money Fund Index fell below the 1.0% level in mid-March and below the 0.5% level in late March. It is down from 1.46% at the start of the year and down from 2.23% at the beginning of 2019. Over half of all money funds and just under a third 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, 7/31, 521 funds (out of 850 total) yield 0.00% or 0.01% with assets of $1.638 trillion, or 33.0% of the total. There are 194 funds yielding between 0.02% and 0.10%, totaling $2.273 trillion, or 45.9% of assets; 120 funds yielded between 0.11% and 0.25% with $872.1 billion, or 17.6% of assets; 15 funds yielded between 0.26% and 0.50% with $173.6 billion in assets, or 3.5%. No funds yield over funds yield over 0.50%. The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 671), shows a 7-day yield of 0.05%, down a basis point in the week through Friday, 7/31. The Crane Money Fund Average is down 42 bps from 0.47% at the beginning of April. Prime Inst MFs were down a basis point to 0.11% in the latest week and Government Inst MFs were flat at 0.04%. Treasury Inst MFs were unchanged at 0.04%. Treasury Retail MFs currently yield 0.01%, (unchanged in the last week), Government Retail MFs yield 0.01% (unchanged in the last week), and Prime Retail MFs yield 0.06% (down a basis point for the week), Tax-exempt MF 7-day yields were down a basis point at 0.04%. (Let us know if you'd like to see our latest MFI Daily.) Our Crane Brokerage Sweep Index, which hit the zero floor almost four months ago, remains at 0.01%. The latest Brokerage Sweep Intelligence, with data as of July 31, shows no changes in the last week. All of the major brokerages now 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 ten weeks at 0.01% (for balances of $100K). Ameriprise, E*Trade, Fidelity, Merrill Lynch, Morgan Stanley, Raymond James, RW Baird, 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). Fin-tech "robo" advisor firms Betterment, Wealthfront and Robinhood have also cut rates and are offering 0.40%, 0.35% and 0.30%, respectively. In other news, see Bloomberg's "Fed Is Headed for a Clash With Hedge Funds, Other Shadow Banks", which says, "The Federal Reserve and other central banks are heading for a collision with shadow lenders -- the firms with a sinister nickname that are increasingly dominating global finance. Even as policy makers struggle to reopen their economies in the midst of the coronavirous pandemic, they've launched a review of what went wrong with markets in March, when a worldwide dash for cash by investors nearly crashed the financial system and forced unprecedented rescue actions by central banks. Their focus is on loosely regulated money market and hedge funds, mortgage originators and other entities. Already, some watchdogs have pointed to highly leveraged trades involving U.S. Treasuries as one source of the turmoil."

A Prospectus Supplement filing for Dreyfus's General New Jersey Money Market Fund tells us, "The Board of Directors of General New Jersey Municipal Money Market Fund, Inc. (the 'Fund') has approved the liquidation of the Fund, effective on or about September 11, 2020 (the 'Liquidation Date'). Before the Liquidation Date, and at the discretion of Fund management, the Fund's portfolio securities will be sold and the Fund may cease to pursue its investment objective and policies. The liquidation of the Fund may result in one or more taxable events for shareholders subject to federal income tax." It explains, "Accordingly, effective on or about August 31, 2020 (the 'Closing Date'), the Fund will be closed to any investments for new accounts, except that new accounts may be established for 'sweep accounts' and by participants in group retirement plans if the Fund is established as an investment option under the plans before the Closing Date. The Fund will continue to accept subsequent investments until the Liquidation Date, except that subsequent investments made by check or pursuant to TeleTransfer or Automatic Asset Builder no longer will be accepted after August 31, 2020. However, subsequent investments by Individual Retirement Accounts and retirement plans sponsored by BNY Mellon Investment Adviser, Inc. or its affiliates (together, 'BNYM Adviser Retirement Plans') pursuant to TeleTransfer or Automatic Asset Builder (but not by check) will be accepted after August 31, 2020. Please note that checks presented for payment to the Fund's transfer agent pursuant to the Fund's Checkwriting Privilege on or after the Liquidation Date will not be honored. Fund shares held on the Liquidation Date in BNYM Adviser Retirement Plans will be exchanged for Dreyfus Class shares of General Government Securities Money Market Fund ('GGSMMF')." See also our March 25 Link of the Day, "Reuters on General NJ MMF's NAV."