Daily Links Archives: April, 2023

The Financial Times published an editorial, "How to make US money market funds safer," which tells us, "In the rough and tumble of financial markets, one player's loss is often another’s gain. That is certainly true for US money market funds. Last month, as depositors fretted over the safety of their funds in the banking system, particularly in shaky regional lenders, they shifted their cash into MMFs at a rapid rate, with inflows of roughly $370bn. With First Republic, the San Francisco-based regional lender, teetering, that trend seems set to continue, albeit at a slower pace." It continues, "MMFs form a core part of the shadow banking system -- financial intermediaries that cannot take deposits. As the US Federal Reserve has raised interest rates, the funds have offered investors rates well above those that banks pay. By investing in short-term debt securities, they also allow investors to manage their cash needs while providing day-to-day finance to the economy. Their scale and importance in the plumbing of the financial system is such, however, that they are a key source of risk." The FT adds, "Another risk is that the funds are outcompeting the regional lenders and weakening their profitability further. A third risk is that MMFs have been increasingly parking their cash in the Fed's reverse repo facility, where they can obtain higher and safer returns. This further drains liquidity from the banking system, adding to worries about credit availability.... This is the time, however, for moderate reform to raise resilience in the sector. MMFs should be required to disclose more data to regulators to aid their monitoring of liquidity and redemption vulnerabilities, and raise investor awareness of the risks. Higher liquidity requirements make sense too, though these need to be modest enough not to overly squeeze the funds. Flows into the reverse repo facility need to be closely watched too. With the authorities preparing to set out new rules for the sector, they should keep in mind that overburdening MMFs with onerous restrictions risks harming the financial system in the long run. Indeed, the recent outflows from banks into these funds highlight the shadow banking sector's role as an important safety valve in times of crisis. Oversight of MMFs is a balancing act: do too little and risks to financial stability emerge, but do too much and an essential source of liquidity gets stymied. Regulators need to get it just right."

The U.S. Treasury's Office of Financial Research published a paper entitled, "Anatomy of the Repo Rate Spikes in September 2019." Its Abstract says, "Repurchase agreement (repo) markets represent one of the largest sources of funding and risk transformation in the U.S. financial system. Despite the large volume, repo rates can be quite volatile, and in the extreme, they have exhibited intraday spikes that are 5-10 times the rate on a typical day. This paper uses a unique combination of intraday timing data from the repo market to examine the potential causes of the dramatic spike in repo rates in mid-September 2019. We conclude that the spike resulted from a confluence of factors that, when taken individually, would not have been nearly as disruptive. Our work highlights how a lack of information transmission across repo segments and internal frictions within banks most likely exacerbated the spike. These findings are instructive in the context of repo market liquidity, demonstrating how the segmented structure of the market can contribute to its fragility."

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 April 21) includes Holdings information from 77 money funds (up 13 from a week ago), which totals $2.814 trillion (up from $2.285 trillion) of the $5.648 trillion in total money fund assets (or 49.8%) tracked by Crane Data. (Our Weekly MFPH are e-mail only and aren't available on the website. See our latest Monthly Money Fund Portfolio Holdings here.) Our latest Weekly MFPH Composition summary again shows Government assets dominating the holdings list with Repurchase Agreements (Repo) totaling $1.574 trillion (up from $1.398 trillion a week ago), or 55.9%; Treasuries totaling $655.4 billion (up from $550.0 billion a week ago), or 23.3%, and Government Agency securities totaling $301.9 billion (up from $235.0 billion), or 10.7%. Commercial Paper (CP) totaled $97.2 billion (up from a week ago at $45.0 billion), or 3.5%. Certificates of Deposit (CDs) totaled $69.5 billion (up from $21.2 billion a week ago), or 2.5%. The Other category accounted for $85.5 billion or 3.0%, while VRDNs accounted for $30.6 billion, or 1.1%. The Ten Largest Issuers in our Weekly Holdings product include: the Federal Reserve Bank of New York with $1.016 trillion (36.1%), the US Treasury with $655.4 billion (23.3% of total holdings), Federal Home Loan Bank with $235.0B (8.4%), Fixed Income Clearing Corp with $119.9B (4.3%), Federal Farm Credit Bank with $62.1B (2.2%), BNP Paribas with $37.0B (1.3%), RBC with $37.0B (1.3%), Bank of America with $33.2B (1.2%), JP Morgan with $32.2B (1.1%) and Citi with $30.4B (1.1%). The Ten Largest Funds tracked in our latest Weekly include: Goldman Sachs FS Govt ($270.5B), JPMorgan US Govt MM ($227.4B), Fidelity Inv MM: Govt Port ($163.8B), Morgan Stanley Inst Liq Govt ($150.3B), Federated Hermes Govt ObI ($147.8B), JPMorgan 100% US Treas MMkt ($128.2B), Dreyfus Govt Cash Mgmt ($115.6B),Goldman Sachs FS Treas Instruments ($105.0B), Fidelity Inv MM: MM Port ($97.5B) and Allspring Govt MM ($95.1B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary.)

A Bloomberg news brief entitled, "Franklin Templeton Says Its Money-Market Fund Is Attracting Crypto Assets," tells us, "Franklin Templeton says its money-market fund that records share ownership on a blockchain is seeing inflows from crypto-related entities in the aftermath of the shuttering of several industry-friendly banks. Total assets in the Franklin OnChain US Government Money Fund (FOBXX), which was launched in 2021 and became publicly available last year, have increased to around $270 million. The fund uses the Stellar blockchain network to process transactions and record ownership. The fund invests in US government securities, cash and repurchase agreements and doesn't hold any cryptocurrencies. One of the crypto projects that has put money into the fund is the Stellar Development Foundation, a nonprofit organization supporting the Stellar blockchain. The foundation invested $20 million recently." The piece quotes Denelle Dixon, CEO of the Stellar Development Foundation, "Our money was just sitting in the bank accounts and that was not the best place for the value to sit." Bloomberg comments, "[T]he organization still holds accounts with banks including failed Silicon Valley Bank. The asset manager has seen an 'elevated' level of conversations with a variety of crypto-related participants, including decentralized autonomous organizations, foundations and projects, according to Roger Bayston, head of digital assets at Franklin Templeton. The fund even has a digital token called BENJI that represents shares of the funds. One share of the fund is maintained at one dollar. The tokens are currently not transferable between fund investors, but executives at the asset manager said that bringing utility to the token is on the roadmap of the firm. 'Money market funds are used for collateral purposes and for payment purposes off-chain,' said Sandy Kaul, senior vice president at Franklin Templeton. We will fully anticipate those type of use cases moving on-chain as the regulations become more clear.'" (See our `Sept. 4, 2019 News, "Franklin Files for Blockchain Enabled U.​S. Govt Money Market Fund," and also, Frankin Templeton's update, "`A moment for US government money market funds?")

A press release entitled, "FSOC Issues for Public Comment Proposed Analytic Framework for Financial Stability Risks and Proposed Guidance on Nonbank Financial Company Determinations," explains, "The Financial Stability Oversight Council (Council) today voted unanimously to issue for public comment a proposed analytic framework for financial stability risks. This new framework is intended to provide greater transparency to the public about how the Council identifies, assesses, and addresses potential risks to financial stability, regardless of whether the risk stems from activities or firms. The Council also voted unanimously to issue for public comment new proposed interpretative guidance on the Council's procedures for designating nonbank financial companies for Federal Reserve supervision and enhanced prudential standards. This proposed guidance would replace the Council's existing guidance and describes the procedural steps the Council would take in considering whether to designate a nonbank financial company." Secretary of the Treasury Janet Yellen commented on Friday, "Today's proposals are important to ensuring the Council has a rigorous approach to identify, assess, and address risks to our financial system. The Council remains committed to public transparency regarding its work, and today's proposals would make us better equipped to handle risks to the financial system, whether they come from activities or firms." The release adds, "The actions proposed today by the Council would: Enhance the Council's ability to address financial stability risks. The financial system continues to evolve, and past crises have shown the importance of being able to act decisively to address risks to financial stability before they destabilize the system. The new proposed guidance would help ensure that the Council can use all of its statutory authorities as appropriate to address risks to U.S. financial stability, regardless of the source of those risks. Provide transparency to the public on how the Council performs its duties. For the first time, the Council is proposing to issue a framework broadly explaining how it identifies, evaluates, and responds to potential risks to U.S. financial stability, whether they come from activities, individual firms, or otherwise. This framework outlines common vulnerabilities and transmission channels through which shocks can arise and propagate through the financial system. It also explains how the Council considers the tools it will use to address these risks. Ensure a rigorous and transparent designation process. The proposed nonbank financial company designations guidance would continue to provide strong processes, including significant two-way engagement with companies under review. These processes would minimize administrative burdens on companies under review while providing ample opportunities to be heard and to understand the Council's analyses. Further, the separate proposed analytic framework explains how nonbank financial company designations fit into the Council's broader approach to financial stability risk monitoring and mitigation."

Just two months to go until our big Money Fund Symposium show, the largest gathering of money market fund managers and cash investors in the world! Money Fund Symposium 2023 will take place June 21-23, 2023 at The Hyatt Regency Atlanta, in Atlanta, Ga. The final agenda is just about set and registrations are still being taken. Money Fund Symposium attracts money fund managers, marketers and servicers, cash investors, money market securities dealers, issuers, and regulators. We'd like to thank our sponsors and exhibitors so far -- Bank of America, Barclays, J.P. Morgan, Dreyfus, Fidelity Investments, TD Securities, Moody's, Nearwater, Nomura, Deutsche Bank, Santander, Natixis, Fitch Ratings, J.P. Morgan Asset Management, Allspring Global, Citi, BlackRock, GLMX, Northern Trust, IntraFi, Tradeweb, Wells Fargo, Toyota, UBS, S&P, Seelaus, Mischler, CastleOak, Lummis, K&L Gates, Capitolis and Stradley Ronon -- for their support. (We're still accepting sponsors!) E-mail us for more details. Visit the Money Fund Symposium website at www.moneyfundsymposium.com for more information. Registration is $1,000, and discounted hotel reservations are available. We hope you'll join us in Atlanta in June! E-mail us at info@cranedata.com to request the full brochure.) We're also making plans for our next European Money Fund Symposium, which is scheduled for Sept. 25-26, 2023, in Edinburgh, Scotland. The draft agenda has been posted and registrations ($1000 to attend) are now live. European Money Fund Symposium offers "offshore" money fund portfolio managers, and money market investors, issuers, dealers and service providers a concentrated and affordable educational experience, as well as an excellent and informal networking venue. Finally mark your calendars for our next Money Fund University "basic training" event, scheduled for Dec. 18-19, 2023, in Jersey City, NJ, and our next Bond Fund Symposium, scheduled for March 25-26, 2024 in Philadelphia, Pa. Let us know if you'd like more details on any of our events, and we hope to see you in Atlanta in June, in Edinburgh in September or in Jersey City in December.

CFO Magazine writes, "Money Market Funds: Safe Keeping for Excess Cash?" The piece tells us, "Recent bank failures prompted outflows of U.S. bank deposits into systemically important banks, but money market funds -- less used by treasurers and CFOs the past few years -- also benefited. About $30.3 billion was poured into U.S. money-market funds (MMFs) in the week of April 12, according to data from the Investment Company Institute. Less risky government funds -- which invest in securities such as Treasury bills and government agency debt -- saw assets rise to $4.4 trillion, a $26.8 billion increase. The rest went to so-called 'prime funds,' which invest in higher-risk assets such as commercial paper." It states, "The surge in money market fund assets was partly due to the shutdown of Silicon Valley Bank (SVB) in early March by regulators. The SVB situation, which required the federal government to guarantee all customer deposits, alerted businesses to the risk of having large amounts of cash in accounts that exceeded the $250,000-per-customer FDIC insurance limit." They quote Lance Pan of Capital Advisors Group, "For businesses with large, unpredictable daily cash flows, keeping a large balance is an unavoidable and accepted risk. Many institutions, however, choose to leave large sums of uninvested cash in their operating accounts as a habit of convenience and unwittingly expose their organizations to an unnecessary source of credit risk." The piece adds, "Part of the reason money is flowing into MMFs now -- not just from some businesses but also institutional investors -- is due to higher returns than bank deposits.... To decide whether to invest in MMFs, businesses need to 'understand their level of risk versus return on cash as well as their liquidity needs,' according to Paul M. Galloway, a senior director of advisory services at Strategic Treasurer, a corporate treasury consulting firm."

Bloomberg writes, "Crypto Startup Ondo Unveils Stablecoin Alternative Backed by Money-Market Funds." They tell us, "Ondo Finance Inc., a decentralized platform set up by a pair of former Goldman Sachs Group Inc. associates, is launching a new product that uses money-market funds investing in US government securities to create a yield-generating stablecoin alternative. Investors in the tokenized money-market fund will receive a digital coin called OMMF, the company said in a blog post Thursday. The details of the fund structure weren't disclosed, but Ondo said that it will invest only in low-risk money market funds, including those holding US government securities." Justin Schmidt, president and COO, comments to Bloomberg, "First generation stablecoins ... were created when interest rates were near zero, so designing them to be able to pass on yield was not a focus.... By tokenizing money-market funds we are able to deliver the price stability and on-chain utility of stablecoins while providing superior investor protections and passing on yield to holders." The piece adds, "Stablecoins, tokens that are designed to hold a steady value in contrast to the price volatility seen in Bitcoin and other crypto assets, have been at the center of some of the recent market shakeups in crypto. USD Coin, one of the most popular stablecoins, saw its value drop below its intended one dollar peg in early March after its issuer Circle Internet Financial Ltd. announced its exposure to failed Silicon Valley Bank. And in February, New York's Department of Financial Services directed Paxos Trust Co. to stop issuing new tokens of BUSD, a stablecoin branded under crypto exchange Binance." See also, WSJ's "Bank Failures Rattle Market for Short-Term Lending" and "Banks Are Finally Facing Pressure to Pay Depositors More."

Money fund yields were relatively flat again last week, though they inched higher by a basis point. They've mostly digested the Fed's March 22nd 25 basis point rate hike and should remain flat until the Fed hikes again on May 2 (if they hike). Our Crane 100 Money Fund Index (7-Day Yield) was up 1 bp to 4.63% in the week ended Friday, 4/14. Yields are up from 4.61% on March 31, 4.39% on Feb. 28, 4.15% on Jan. 31 and 4.05% on 12/31/22. They've increased from 3.59% on Nov. 30, from 2.88% on Oct. 31 and from 2.66% on Sept. 30. A handful of the top-yielding money market funds remain above the 5.0% level. The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 687), shows a 7-day yield of 4.52%, up 2 bps in the week through Friday. Prime Inst MFs were up 1 bp at 4.73% in the latest week. Government Inst MFs rose by 3 bps to 4.62%. Treasury Inst MFs up 3 bps for the week at 4.50%. Treasury Retail MFs currently yield 4.27%, Government Retail MFs yield 4.31%, and Prime Retail MFs yield 4.56%, Tax-exempt MF 7-day yields were down at 2.19%. According to Monday's Money Fund Intelligence Daily, with data as of Friday (4/14), only 30 money funds (out of 823 total) yield under 2.0% with $2.5 billion, or 0.0%; 107 funds yield between 2.00% and 2.99% with $118.6 billion, or 2.1%; 40 funds yield between 3.00% and 3.99% ($24.4 billion, or 0.4%), and 646 funds yield 4.0% or more ($5.483 trillion, or 97.4%). Eight funds have now officially surpassed the 5.0% mark (though most are private and not listed in our "Highest-Yielding Funds" table above) but we expect more to follow in coming weeks. Our Brokerage Sweep Intelligence Index, an average of FDIC-insured cash options from major brokerages, was unchanged at 0.56% after increasing 1 bp last week. The latest Brokerage Sweep Intelligence, with data as of April 14, shows that there were no changes over the past week. Just 3 of 11 major brokerages still offer rates of 0.01% for balances of $100K (and lower tiers). These include: E*Trade, Merrill Lynch and Morgan Stanley.

MarketWatch writes that, "The 'super surge' of money market funds is on with yields over 4.6% luring savers. Here's what you need to know." Author Eleanor Laise tells us, "Last month's bank failures, combined with a healthy yield advantage over bank deposit accounts, has prompted a 'super surge' of assets into money market mutual funds, according to research firm Crane Data. Money market funds, which invest in very short-term, high-quality debt, in March enjoyed their third-best month of inflows ever, according to Crane, as investors spooked by the banking turmoil poured about $345 billion into these funds. While the 25 largest U.S. commercial banks saw deposits climb $18 billion in March, smaller banks' deposits dropped $212 billion, according to Federal Reserve data. The 100 largest taxable money funds tracked by Crane yield more than 4.6% on average, while the average rate on savings accounts nationwide is 0.37%, according to DepositAccounts.com, a unit of LendingTree. The flood of cash into money market funds, which now have a record of more than $5.6 trillion in assets, is a major break from the typical pattern at this time of year, when investors tend to pull cash from money funds to make tax payments. Traditionally, 'March and April are the two weakest months of the year' for money funds, said Peter Crane, president of Crane Data. 'This is far from normal.'" The article explains, "For savers looking to reap the rewards of the Federal Reserve’s recent interest-rate increases, money market funds have some clear advantages. A recent report from the Federal Reserve Bank of New York illustrates the point. Since March of last year, money fund yields have climbed 4.13 percentage points, or 97% of the increase in the effective federal-funds rate over that period, while the average rate on banks' three-month certificates of deposit offered to retail customers climbed just 0.32 percentage point, or 8% of the effective federal-funds rate increase, the New York Fed found. Money market funds also offer daily liquidity, allowing savers easy access to their cash." The piece adds, "While money market fund yields generally follow the Fed, tax-exempt money market funds march to a different drummer. Yields on these funds, which hold short-term municipal securities, tend to fluctuate with an index of floating-rate muni instruments and are generally more volatile than taxable money market fund yields.... The Congressional standoff over raising the federal government's debt limit, meanwhile, has raised concerns about money market funds focused on U.S. Treasury securities."

A press release entitled, "Citi launches new Sustainable Time Deposit Solution to support U.S. Institutional Clients" tells us, "Citi has announced the launch of a new sustainable time deposit solution designed to assist U.S. institutional clients when investing excess cash while supporting their sustainability goals. Citi's new Sustainable Time Deposit (TD) will deliver competitive yields and supports projects identified under Citi's green and social bond frameworks, expanding the program launched in Europe, the Middle East and Asia last year." Stephen Randall, Global Head of Liquidity Management Services, for Citi Treasury and Trade Solutions, comments, "Finance and treasury teams are playing an increasingly strategic role in helping their firms to support their sustainability and environmental, social and governance (ESG) goals. Our new Sustainable Time Deposit solution reflects Citi's commitment to providing tools that help our clients reach their goals with their own organizations and their communities." The release continues, "Funds deposited into Sustainable TDs are allocated toward financing or refinancing assets in a portfolio of eligible green and/or social finance projects, based on criteria set in the Citi Green Bond Framework, Social Finance Bond Framework and Social Bond for Affordable Housing Frameworks, including projects for renewable energy, energy efficiency, water quality, and conservation as well as in social projects that expand financial inclusion for women and traditionally under-represented communities. Michael Fossaceca adds, "The expansion of our sustainable product suite is an important step toward providing comprehensive sustainable cash management solutions to our clients. We are excited to bring this capability to our clients in the U.S."

The Wall Street Journal writes "Bank Losses Can Be Gains for This Money Fund." The article tells us, "There could be a simple way for investors to profit as banks shed deposits. Money-market fund managers are in position to be big beneficiaries of the recent surge of cash into these vehicles. Many of the biggest managers are actually relatively small parts of vast financial institutions. But there is one significant manager that is a more direct play on the money-fund business. Federated Hermes (FHI) says its share of the money-market mutual fund market was about 7.7% at the end of last year. According to Crane Data, its tracked money-fund assets at the end of March only ranked behind those of global asset-management giant BlackRock, nontraded Fidelity and Vanguard and megabanks JPMorgan Chase and Goldman Sachs. The Pittsburgh-based company had about 40% of its total revenue in 2022 attributable to money-market assets." The "Heard on the Street" piece says, "Already this year Federated's shares are up over 15%, escaping the financial sector's decline and outperforming the S&P 500's gain. Now a question for investors is whether money-fund inflows will continue to be strong, or whether recent weeks have pulled forward what would have been future flows. There are a number of reasons to believe inflows might continue. Strategists at Barclays have projected that balances for money-market funds that only hold government-backed instruments could rise by $500 billion to $1.5 trillion in the next 12 months, on top of what happened in March. 'Institutional investors have noticed that they were not getting as much compensation for taking on unsecured bank risk by keeping bank deposits above the $250,000 insurance cap,' they wrote in a recent note." The WSJ adds, "Plus, any big banks that received deposit inflows during the recent crisis might not raise their deposit rates as aggressively as they might have otherwise amid this surplus, which could give money-market funds a continued edge with many yield-seeking customers. April may be a litmus test for money-market funds. Normally it is a rough month for funds' flows, as people withdraw to make tax payments. But through April 10, month-to-date inflows industrywide are more than $40 billion, according to Crane. If those persist through tax day, that might surprise the market a bit. Autonomous Research analyst Patrick Davitt estimates that Federated may report $20 billion-plus of net inflow to money funds in the first quarter, and that market estimates for its full year may also need to be revised upward. So investors looking to diversify out of banks should keep looking at the flip side of that trade, too." (See also, Bloomberg's "`Investors Seen Pouring $1.5 Trillion More Into the Safest Money Funds, Barclays Says.")

The Federal Reserve Bank of New York's "Liberty Street Economics" blog published an update entitled, "Deposit Betas: Up, Up, and Away," which explains, "Deposits make up an $18 trillion market that is simultaneously the main source of bank funding and a critical tool for households' financial management. In a prior post, we explored how deposit pricing was changing slowly in response to higher interest rates as of 2022:Q2, as measured by a 'deposit beta' capturing the pass-through of the federal funds rate to deposit rates. In this post, we extend our analysis through 2022:Q4 and observe a continued rise in deposit betas to levels not seen since prior to the global financial crisis." (See our April 4 News, "NY Fed: MMFs Move with Monetary Policy.") The post continues, "In addition, we explore variation across deposit categories to better understand banks' funding strategies as well as depositors' investment opportunities. We show that while regular deposit funding declines, banks substitute towards more rate-sensitive forms of finance such as time deposits and other forms of borrowing such as funding from Federal Home Loan Banks (FHLBs). We estimate the evolution of deposit betas using data from bank holding company (BHC) regulatory filings (FR Y-9C).... Although we focus on the rates paid on interest-bearing (IB) deposits, we also consider all deposits in several figures. We use the industry-level of deposits given our interest in the overall pass-through of monetary policy to deposit rates, but we will explore size differences in a future post." Finally, the blog adds, "Deposit rates continue to lag the fed funds rate, but the pass-through of policy rates is quickly approaching levels not seen since the early 2000s. The rapid rise in rates has resulted in a fall in overall deposit balances, a tightening of funding ratios, and an increase in non-deposit borrowing. Banks have been managing the deposit runoff using more attractive time-deposit rates and other borrowings. Given the increase in fed funds rates since 2022:Q4 and the wide gap between deposit rates and the fed funds rate, we expect that deposits will continue to shift into higher rate categories that are more responsive to monetary policy."

Money fund yields were mostly flat last week as they've now mostly digested the Fed's March 22nd 25 basis point rate hike. Yields should be flat going forward until the Fed changes rates again (perhaps on May 2). Our Crane 100 Money Fund Index (7-Day Yield) was up 1 bp to 4.62% in the week ended Friday, 4/6. Yields are up from 4.39% on Feb. 28, 4.15% on Jan. 31 and 4.05% on 12/31/22. They've increased from 3.59% on Nov. 30, from 2.88% on Oct. 31 and from 2.66% on Sept. 30. A handful of the top-yielding money market funds continue to break the 5.0% level. The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 687), shows a 7-day yield of 4.50%, up 1 bp in the week through Thursday (Friday being a Holiday). Prime Inst MFs were unchanged at 4.72% in the latest week. Government Inst MFs rose by 1 bp to 4.59%. Treasury Inst MFs up 1 bp for the week at 4.47%. Treasury Retail MFs currently yield 4.25%, Government Retail MFs yield 4.29%, and Prime Retail MFs yield 4.55%, Tax-exempt MF 7-day yields were down at 3.01%. According to Monday's Money Fund Intelligence Daily, with data as of Thursday (4/6), zero money funds (out of 823 total) yield under 2.0%; 63 funds yield between 2.00% and 2.99% with $33.1 billion, or 0.6%; 120 funds yield between 3.00% and 3.99% ($117.8 billion, or 2.1%), and 640 funds yield 4.0% or more ($5.449 trillion, or 97.3%). Eight funds have now officially surpassed the 5.0% mark (though most are private and not listed in our "Highest-Yielding Funds" table above) and we expect more to follow in coming days. Our Brokerage Sweep Intelligence Index, an average of FDIC-insured cash options from major brokerages, was up 1 bp to 0.56% after increasing 1 bp two weeks prior. The latest Brokerage Sweep Intelligence, with data as of April 6, shows that there was one change over the past week. RW Baird increased rates to 1.76% for all balances between $1k and $999K, to 2.74% for balances between $1 million and $1.9 million, and to 3.54% for balances of $5 million and more. Just 3 of 11 major brokerages still offer rates of 0.01% for balances of $100K (and lower tiers). These include: E*Trade, Merrill Lynch and Morgan Stanley.

The Investment Company Institute's latest "Money Market Fund Assets" report shows money fund totals hitting record levels for the fourth week in a row, breaking the $5.2 trillion barrier for the first time ever. MMF assets have risen by $353.4 billion, or 7.2%, since March 8. The failure of Silicon Valley Bank has raised concerns over uninsured bank deposits, and large investors continue shifting assets into money funds (though they're now being joined by some big retail inflows). Over the past 52 weeks, money fund assets have risen $688 billion, or 15.1%, with Retail MMFs rising by $462 billion (32.2%) and Inst MMFs rising by $226 billion (7.2%). ICI shows assets up by $512 billion, or 10.8%, year-to-date in 2023, with Institutional MMFs up $294 billion, or 9.6% and Retail MMFs up $218 billion, or 13.0%. (According to Crane Data's separate Money Fund Intelligence Daily series, money fund assets hit a record $5.638 trillion on Wednesday. Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data, so they're over $400 billion lower than Crane's asset series.) Their weekly release says, "Total money market fund assets increased by $49.07 billion to $5.25 trillion for the week ended Wednesday, April 5, the Investment Company Institute reported.... Among taxable money market funds, government funds increased by $34.80 billion and prime funds increased by $8.03 billion. Tax-exempt money market funds increased by $6.24 billion." ICI's stats show Institutional MMFs jumping $27.1 billion and Retail MMFs surging $22.0 billion in the latest week. Total Government MMF assets, including Treasury funds, were $4.366 trillion (83.2% of all money funds), while Total Prime MMFs were $765.3 billion (14.6%). Tax Exempt MMFs totaled $116.8 billion (2.2%). ICI explains, "Assets of retail money market funds increased by $21.98 billion to $1.90 trillion. Among retail funds, government money market fund assets increased by $12.07 billion to $1.28 trillion, prime money market fund assets increased by $5.19 billion to $509.08 billion, and tax-exempt fund assets increased by $4.72 billion to $104.12 billion." Retail assets account for over a third of total assets, or 36.1%, and Government Retail assets make up 67.6% of all Retail MMFs. They add, "Assets of institutional money market funds increased by $27.09 billion to $3.35 trillion. Among institutional funds, government money market fund assets increased by $22.73 billion to $3.08 trillion, prime money market fund assets increased by $2.84 billion to $256.19 billion, and tax-exempt fund assets increased by $1.52 billion to $12.06 billion." Institutional assets accounted for 63.9% of all MMF assets, with Government Institutional assets making up 92.0% of all Institutional MMF totals.

A new ICI "Viewpoint" entitled, "Rhetoric Versus Reality About Open-End and Money Market Funds," written by CEO Eric Pan, tells us, "Last week, in a major speech given at a time when financial regulators are managing a banking crisis, U.S. Treasury Secretary Janet Yellen pointed the finger at open-end funds and money market funds as posing risks to the financial system. ICI is happy to talk facts about the many strengths that open-end and money market funds bring to the table. These highly regulated investment vehicles serve more than 100 million Americans. And recently investors 'looking for safe havens,' to quote the Financial Times, are flocking to money market funds amidst the troubles they have seen or experienced with banks." (See Crane Data's March 31 Link of the Day, "Yellen Hits MMFs in Stability Speech" and see Yellen's speech here.") Pan comments, "Money market funds have employed significantly enhanced liquidity management practices over the past 15 years. These products serve as a trusted tool for both investment and cash management. In fact, ICI's data show that their assets are now at a record high—more than $5 trillion. Sec. Yellen has claimed that the 'vulnerabilities of the system to runs and fire sales have been clear-cut,' in the case of money market funds. In fact, we only have to look at the events of the past month to see that deposits have moved by the hundreds of billions of dollars from banks to money market funds in large part because of a run -- at Silicon Valley Bank -- and a fire sale, at Credit Suisse! The irony is quite remarkable." He continues, "The statement from Sec. Yellen seems to be based on a skewed interpretation of the events of March 2020. ICI has written extensively, based on industry-leading data, about the liquidity events during that month. Our comprehensive analysis of data has shown that money market funds were not the cause of market instability as COVID spread around the globe. And regulation itself -- the tie between weekly liquid assets and fees & gates -- exacerbated outflows, so much so that the SEC has now proposed doing away with this tie. In other words, Sec. Yellen's case against money market funds is far from clear cut." Pan adds, "In terms of open-end funds, their track record speaks for itself. We've heard talk of 'liquidity mismatch' and 'first-mover advantage' from various international regulatory groups for years. These kinds of suggestions seem incongruous given that Silicon Valley Bank's demise owed much to its strategy of funding its holdings of long-term securities with deposits that flew out the door at the first sign of trouble. What is happening with banks in recent weeks shows that any sort of 'first mover advantage' is by no means unique to the mutual fund structure. In fact, as shown by ICI's research, it's a universal investor response.... We also should not forget the many significant problems we have identified with the SEC's proposed swing pricing rules for money market and all mutual funds. Suffice it to say, they appear to be unworkable solutions to unquantified theoretical problems. For more information, you can read ICI's substantive comments to the SEC here and here."

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 31) includes Holdings information from 56 money funds (down 6 from a week ago), which totals $2.130 trillion (down from $2.230 trillion) of the $5.610 trillion in total money fund assets (or 38.0%) tracked by Crane Data. (Our Weekly MFPH are e-mail only and aren't available on the website. See our latest Monthly Money Fund Portfolio Holdings here.) Our latest Weekly MFPH Composition summary again shows Government assets dominating the holdings list with Repurchase Agreements (Repo) totaling $1.271 trillion (down from $1.347 trillion a week ago), or 59.7%; Treasuries totaling $531.1 billion (down from $554.6 billion a week ago), or 24.9%, and Government Agency securities totaling $234.2 billion (up from $224.4 billion), or 11.0%. Commercial Paper (CP) totaled $40.3 billion (down from a week ago at $46.6 billion), or 1.9%. Certificates of Deposit (CDs) totaled $18.9 billion (down from $19.7 billion a week ago), or 0.9%. The Other category accounted for $19.3 billion or 0.9%, while VRDNs accounted for $14.7 billion, or 0.7%. The Ten Largest Issuers in our Weekly Holdings product include: the Federal Reserve Bank of New York with $851.1 billion (40.0%), the US Treasury with $531.1 billion (24.9% of total holdings), Federal Home Loan Bank with $186.3B (8.7%), Fixed Income Clearing Corp with $124.6B (5.9%), Federal Farm Credit Bank with $44.7B (2.1%), JP Morgan with $42.2B (2.0%), RBC with $25.7B (1.2%), BNP Paribas with $22.1B (1.0%), Citi with $21.9B (1.0%) and Barclays PLC with $21.6B (1.0%). The Ten Largest Funds tracked in our latest Weekly include: Goldman Sachs FS Govt ($266.1B), Fidelity Inv MM: Govt Port ($172.4B), Morgan Stanley Inst Liq Govt ($140.2B), BlackRock Lq FedFund ($127.5B), Dreyfus Govt Cash Mgmt ($117.8B), BlackRock Lq Treas Tr ($101.7B), Goldman Sachs FS Treas Instruments ($99.1B), Fidelity Inv MM: MM Port ($97.1B), Allspring Govt MM ($91.0B) and BlackRock Lq T-Fund ($84.1B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary.)

Barron's says, "Muni Money-Market Fund Yields Hit 4%." The article tells us, "Investors can now get a 4% yield on low-risk municipal money-market mutual funds -- but that rate may not last because yields in the sector are volatile. Municipal money-market funds are formerly a hot and now backwater area of the tax-exempt market that offers investors an alternative to the much larger taxable money-market funds. There are about $130 billion of muni money-market funds, according to Morningstar, against more than $5 trillion of taxable money funds. The muni total is down from $500 billion prior to the financial crisis. Vanguard, Fidelity, Charles Schwab, and JPMorgan Chase are leading players in muni money funds." It continues, "Recently, yields on muni money-market funds have spiked, resulting in roughly 4% yields on the $16 billion Vanguard Municipal Money Market Fund (VMSXX) and the $6.7 billion Fidelity Investments Money Market Tax Exempt (FTCXX).... A 4% yield on a municipal money-market fund is equivalent to a yield of more than 6% for someone in the 35% federal tax bracket. The current yields can make tax-exempt muni funds an alternative to taxable funds. Taxable money-fund yields have risen to 4.5% or higher on some funds as the Federal Reserve recently lifted the key federal-fund rate to a range of 4.75% to 5%. The giant Vanguard Federal Money Market Fund (VMFXX) with over $200 billion in assets yields about 4.75%." Barron's adds, "Yields could stay elevated in April on muni money-market funds because many investors redeem money-fund holdings to pay taxes, decreasing demand. There are single-state muni money-market funds that offer a full tax exemption to in-state residents on interest income. The bulk of the single-state funds are focused on California and New York, the two most populous high-tax states. Schwab, Fidelity, JP Morgan, and Vanguard all have New York and California-focused funds." For more money fund mentions, see The Wall Street Journal articles, "Investors Seek Safety in Tech Stocks, Money-Market Funds" and "Individual Investors Slow Stock Purchases, Leaving Markets Vulnerable."

Barron's published a Q&A with T. Rowe Price's Cheryl Mickel entitled, "Finding Good Yields in the Banking Tumult." It says, "As banking turmoil roils markets, Cheryl Mickel, who oversees money markets, short-term taxable bonds, and stable value for T. Rowe Price's fixed-income group, is finding opportunities amid the chaos -- even in the short-term debt of banks.... Mickel, who heads T. Rowe Price's U.S. Taxable Low Duration Group, oversee[s] more than $100 billion in assets. But rather than hunker down, Mickel's team is searching for opportunities to lock in higher yields." Mickel comments, "The move we are seeing in the market can wreak unforeseen havoc from hedges and positioning that may be offsides, so you have to be on high alert here. We have been conservatively positioned and are starting in a ZIP Code of higher rates, which provide a lot of cushion that we didn't have a year ago.... We are looking for dislocated pockets of opportunity. All yield is not created equal, so we are looking selectively for strong credits that can weather the volatility. We look through each company and put each in context within the broader market, searching for strong business models and cash flows. We are looking at the ability [of banks] to withstand a run, what their asset base looks like -- and how they are managing it -- and differentiating among specific companies based on how they are positioned to withstand volatility." The piece asks, "Where should investors be parking their cash right now?" She responds, "We advise our investors to divide their cash needs by time. For example, businesses and individuals usually have cash required in the very short term for unforeseen emergencies and daily needs -- think zero-to-six months. This might be in a bank, or you may consider a money-market fund with a time frame of a few months. We are seeing money-fund flows growing significantly, and this is presumably out of bank deposits, especially from smaller banks. If pressures within the banking system continue to mount and spread, we'll see continued moves in this direction. I would consider owning government money funds for liquidity and short time frames. Yields for government money funds are in the 4.7% range, gross; 4.5%, net range."

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