Daily Links Archives: March, 2022

A recent Jason Zweig "The Intelligent Investor column in The Wall Street Journal briefly discusses "Ned Johnson (1930-2022)." He comments, "Earlier this month, Edward C. Johnson III, who built Fidelity Investments into a financial colossus, died at age 91. Along with Charles Schwab and the late Jack Bogle of Vanguard, Ned Johnson was part of the pioneering triumvirate who offered ordinary people a seat at the investing table, where traditionally only the rich had been welcome. Above all, he understood that three things would attract investors: people, performance and price. Fidelity relentlessly promoted its fund managers by name and face: Peter Lynch in the 1980s, Jeff Vinik and a host of others in the 1990s were ubiquitous guests on financial TV and cover boys for personal-finance magazines." Zweig tells us, "In a marketing masterstroke, as interest rates were shooting up in 1974, Ned Johnson pushed cheap money-market mutual funds. They appealed to investors who were afraid of stocks but disgusted by the low rates on bank accounts. Fidelity's Daily Income Trust paid upwards of 9% at a time when bank deposits yielded 5.25%. That December, when the Federal Deposit Insurance Corp. said it would cover balances at the Fidelity fund, Ned Johnson was ready. The very next day, Fidelity ran this ad in The Wall Street Journal: 'Learn how your investment in our money market trust is now insured by the FDIC'" He continues, "Money poured in, helping Fidelity survive the bear market in stocks that lasted into the early 1980s. Mr. Johnson was obsessed with the Japanese principle of kaizen: continuous gradual improvement and attention to detail. Not much escaped his attention: He even had the shrubs at one of Fidelity's facilities replanted in random clusters to look more natural."

Another recent letter posted to the SEC under its "Comments on Money Market Fund Reform" page comes from Tanguy van de Werve, Director General, European Fund and Asset Management Association (EFAMA), Trade Association. Under the headline, "EFAMA Swing Pricing Clarification," he writes, "This letter is respectfully submitted by the European Fund and Asset Management Association ('EFAMA') in response to the rules regarding money market funds ('MMFs') proposed by the Securities and Exchange Commission (SEC) on 15 December 2021 and published in the Federal Register on 8 February 2022 and is intended to clarify for the SEC's record that money market funds in Europe do not, and have not, utilized swing pricing. On page 7269 [sic] of the Proposal, in referencing the operational opposition to the application of swing pricing to MMFs, the SEC notes that '[s]ome commenters asserted that swing pricing works better in Europe due to fundamental differences between fund operations in the U.S. and Europe (i.e., earlier trading cut-off times, greater use of currency-based orders versus share- or percentage based transactions, and more direct-sold funds).' It should be clarified that commenters referenced are not referring to EU MMFs. Additionally, on page 7303 [sic] of the Proposal, in the SEC's discussion on the use of swing pricing in other jurisdiction, footnote 355 refers to the operation of swing pricing in other jurisdiction but does not clarify which jurisdictions it is referring to. We are not commenting on any other jurisdiction that the SEC may be referring to, however would like to confirm again that in Europe, MMFs do not and have not utilized swing pricing. We recognize, however, that such liquidity management tool is available for non-MMF vehicles domiciled in Europe and has been used successfully, for instance, in high-yield fixed income funds. We appreciate this opportunity to clarify for the record that swing pricing has not been applied to EU MMFs, as it is important that global policy makers not make policy determinations based on incorrect or misleading data. For further details, please contact Federico Cupelli, Deputy Director for Regulatory Policy. I thank you for your consideration and remain at your disposal. Yours sincerely, Tanguy van de Werve, Director General."

J.P Morgan recently published an article titled, "Stablecoins in an unstable world," which talks about the pros and cons of stablecoins. The article starts off, "The world has been a little busy between the Fed and geopolitical tensions in Eastern Europe, but that has not stopped the world from continuing to acclimate to digital assets. Arguably, this has even heightened the focus on cryptocurrency, including stablecoins. Indeed, even as the broader cryptocurrency market has been under pressure recently, the market capitalization of stablecoins has continued to grow, reinforcing the notion that stablecoins are the cash of crypto. According to CoinMarketCap, the top six largest stablecoin issuers alone have about $178bn in market value, up from $156bn at year-end and just $57bn a year ago.... Meanwhile, the broader cryptocurrency market has fallen by 17% YTD to a market cap of $1.8tn, roughly flat to where it was a year ago." They continue, "Given the explosive growth of stablecoins, it's not surprising that public scrutiny of this sector has intensified sharply over the past few months. Regulators are determined to regulate it. In a July 2021 FSOC meeting, Treasury Secretary Yellen 'underscored the need to act quickly to ensure there is appropriate U.S. regulatory framework in place.' In his Congressional testimony in September, Fed Chair Powell noted that 'stablecoins... [are] to some extent outside the regulatory perimeter, and it's appropriate that they be regulated.' SEC Chair Gensler further emphasized in a media interview that 'stablecoins are acting almost like poker chips at the casino right now. Without stronger overview, people get hurt.' In November 2021, a report on stablecoins from the President's Working Group on Financial Markets recommended that stablecoin issuers be regulated like banks.... In a recent opinion piece as well as in her Congressional testimony, Nellie Liang, the Under Secretary for Domestic Finance, also argued for more oversight and to regulate stablecoin issuers like banks." JPM adds, "All of this matters because the growing adoption of stablecoins could have significant implications for both banks and the broader money markets. As stablecoins become more mainstream, they could fundamentally change the way households and businesses bank given their real-time nature and the ease of digital payments. The utility and economic value of stablecoins could take away substantial funding from banks and MMFs, and potentially influence the implementation of monetary policy. The competitive landscape for banks and MMFs could also dramatically change as alternatives such as CBDCs and/or tokenized deposits surface. Arguably, from a markets perspective, this could structurally widen the Libor/Bills spread. In this note, we take a look at what stablecoins are, and what they are not. We focus on the similarities and differences among stablecoins, deposits, and MMFs. From there, we assess how regulating stablecoins like banks could have implications for the money markets and the banking system."

J.P. Morgan Asset Management recently published the piece, "Rising Rates: Managing liquidity through periods of rising interest rates," which tells us, "Rising rate environments can challenge even the most sophisticated fixed income investor. Considering the current market juncture and its potential impact on liquidity management and fixed income portfolios, we believe analyzing historical rising rate periods can provide a valuable perspective to investors. We make these key observations: (1) When interest rates rise, the market value of previously issued fixed coupon bond holdings will fall as investor demand shifts to new, higher-yielding bonds. But not all securities are created equal. (2) Bonds with shorter maturities, floating interest rates and/or higher yields should experience less dramatic price declines, and even potential price increases if demand for them outpaces supply available. (3) During periods of rising interest rates and stable credit conditions, investors shortening duration could benefit from not only better overall total returns but also, and possibly equally importantly, reduced volatility in their portfolios. This paper examines the risks of -- and opportunities in -- rising rates. We explore prior rising rate periods, using indexes as proxies to illustrate how various fixed income strategies performed and outline strategies and solutions to better insulate a short-term fixed income portfolio in a rising rate environment." Discussin "Analyzing recent interest rate cycles," the paper says, "Investors anticipating a reduction of monetary stimulus may benefit from a review of the four major periods of monetary tightening and rising interest rates that occurred over the last 30 years, as the direction of interest rates is a critical determinant of the performance of fixed income securities. As rates fall and rise in cycles, bond markets can turn from boom to bust, creating or hurting investment value in a sometimes unpredictable fashion. When interest rates fall, previously issued fixed-coupon securities will typically increase in market value. When rates are rising, those same securities will decrease in value. All four rising rate periods saw both U.S. Federal Reserve target rate (fed funds) and U.S. Treasury (UST) yields increase. In periods 2 and 3, the markets were able to anticipate and price in the tightening of monetary policy before the fed funds target rate moved. This is evidenced in the rise of UST yields roughly nine and 12 months prior to monetary policy tightening in each respective period. The 1994 tightening caught markets off guard, as both the fed funds target rate and UST yields began to move higher at about the same time. And, in period 4, the low-growth, low-inflation environment led the U.S. Federal Reserve (the Fed) to start the cycle extremely slowly with only one hike per year in 2015 and 2016, muting initial yield changes on term Treasuries, before speeding up the pace in subsequent years, causing yields to rise further out on the yield curve."

The Wall Street Journal writes "Edward 'Ned' Johnson, Former Fidelity CEO, Dies." The piece explains, "Edward 'Ned' Johnson III, who transformed Fidelity Investments into a financial behemoth and opened Wall Street to millions of Americans, died Wednesday. Mr. Johnson was 91 years old.... Fidelity was the first to offer a money-market fund that let investors write checks on their holdings." The piece adds, "Fidelity made its first direct contact with Main Street in 1974 with its new money-market fund offering. The firm launched its brokerage in 1978, and in 1982 started selling retirement accounts to U.S. companies. In 1995, Fidelity became the first major investment firm with a website." The Boston Globe, in "Edward C. Johnson III dies; his leadership of Fidelity helped transform investing," writes, "Mr. Johnson led the Boston investment giant for about four decades, helping grow the sums Fidelity invested for customers from $3.9 billion to $4.5 trillion. In a city known for its many financial companies, Fidelity towered above them all under his leadership.... Mr. Johnson decided Fidelity needed something other than stock funds. That turned out to be Fidelity Daily Income Trust, a money market fund that came with an unusual feature: Customers could write checks on their money market accounts. Mr. Johnson also believed Fidelity could sell more shares of the new money market fund by bypassing brokers and appealing directly to investors. Newspaper ads promoted the new money market, and the phones began to ring at Fidelity. Even Mr. Johnson took orders from callers." They add, "Fidelity became a big competitor in the money market business but hit its real stride when the stock market took off in the early 1980s. Mr. Johnson gave successful stock fund managers the freedom to become investment stars, pulling in hundreds of millions of dollars from individual investors who wanted a piece of the market."

The Federal Reserve Bank of New York has once again updated its list of "Reverse Repo Counterparties." The statement says, "Prudential Investment Portfolios 2 - PGIM Institutional Money Market Fund has been added to the list of reverse repo counterparties, effective March 22, 2022." The NY Fed's current list of "Money Market Funds" now includes: AllianceBernstein: AB Fixed-Income Shares, Inc., AB Government Money Market Portfolio; Allspring Funds Management: Allspring Government Money Market Fund, Allspring Heritage Money Market Fund, Allspring Money Market Fund and Allspring Treasury Plus Money Market Fund; BlackRock Liquidity Funds: FedFund, T-Fund, TempCash, TempFund, Money Market Master Portfolio and Treasury Money Market Master Portfolio; BNY Mellon Investment Adviser: Dreyfus Cash Management, Dreyfus Government Cash Management, Dreyfus Institutional Preferred Government Money Market Fund, Dreyfus Treasury and Agency Liquidity Money Market Fund, Dreyfus Treasury Obligations Cash Management; Capital Research and Management Company: American Funds U.S. Government Money Market Fund and Capital Group Central Fund Series, Capital Group Central Cash Fund; Charles Schwab Investment Management: Schwab Government Money Fund, Schwab Treasury Obligations Money Fund, Schwab Value Advantage Money Fund and Schwab Variable Share Price Money Fund; Columbia Management Investment Advisers: Columbia Short-Term Cash Fund, a series of Columbia Funds Series Trust II; Deutsche Investment Management Americas: Government Cash Management Portfolio; Dimensional Fund Advisors LP: The DFA Short Term Investment Fund of The DFA Investment Trust Company; Federated Investment Management: Edward Jones Money Market Fund, Federated Hermes Capital Reserves Fund, Federated Hermes Government Obligations Fund, Federated Hermes Government Obligations Tax-Managed Fund, Federated Hermes Government Reserves Fund, Federated Hermes Inst Prime Obligations Fund, Federated Hermes Inst Prime Value Obligations Fund, Federated Hermes Municipal Obligations Fund, Federated Hermes Prime Cash Obligations Fund, Federated Hermes Tax-Free Obligations Fund, Federated Hermes Treasury Obligations Fund, Federated Hermes Trust for U.S. Treasury Obligations and Federated Hermes U.S. Treasury Cash Reserves; Fidelity Management & Research Company: Fidelity Colchester Street Trust: Government Portfolio, Fidelity Colchester Street Trust: Money Market Portfolio, Fidelity Colchester Street Trust: Treasury Portfolio, Fidelity Hereford Street Trust: Fidelity Government Money Market Fund, Fidelity Hereford Street Trust: Fidelity Money Market Fund, Fidelity Newbury Street Trust: Fidelity Treasury Money Market Fund, Fidelity Phillips Street Trust: Fidelity Government Cash Reserves, Fidelity Revere Street Trust: Fidelity Cash Central Fund, Fidelity Revere Street Trust: Fidelity Securities Lending Cash Central Fund, Fidelity Salem Street Trust: Fidelity Series Government Money Market Fund and VIP Government Money Market Portfolio; Franklin Advisers: The Money Market Portfolio; Goldman Sachs Asset Management: Goldman Sachs Financial Square Government Fund, Goldman Sachs Financial Square Money Market Fund, Goldman Sachs Financial Square Prime Obligations Fund, Goldman Sachs Financial Square Treasury Obligations Fund and Goldman Sachs Financial Square Treasury Solutions Fund; HSBC Global Asset Management (USA): HSBC U.S. Government Money Market Fund; Invesco Advisers: STIT Government and Agency Portfolio and STIT Treasury Portfolio; J.P. Morgan Investment Management: JPMorgan Liquid Assets Money Market Fund, JPMorgan Prime Money Market Fund, JPMorgan Tax Free Money Market Fund, JPMorgan U.S. Government Money Market Fund and JPMorgan U.S. Treasury Plus Money Market Fund; Legg Mason Partners Fund Advisor: Western Asset/Government Portfolio, Western Asset/Liquid Reserves Portfolio and Western Asset/U.S. Treasury Reserves Portfolio; Morgan Stanley Investment Management: Morgan Stanley Institutional Liquidity Funds Government Portfolio, Morgan Stanley Institutional Liquidity Funds Government Securities Portfolio, Morgan Stanley Institutional Liquidity Funds Prime Portfolio, Morgan Stanley Institutional Liquidity Funds Treasury Portfolio and Morgan Stanley Institutional Liquidity Funds Treasury Securities Portfolio; Northern Trust Investments: NTAM Treasury Assets Fund, Northern Funds - U.S. Government Money Market Fund, Northern Funds - U.S. Government Select Money Market Fund, Northern Institutional Funds - Government Portfolio, Northern Institutional Funds - Government Select Portfolio and Northern Institutional Funds - Treasury Portfolio; Pacific Investment Management Company LLC: PIMCO Funds: PIMCO Government Money Market Fund; PGIM Investments LLC: Prudential Investment Portfolios 2 - PGIM Institutional Money Market Fund; Principal Global Investors, LLC: Principal Funds, Inc. - Government Money Market Fund; RBC Global Asset Management (U.S.): RBC Funds Trust, U.S. Government Money Market Fund; SSgA Funds Management: Institutional Liquid Reserve Portfolio, Institutional US Gov. Money Market Fund, a series of the State Street Master Funds, State Street Navigator Securities Lending Government Money Market Portfolio and State Street Treasury Plus Money Market Portfolio; T. Rowe Price Associates: T. Rowe Price Government Money Fund, Inc., T. Rowe Price Government Reserve Fund, T. Rowe Price Treasury Reserve Fund and T. Rowe Price U.S. Treasury Money Fund; UBS Asset Management (Americas): Government Master Fund, Limited Purpose Cash Investment Fund, Prime Master Fund and Treasury Master Fund; U.S. Bancorp Asset Management: First American Government Obligations Fund and First American Treasury Obligations Fund; The Vanguard Group: Vanguard Treasury Money Market Fund, Vanguard Market Liquidity Fund and Vanguard Cash Reserves Federal Money Market Fund; and Wilmington Funds Management: Wilmington U.S. Government Money Market Fund. The NY Fed describes the "Eligibility criteria of the program, "In order to be eligible to become a reverse repo counterparty, a firm must be either: A state or federally chartered bank or savings association (or a state or federally licensed branch or agency of a foreign bank) with total assets equal to or greater than $30 billion, or reserve balances equal to or greater than $10 billion on the last quarter for which relevant reports are available; or A government-sponsored enterprise; or An SEC-registered 2a-7 fund that has, measured at each month-end for the most recent six consecutive months, either net assets of no less than $2 billion or an average outstanding amount of RRP transactions of no less than $500 million. Firms must already have arrangements in place to operate in the triparty repo market, in transactions collateralized by U.S. government debt, agency debt and agency mortgage-backed securities. Firms must be able to execute RRPs with securities margined at 100% (i.e. the value of the securities provided by the New York Fed will equal the funds provided by the counterparty)." (See here for the NY Fed's latest "Repo and Reverse Repo Operations".)

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 March 18) includes Holdings information from 57 money funds (down from 71 a week ago), which represent $1.772 trillion (down from $2.561 trillion) of the $4.980 trillion (35.6%) in total money fund assets tracked by Crane Data. (Our Weekly MFPH are e-mail only and aren't available on the website. See our March 10 News, "March MF Portfolio Holdings Flat: Repo Inches Higher, Treasuries Lower," for more.) Our latest Weekly MFPH Composition summary again shows Government assets dominating the holdings list with Repurchase Agreements (Repo) totaling $851.4 billion (down from $1.232 trillion a week ago), or 48.1%; Treasuries totaling $706.3 billion (down from $1.022 trillion a week ago), or 39.9%, and Government Agency securities totaling $119.1 billion (down from $134.1 billion), or 6.7%. Commercial Paper (CP) totaled $36.2 billion (down from a week ago at $61.7 billion), or 2.0%. Certificates of Deposit (CDs) totaled $16.2 billion (down from $38.7 billion a week ago), or 0.9%. The Other category accounted for $28.8 billion or 1.6%, while VRDNs accounted for $14.0 billion, or 0.8%. The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $706.3 billion (39.9% of total holdings), the Federal Reserve Bank of New York with $519.2B (29.3%), Fixed Income Clearing Corp with $57.4B (3.2%), Federal Home Loan Bank with $52.9B (3.0%), Federal Farm Credit Bank with $43.0B (2.4%), BNP Paribas with $29.5B (1.7%), RBC with $26.0B (1.5%), Societe Generale with $23.7B (1.3%), Barclays PLC with $22.7B (1.3%) and JP Morgan with $17.7B (1.0%). The Ten Largest Funds tracked in our latest Weekly include: BlackRock Lq FedFund ($164.4B), Morgan Stanley Inst Liq Govt ($145.3B), Allspring Govt MM ($132.3B), Fidelity Inv MM: Govt Port ($128.8B), BlackRock Lq Treas Tr ($121.7B), Dreyfus Govt Cash Mgmt ($116.0B), BlackRock Lq T-Fund ($112.7B), First American Govt Oblg ($88.7B), State Street Inst US Govt ($86.2B), and Invesco Govt & Agency ($75.4B). (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.)

Barron's writes that "Cash-Rich Berkshire Hathaway, Apple, and Alphabet Should Gain From Higher Rates." They tell us, "With its enormous cash reserves now earning next to nothing, Berkshire Hathaway could be one of the bigger corporate beneficiaries of the Federal Reserve's expected moves to raise short-term interest rates to about 2% by year-end. The company's earnings in 2023 could rise about 8% simply from the higher yields on its cash, Barron's estimates. Other big companies that should gain are cash-rich Apple (AAPL) and Alphabet (GOOGL). Apple had $203 billion of cash and equivalents at year-end 2021, and Alphabet was sitting on $139 billion. Apple could be earning $4 billion more on its cash by 2023 and Alphabet nearly $3 billion. Higher interest income could boost Apple's net income by about 3% next year, and Alphabet's earnings may get a 4% lift." The Barron's piece explains, "`Berkshire Hathaway (BRK.A and BRK.B) had $144 billion of cash and equivalents at the end of 2021, excluding about $2.8 billion of cash held at its railroad and utilities businesses. Berkshire could be earning $3 billion annually on its cash by the end of this year against an estimated $150 million in 2021 given that the company keeps the bulk of its cash in supersafe Treasury bills, which yielded around 0.1% during 2021.... Berkshire CEO Warren Buffett takes no chances with Berkshire's cash. He has been willing to forgo some investment income by holding Treasury bills rather than higher yielding commercial paper or other short-term instruments. T-bills accounted for $120 billion of Berkshire's $144 billion of cash at year-end, according to Buffett's annual shareholder letter." The article adds, "With Federal Reserve monetary policy makers anticipating that the benchmark federal-funds rate will be about 2% by year-end and moving toward 2.5% or higher in 2023, Berkshire stands to earn $3 billion or more on its cash in 2023. Earlier this week, the Fed lifted its target rate on the fed-funds by a quarter percentage point, to a range of 0.25% from 0.50% in the first of what could be seven rate increases this year. The anticipated moves could lift Berkshire's net earnings by $2.25 billion (assuming a 25% total tax rate) in 2023, or 8%, relative to the $27.5 billion that the company netted after taxes from operations in 2021. There should be a favorable impact this year as well on Berkshire’s earnings. If Treasury bill rates average 1%, Berkshire's earnings could get lift of more than $1 billion in 2022. That assumes that Berkshire continues to hold so much cash."

Mutual fund news source ignites published "Fed Rate Hike Is 'Fantastic News' for Money Funds Friday, which explains, "The Federal Reserve's interest rate hike is expected to translate into greater money market fund revenue for firms. The Fed announced Wednesday that it would boost its target federal funds rate to between 0.25% and 0.50%. In addition, the 'dot plot' of individual Fed members' projections showed that their median expectation is for short-term rates to reach 1.9% by the end of this year and 2.8% in 2023, which would result in even more money fund revenue." They write, "This week's rate hike is 'fantastic news for money market fund managers' because it means that their revenue just increased substantially, said Pete Crane, chief executive of Crane Data. Additional rate hikes 'will be good news for money fund investors,' he said. Crane Data in late December forecast about $4 billion in industrywide annualized money fund revenue. The forecast rose to $5.8 billion as of Feb. 28, and with Wednesday's rate hike it will likely grow to $6 billion or even $7 billion by the end of this week, Crane said." The ignites piece continues, "The 25-bp rate increase and attendant bump up in yield will allow money fund shops to begin unwinding the fee waivers that most products instituted when the Fed slashed rates twice in March 2020, to near zero, due to the economic slowdown spurred by the pandemic. Money market fund shops waived about $8.4 billion in fees last year, a 171% increase compared to 2020, Investment Company Institute data shows. Average money fund assets last year were $4.5 trillion, up 4.7% from 2020, as reported. Last year marked the highest amount of fee waivers since 2014, when interest rates were similarly at near-zero levels and money funds waived about $6.3 billion in fees, according to ICI data. Some 97% of money fund share classes waived expenses last year, ICI data shows, up slightly from the prior year." The article adds, "BNY Mellon predicted in January that it could cut its fee waivers in half with a 25-bp rate hike.... 'From an industry perspective, even this modest action should go a long way to providing relief to fee waivers and returning to an environment in which investors in liquidity products can earn higher returns,' wrote Susan Hill, senior PM and head of Federated Hermes' government liquidity group.... Money funds typically charge 30 bps in expenses, Crane said, but as of January, they were charging about 9 bps. 'They're going to be charging 20 [bps] by next week and probably 30 [bps] in another month,' Crane said. 'They'll quickly get back to where they were.'"

The New York Times writes "What a Federal Reserve Rate Increase Means for You." The article states, "By increasing its benchmark rate a quarter of a point on Wednesday, the Federal Reserve is trying to rein in inflation, which is at a 40-year high. The mechanics are relatively straightforward: By raising its federal funds rate -- the rate banks charge one another for overnight loans -- the Fed sets off a domino effect. Whether directly or indirectly, a number of borrowing costs for consumers go up. In theory, this slows demand for goods and taps the brakes on inflation. The rate increase was the first bump in the benchmark rate since the pandemic gripped the world in March 2020 and pushed the rate to near zero." It explains, "Many people stashed extra money in their bank accounts over the past couple of years, but whether rate increases translate into a more attractive yield depends on the type of account you have and the institution you’re doing business with. An increase in the Fed benchmark often means banks will pay more interest on deposits -- but not necessarily right away. Banks tend to raise rates when they want to bring more money in, but the largest banks already have plenty of deposits. That gives them little incentive to pay depositors more. Smaller banks and online banks tend to pay better rates more quickly than larger institutions, according to Ken Tumin, founder of DepositAccounts.com, part of LendingTree. And some of them, particularly the savings arms of credit-card banks including Capital One and American Express, have already begun increasing their rates a bit, he added." The Times piece adds, "But overall, rates remain quite low. The average online savings account was paying just 0.49 percent in March, according to DepositAccounts.com; the average was 0.48 a year ago. At brick-and-mortar banks, the average savings account paid 0.12 percent in March, down slightly from 0.15 the year prior. Certificates of deposit, which tend to track similarly dated Treasury securities, have already begun to move a bit higher, particularly among online banks: The average one-year C.D. at online banks is 0.67 percent in March, up from 0.51 percent in January, while the average five-year C.D. is 1.08 percent, up from 0.86 percent in January. Most money market mutual funds, which tend to hold lower-risk investments like short-term government securities, are also expected to rise, albeit from a rock-bottom rate. Most money market fund yields are below 0.02 percent. 'They usually respond fairly quickly to changes in the federal funds rate,' Mr. Tumin said."

The Federal Reserve lifted short-term interest rates for the first time in three years, bringing a huge sigh of relief to the money market mutual fund industry, which had been waiving a big percentage of their fees to keep yields above zero. A release entitled, "Federal Reserve issues FOMC statement," tells us, "Indicators of economic activity and employment have continued to strengthen. Job gains have been strong in recent months, and the unemployment rate has declined substantially. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures. The invasion of Ukraine by Russia is causing tremendous human and economic hardship. The implications for the U.S. economy are highly uncertain, but in the near term the invasion and related events are likely to create additional upward pressure on inflation and weigh on economic activity." The Fed explains, "The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With appropriate firming in the stance of monetary policy, the Committee expects inflation to return to its 2 percent objective and the labor market to remain strong. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 1/4 to 1/2 percent and anticipates that ongoing increases in the target range will be appropriate. In addition, the Committee expects to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities at a coming meeting." They add, "In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments." A separate posting, entitled, "Federal Reserve Board and Federal Open Market Committee release economic projections from the March 15-16 FOMC meeting," comments, "In conjunction with the Federal Open Market Committee (FOMC) meeting held on March 15–16, 2022, meeting participants submitted their projections of the most likely outcomes for real gross domestic product (GDP) growth, the unemployment rate, and inflation for each year from 2022 to 2024 and over the longer run. Each participant's projections were based on information available at the time of the meeting, together with her or his assessment of appropriate monetary policy -- including a path for the federal funds rate and its longer-run value -- and assumptions about other factors likely to affect economic outcomes." The median Fed funds rate projections are 0.9% for December 2022, 1.6% for December 2023, 2.1% for December 2024 and 2.5% over the longer run. We should see money market mutual fund yields begin rising tomorrow, though the increase in net yields will no doubt be muted by the unwinding of temporary fee waivers.

Fitch Ratings published "Local Government Investment Pools: 4Q21," which tells us, "Fitch Ratings' two local government investment pool (LGIP) indices experienced asset increases in the fourth quarter of 2021 (4Q21). This gain was driven by the tax collection season and follows seasonal asset losses during 3Q21. Much of the coronavirus-related stimulus moneys deposited by public sector entities into LGIPs since the pandemic began have been withdrawn for earmarked projects. Combined assets for the Fitch Liquidity LGIP Index and the Fitch Short-Term LGIP Index were $448 billion at the end of4Q21, representing increases of $34 billion qoq and $58 billion yoy. The Fitch Liquidity LGIP Index was up 5% qoq and the Fitch Short-Term LGIP Index was up 17% qoq, compared to average growth of 9% and 17%, respectively, in the fourth quarter over the past three years." The report explains, "The Fitch Liquidity LGIP Index and the Fitch Short-Term LGIP Index ended the quarter with average net yields of 0.05%, an increase of 1 basis point (bp) qoq, and 0.59%, down 1 bp qoq, respectively. Compared to the previous quarter, yields remain relatively unchanged; however, Fitch expects market yields next quarter to increase more rapidly as monetary policy tightening begins with expectations for multiple rate hikes in 2022. Rates have already begun to rise given such market expectations, with three-month U.S. Treasury bills yielding 0.32% as of March 1, 2022, up from 0.06% as of Dec. 31, 2021." Fitch adds, "The trend of longer weighted average maturities (WAMs) and durations observed in recent years is beginning to reverse as interest rate increases approach. The WAM of the Fitch Liquidity LGIP Index decreased to 45 days, down three days qoq but still higher than money market funds (MMFs) at 34 days, while the duration of the Fitch Short-Term LGIP Index ticked down to 1.18 years, a small decrease from 1.29 years at the end of 3Q21. Fitch expects durations to continue to decline."

A press release entitled, "Citi Launches New U.S. Deposit Sweep Solution for Institutional Clients," explains, "Building on its history of innovation in cash management, Citi's Treasury and Trade Solutions today announced the launch of a new solution to allow institutional clients (Corporate, Public Sector, and Financial Institution) with U.S. accounts to sweep cash into demand deposit accounts at participating U.S. branches of non-U.S. banks. Offered via IntraFi Network's Yankee Sweep service, Citi's institutional clients now have additional flexibility to diversify their deposits across multiple institutions while enjoying an opportunity for enhanced yields. For treasury organizations, key aspects of effective liquidity management include managing risk, counterparty exposure, daily liquidity, and optimizing yield. In order to achieve these objectives, organizations would need to manage cash across multiple banks and/or money market funds. With Citi's new solution, institutional clients now have access to a more streamlined experience to help them diversify their counterparty risk and maximize yields with the additional safety and security provided by a deposit solution." Michael Berkowitz, North America Head of Liquidity Management at Citi's Treasury and Trade Solutions comments, "Citi is pleased to be the first bank in the U.S. to launch this solution in partnership with IntraFi, one of the most innovative companies in the FinTech Liquidity Management space. The new capabilities will help our clients balance competing demands for returns, risk management, and daily liquidity while simplifying the process to diversify their counter-party exposure." IntraFi Network CEO Mark Jacobsen adds, "IntraFi is pleased to be working with Citi as the first provider of the Yankee Sweep solution.... The new solution will give Citi the opportunity to offer clients even greater utility when managing their liquidity."

We're now just two weeks away from our Bond Fund Symposium conference, which will take place live and in person in Newport Beach, Calif., March 28-29! We're still taking registrations, and discounts or "comp" tickets are available to large clients and portfolio managers. (Ask Pete for details.) Bond Fund Symposium is the only conference devoted entirely to bond mutual funds, bringing together bond fund managers, marketers, and professionals with fixed-income issuers, investors and service providers. It offers a concentrated and affordable educational experience, as well as an excellent networking venue, for bond fund and fixed-income professionals. A block of rooms has been reserved at the Hyatt Regency. We'd like to thank our sponsors -- Bank of America, Northern Trust, Federated Hermes, UBS Asset Management, Morgan Stanley IM, Dreyfus, Fitch Ratings, J.P. Morgan, S&P Global Ratings, StoneX, Toyota, Invesco and Bloomberg Intelligence -- for their support. E-mail us for more details, and we look forward to seeing you in California soon! Also, start gearing up for our big show, Money Fund Symposium, which is June 20-22 in Minneapolis, Minn. Registration is $750, and discounted hotel reservations are available. We hope you'll join us in Minneapolis this June! Finally, mark your calendars for our next European Money Fund Symposium, which is scheduled for Sept. 27-28, 2022, in Paris, France and for our next Money Fund University, which is scheduled for Dec. 15-16, 2022, in Boston, Mass. Let us know if you'd like more details on any of our events, and we hope to see you in Newport Beach late this month, in Minneapolis in June or in Paris or Boston later in 2022!

The Investment Company Institute's latest "Money Market Fund Assets" report shows assets falling sharply after a huge jump last week. Year-to-date, MMFs are down by $130 billion, or -2.8%, with Institutional MMFs down $145 billion, or -4.5% and Retail MMFs up $16 billion, or 1.1%. Over the past 52 weeks, money fund assets have increased by $183 billion, or 4.2%, with Retail MMFs falling by $27 billion (-1.8%) and Inst MMFs rising by $211 billion (7.3%). ICI's weekly release says, "Total money market fund assets decreased by $30.48 billion to $4.58 trillion for the week ended Wednesday, March 9, the Investment Company Institute reported.... Among taxable money market funds, government funds decreased by $26.45 billion and prime funds decreased by $4.00 billion. Tax-exempt money market funds decreased by $35 million." ICI's stats show Institutional MMFs decreasing $31.9 billion and Retail MMFs increasing $1.4 billion in the latest week. Total Government MMF assets, including Treasury funds, were $4.065 trillion (88.8% of all money funds), while Total Prime MMFs were $429.1 billion (9.3%). Tax Exempt MMFs totaled $85.2 billion (1.9%). ICI explains, "Assets of retail money market funds increased by $1.44 billion to $1.48 trillion. Among retail funds, government money market fund assets increased by $2.19 billion to $1.21 trillion, prime money market fund assets decreased by $638 million to $198.09 billion, and tax-exempt fund assets decreased by $116 million to $75.63 billion." Retail assets account for just under a third of total assets, or 32.4%, and Government Retail assets make up 81.6% of all Retail MMFs. They add, "Assets of institutional money market funds decreased by $31.92 billion to $3.09 trillion. Among institutional funds, government money market fund assets decreased by $28.64 billion to $2.85 trillion, prime money market fund assets decreased by $3.36 billion to $227.01 billion, and tax-exempt fund assets increased by $81 million to $9.59 billion." Institutional assets accounted for 67.6% of all MMF assets, with Government Institutional assets making up 92.3% of all Institutional MMF totals. (Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data, so they're almost $400 billion lower than Crane's asset series.)

Allspring Money Market Funds' latest "Portfolio Manager Commentary," tells us, "Against a backdrop of risk assets underperforming due to the prospect of Fed rate hikes coupled with the Russian invasion of Ukraine, money markets have exhibited relative calm, providing investors a valuable way to limit long duration and credit exposure by participating in the front end of the rate and credit curve. In the money fund universe, weighted average maturities have come down recently to capture the potential impact of the FOMC raising rates, while widening credit spreads out the curve haven't had a meaningful effect on money market securities. The yield pick-up from one-month to six-month London Interbank Offered Rate (LIBOR) was roughly 25 bps at the end of the year but has since widened to almost 60 bps on expectations of the FOMC actively removing monetary accommodation." It also says, "We tend to take a conservative approach when constructing our portfolios and favor keeping excess liquidity over the stated regulatory requirements, running shorter weighted-average maturities and looking to extend if the opportunity offers a favorable risk/reward proposition. This additional liquidity buffer enhances our ability to meet liquidity needs of our investors and helps stabilize net asset value (NAV) volatility, while still allowing us to opportunistically add securities to lock in higher yields if the opportunity arises." On "Municipal money markets," Allspring writes, "The municipal markets continued to exhibit overall softness as both long-term and money market funds experienced moderate outflows again this month. Demand for overnight variable-rate demand notes (VRDNs) and tender option bonds (TOBs) remained exceptionally strong as buyers stayed focused on maintaining high degrees of liquidity during bouts of volatility this month. Rates on overnight paper closed out the month at 0.09%, down from 0.12% in January. However, further out on the curve, rates experienced a significant backup. The Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Index gradually rose to 0.20% at month-end, up from 0.06% the prior month. Secondary inventory of VRDNs and TOBs remained at elevated levels, and rates on high-grade tax exempt commercial paper rose roughly 20 to 30 bps during the month, with yields ranging from 0.30% to 0.50% in the two-month and three-month space.... During the month, we continued to focus our purchases primarily in VRDNs and TOBs with daily and weekly put options, in order to preserve principal and provide ample fund liquidity. Our funds benefitted from their large exposures to SIFMA-based floaters as rates rose throughout the month. Additionally, we remained highly selective in our fixed-rate purchases further out on the curve as the outlook for monetary policy remained uncertain."

CFO Magazine writes, "SEC Tries to Patch Money Market Rules." They ask, "Will the newest round of money market fund reforms from the Securities and Exchange Commission cause corporate treasurers to ditch the vehicles as a parking place for excess cash? Last December, the SEC proposed its third set of money market reforms in a decade-and-a-half. Like previous changes, the new rules are intended to 'enhance the resiliency of this crucial $5 trillion asset class during periods of stress,' as SEC Chief Gary Gensler put it. The rules deal with fund liquidity levels, changing who bears the costs when there's a flood of investor redemptions, and removing some safety mechanisms established a few years ago. The SEC tinkered with money market fund rules since the financial crisis, and most of the rules have made prime money market funds less attractive to institutional investors." The article explains, "Money market funds once seemed to be the perfect short-term investing vehicle to invest excess corporate cash because they offered stability of principal, diversification, and daily liquidity. Over the years, though, corporate treasurers have allocated a smaller portion of excess cash to prime funds. On average, companies had about 5% of their short-term cash in prime or diversified money market funds in 2021, according to the AFP's annual liquidity survey. That compared with 52% in bank deposits and 17% in government or Treasury money market funds." It adds, "If the rules are approved, the higher liquidity levels in prime funds may compress yields and drive investors into treasury and government MMFs, according to Fitch Ratings. The swing pricing requirement, however, is the real potential thorn in the industry's side. That requirement 'would likely entail significant operational complexity, which could discourage investors from buying the funds and managers from operating them,' said Fitch.... SEC Commissioner Hester Pierce, who in December called the reform proposals too prescriptive, predicted swing pricing would drive more prime fund money into government funds, 'leaving investors, issuers of commercial paper, and markets worse off.'"

The U.K.-based Association of Corporate Treasurer's (ACT) and HSBC Asset Management announced the launch of "The Treasurer's Global Cash Investment Resource Hub." An e-mail notice tells us, "We are delighted to bring you a new library of resources from the ACT and HSBC Asset Management. The online successor to the 2019 printed guide, on our new Hub you can find a comprehensive overview of the professional investment of corporate cash. Our resource material is designed to guide treasurers through the complexities of developing and implementing an investment policy, and to help refine policies for those who already have an investment strategy in place. We also explore in-depth the key factors that affect investment decision making. Throughout the year we will hold a series of roundtable discussions with senior treasurers, and continue to add resources to the Hub each month." The first article posted is entitled, "Time to get proactive." Written by Jonathan Curry, CIO of HSBC Asset Management, it explains, "Liquidity and cash management have, of course, always been a critical component of a treasurer's responsibilities. However, as uncertainty continues to influence the global economic outlook, treasury departments will not only have to continue to carefully manage their cash, but at the same time also find suitable risk-adjusted returns on excess funds. While some major central banks have started the process of unwinding stimulus, short-term interest rates are still expected to remain low in historic terms, even if above the current ultra-low levels that treasurers have had to navigate for many years." Curry comments, "Whatever the prevailing market conditions, the fundamental principles for a treasurer remain the same: managing the risks associated with investing cash both in terms of the preservation of capital and maintaining sufficient liquidity. Unfortunately, in the recent climate, seeking liquidity and capital preservation while earning enhanced yields is complex, to say the least. An added challenge is the growing interest in sustainable investment solutions.... The search for sustainably invested solutions presents an opportunity for treasurers to align their treasury operations with their organisation's wider sustainability objectives. However, this is complicated by pervading claims over 'greenwashing' and a current lack of consistency in determining how exactly these solutions define and achieve sustainable objectives." The piece adds, "[E]nsuring access to near-term liquidity will likely still be at the forefront of the treasurer's priorities. At the same time, they will need to work to counter the impact of low and negative yields, through optimising the level of surplus cash on the balance sheet and in some cases by looking for new cash investment solutions where appropriate.... As has been the case in many areas of financial markets and related activity, money market funds (MMFs) have not been immune to regulation since the global financial crisis. The impact of the pandemic on markets has refocused regulator attention on the efficient operation of financial markets, with added focus on MMFs that access those markets on behalf of their investors. Regulatory reviews and consultations were launched in 2021 with participant stakeholders, both in the US and the EU. Treasurers who typically prize the current structure and utility value of MMFs will need to be aware of any resulting legislative changes and understand if or how that impacts them."

J.P Morgan's latest "Short-Term Market Outlook and Strategy" discusses "Precautionary liquidity" over the invasion of Ukraine. They write, "Price action in the US funding markets was volatile over the past week. The announcement of the sanctions on Russia unleashed fears of a funding crisis possibly similar to those in September 2008 and March 2020. On Monday, spreads in the FX and cross-currency basis markets opened sharply wider, as did the CP/CD market. But while the FX and cross-currency basis markets retraced nearly all of their spread widening by week's end, funding costs in CP/CD continued to climb.... In contrast, price action in the repo markets was stable." The piece tells us, "While it's tempting to compare the events of this past week to prior liquidity crises, we believe the sharp rise in funding costs is not a reflection of a lack of liquidity in the marketplace. In fact, there is plenty of it, as evidenced by the $1.5tn at the Fed's RRP and $4tn of reserves sitting on bank balance sheets. Prime MMF AUMs also held steady at $800bn, an indication of stable liquidity. That is, shareholders are not running for the exits as we saw in 2008 and 2020, which resulted in a massive pullback in USD lending. Instead, the price action of this past week is a reflection of precautionary liquidity. As we noted previously, we believe the direct linkages between Russia and the financial markets are limited, though we acknowledge there could be more exposures beyond what the Central Bank of Russia and BIS tell us. According to our European bank equity strategists, their initial assessment is that Russia is not a capital at-risk event, equal to about 5-10% of Lehman risk, even with their expectation of losses to come.... As a result, they believe the overall capital impact from higher Russian provisioning remains manageable." Authors Teresa Ho, Alex Roever and Holly Cunningham continue, "Even so, rising geopolitical risks and the potential impact on banks from a capital and earnings perspective are prompting banks to preemptively raise more funding. Moreover, even given the course of events this past week, the Fed seems set on tightening and draining liquidity (albeit from high levels). Overall, banks are being prudent by actively raising excess cash, with a focus on term. This is particularly the case among the Nordic and Canadian banks.... Unfortunately, the sudden increase in term funding was met with an investor base that has been defensive since the start of the year, and remained so as they tried to assess the economic implications in the US and what those might mean for the Fed. Indeed, prime MMFs have been shortening their WAMs since the beginning of the year on the prospect of a potential 50bp hike.... Chair Powell's testimony this week confirmed this is unlikely in March, but left the door open for more aggressive action down the road. Furthermore, the rapid ascent in yields over the past 6 months is already having an impact on portfolio NAVs as they trend closer to par.... As a result, there is limited interest for investors to commit out the curve (1y SOFR FRNs widened 20bp week over week) and risk a further drawdown in NAVs. Looking ahead, until we see more clarity with the situation in Ukraine and the sanctions on Russia, the need for banks to raise term funding might persist." They add, "That said, we think the knee-jerk reaction to raise term funding at once might be behind us, as we're seeing signs of stability in the FX and cross-currency basis markets. We're also starting to see money market investors being more opportunistic with term trades. Still, it might take a few more weeks for spreads to stabilize as we head into a period of high bank CP/CD maturities and quarter-end."

The March issue of the Independent Advisor for Vanguard Investors' features a brief entitled, "Cash Climbs." They write, "You won't get rich on money market yields, but at least they're rising from the near-zero bound of 0.01% that we've all been frustrated by for so long. At February's end, the seven-day yield on Treasury Money Market stood at a relatively mouth-watering 0.09% while its taxable siblings were still posting 0.01% yields. Vanguard's municipal money funds yielded between 0.02% and 0.07%." The newsletter tells us, "Obviously, rising money market yields are a direct result of traders' expectations that the Federal Reserve will be hiking short-term interest rates in the very near future.... [Y]ields began rising shortly before or shortly after the Fed's first rate hike following the Great Financial Crisis in December 2015. Vanguard's money markets team's investments in floating rate securities and shortened maturities generated higher yields. The yield advantages led Vanguard to end its fee waivers, totaling some $123 million, sometime between Aug. 2015 and Feb. 2016." It adds, "Right now, Vanguard is still waiving expenses on its money funds. Based on the latest reports, Vanguard has again waived about $124 million in money market fees, though on a much higher base of assets. Whether the waivers continue once the Fed begins raising interest rates remains to be seen, but while single-digit yields are nothing to stake your retirement on, the income drought appears to be ending. As always, my advice is to use money market funds as strategic vehicles for your spending. Don't keep long-term money here as inflation will quickly reduce your spending power. However, money funds are great tools for immediate spending needs -- you can wire funds from them and the one thing you can be assured of is that every dollar you put into one will be a dollar you can take out. And that's worth some peace of mind."

Investor's Business Daily published the article, "Thinking of Going to Cash? Here's How to Shop for Yield." It explains, "The daily ups and downs have left the market down about 10% for the year, going into Friday. Like a pair of tag-team wrestling bad guys, the main culprits are easy to identify: the Federal Reserve and its game plan for interest-rate hikes and Vladimir Putin's invasion of Ukraine. So what should you do with your investments? Time to go to cash? The answer depends on which part of your portfolio you're asking about." The piece asks, "What about the short-term part of your diversified portfolio? That's the part of your portfolio that you plan to use to pay for goals within the next, say, three years. It is earmarked to pay for goals that are fast approaching. And you probably know the exact or approximate dollar size of those upcoming bills. Those funds may be your only way of paying for those goals. If so, you need all of the money. You can't afford to let a market downturn cut the balance to below your targeted spending amount. That's money that you can justify cashing out." IBD says on the "Risks of Shopping for Higher Interest Rates," "So if you do go to cash with a short-term portion of your diversified portfolio, how do you find the best place to park that money? Where does the 'planning' part of retirement planning enter the picture? Almost all brokerages offer a default account called a sweep account. Just as the name suggests, that's an account into which the brokerage sweeps your idle cash. Many brokerages offer alternatives to their one basic default sweep account. Some brokerages offer many choices. In most instances, the basic default sweep account pays next to zero interest. Their main virtue is that generally they won't actually decline in value. And in a few cases, you can shop for alternatives that pay somewhat more." It continues, "[I]f you're willing to move cash from one financial firm to another, you can shop for more bank accounts, money market accounts and certificates of deposit (CDs). But moving money like that can be inconvenient. You may also incur fees. And when you want to put the money back to work in the old investment account, the transfer may not take effect right away. You can lose out on market gains." Finally, they add, "The highest savings account rate from top online banks listed by Bankrate.com on Friday was Comenity Direct High Yield Savings. Its annual percentage yield (APY) was 0.6%. Basically, APY is annual interest rate. Bankrate.com's highest money market account APY was Vio Bank's 0.56%. Bankrate.com's highest three-month CD APY was Bethpage Federal Credit Union's 0.4%. But even those interest rates are not dramatically higher than what you can find in the highest-yield accounts at many brokers.... Take online broker giant Schwab. Its basic default sweep account for money in Schwab brokerage and retirement accounts offers a next-to-nothing annual percentage yield (APY) of 0.01%. But that account is not an FDIC-insured bank account. Schwab's nonsweep account for its Schwab One brokerage customers pays triple that, but it's still a humble 0.03%. You can also get various nonsweep money funds and certificates of deposit. The CDs pay APY ranging from 0.25% up to 1%. A nonsweep account means you have to take a few more steps to set up the account and arrange to use it."

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 Feb. 25) includes Holdings information from 88 money funds (up from 73 a week ago), which represent $2.908 trillion (up from $2.594 trillion) of the $4.946 trillion (58.8%) in total money fund assets tracked by Crane Data. (Our Weekly MFPH are e-mail only and aren't available on the website. See our Feb. 10 News, "Feb. MF Portfolio Holdings: Repo Drops, Time Deposits, Treasuries Jump," for more.) Our latest Weekly MFPH Composition summary again shows Government assets dominating the holdings list with Repurchase Agreements (Repo) totaling $1.398 trillion (up from $1.270 trillion a week ago), or 48.1%; Treasuries totaling $1.118 trillion (up from $999.4 billion a week ago), or 38.4%, and Government Agency securities totaling $159.0 billion (up from $141.5 billion), or 5.5%. Commercial Paper (CP) totaled $75.8 billion (up from a week ago at $63.8 billion), or 2.6%. Certificates of Deposit (CDs) totaled $50.7 billion (up from $40.7 billion a week ago), or 1.7%. The Other category accounted for $73.7 billion or 2.5%, while VRDNs accounted for $32.5 billion, or 1.1%. The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $1.118 trillion (38.4% of total holdings), the Federal Reserve Bank of New York with $864.6B (29.7%), Fixed Income Clearing Corp with $89.4B (3.1%), Federal Home Loan Bank with $65.9B (2.3%), BNP Paribas with $60.1B (2.1%), Federal Farm Credit Bank with $57.2B (2.0%), RBC with $46.6B (1.6%), Societe Generale with $32.6B (1.1%), Barclays PLC with $26.7B (0.9%) and Citi with $25.7B (0.9%). The Ten Largest Funds tracked in our latest Weekly include: JPMorgan US Govt MM ($242.3B), Goldman Sachs FS Govt ($221.9B), BlackRock Lq FedFund ($165.9B), Morgan Stanley Inst Liq Govt ($146.2B), Allspring Govt MM ($135.4B), Fidelity Inv MM: Govt Port ($135.1B), Federated Hermes Govt Obl ($128.1B), Dreyfus Govt Cash Mgmt ($125.8B), BlackRock Lq Treas Tr ($118.8B) and Goldman Sachs FS Treas Instruments ($117.3B). (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.)

Fitch Ratings updated its "U.S. ESG Money Market Funds: 4Q21" quarterly. The release states, "As of Dec. 31, 2021, total U.S. ESG money market fund (MMF) assets under management (AUM) were $9.0 billion. The AUM increased by $57.0 million in 4Q21, or 0.6%, while overall prime MMF AUM decreased by 6.4%. Gross yields of ESG MMFs averaged 15 basis points (bps) in 4Q21, 2 bps lower than non-ESG MMFs, due to ESG MMFs' reduced investable universe. ESG MMFs' net yields averaged 4 bps during the quarter, which is 1 bp higher than comparable non-ESG MMFs due to lower expense ratios at the ESG funds. Yields have risen in recent weeks, as the market has begun to expect a quicker pace of monetary policy tightening. ESG MMFs' gross and net yields were up 3 bps and 2 bps, respectively, between Oct. 29, 2021 and Feb. 9, 2022, while non-ESG MMFs' gross and net yields rose 2 bps and 1 bp, respectively, over the same period." Fitch adds, "Notable differences between ESG and non-ESG MMFs in 4Q21 versus prior periods included allocations to BNP Paribas, JP Morgan, Sumitomo Mitsui Trust Bank, National Bank of Canada and Bank of America, all of which have favorable or improving ESG profiles. The average ESG MMF exposure to these issuers was 19.4% during this period, while the average non-ESG MMF exposure was 12.8%. ESG MMFs' total allocations to these five issuers remained stable, while issuer-specific allocations changed. Average ESG MMF allocations to BNP Paribas fell 2.5%, while allocations to JP Morgan rose 2.4%."

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