Money Market News
Last week, Crane Data hosted its 8th annual European Money Fund Symposium in Paris, France. The record 160+ attendees discussed rising yields in USD, EUR and GBP MMFs, the potential for more regulatory reforms in Europe and in the U.S., and turmoil in the sterling money markets, among other things. Day 2 of the event began with a session entitled, "ICI Global & EFAMA Talk Regulatory Issues," which featured updates from ICI Global's Michael Pedroni and EFAMA's Federico Cupelli. We excerpt from Pedroni's segment below. (Note: Thanks again to our European MFS speakers, sponsors and attendees! Watch for more quotes in coming days and in our upcoming October Money Fund Intelligence newsletter.)
The Investment Company Institute released its latest weekly "Money Market Fund Assets" report, as well as its monthly "Trends in Mutual Fund Investing" and "Month-End Portfolio Holdings of Taxable Money Funds" for August 2022 Thursday. Their weekly update shows money fund assets rose again in the latest week after a big jump last week (but declines in 6 of the past 8 weeks before that). (Note: Thanks once more to the speakers, sponsors and attendees at our European Money Fund Symposium in Paris earlier this week! Watch for excerpts and quotes from the event in our October Money Fund Intelligence newsletter in coming days, and let us know if you'd like to see the conference binder.)
Moody's Investors Service just published a report entitled "French MMFs' H1 asset contraction exceeds that of European peers," which explains, "French money market funds (MMF) lost about 12% of their assets under management (AUM) in the first half of 2022, more than their European peers. This reflects investor withdrawals in response to rising inflation and to satisfy margin calls triggered by Ukraine-related energy market turbulence. The average asset quality of French MMFs has improved as geopolitical tensions have encouraged investment in low-risk assets. However, French players still hold a higher proportion of lower-rated securities than rated European peers, mostly domiciled in Ireland and Luxembourg. The French MMF market remains highly heterogeneous, consisting of a handful of dominant players and a large number of smaller entities with varying risk appetite." (Note: Thanks again to those who attended our European Money Fund Symposium in Paris! Watch for excerpts and quotes from the event in our October Money Fund Intelligence newsletter.)
A paper written earlier this year entitled, "A Lending Network under Stress: A Structural Analysis of the Money Market Funds Industry," studies funding supply shocks in the money markets. Author `Paula Beltran from UCLA explains, "In this paper, I study the transmission of an aggregate funding supply shock in a lending network and quantitatively assess the implications for the allocative efficiency of funding provision of the US Money Markets Funds Industry. I build a tractable model that features banks and funds that bargain over the terms of trade subject to an incomplete network of existing counterparties and bilateral bargaining. I discipline the model using data on the funds' portfolio." (Note: Thanks to those who attended our European Money Fund Symposium, in Paris! We hope you enjoy Day 2, and safe travels home. Thanks to our speakers and sponsors! Watch for excerpts and quotes from the event in our daily news next week and in our October Money Fund Intelligence newsletter.)
State Street Global Advisors published a new "Monthly Cash Review" update entitled, "Ask April," which explains, "Portfolio Strategist William Goldthwait sits down with April Borawski, Portfolio Manager, to discuss the latest trends in money markets." (Note: For those attending our European Money Fund Symposium, welcome to Paris! We look forward to 2 days of presentations and discussions on "offshore", European and global money market funds, and watch for excerpts and quotes from the event in our daily news next week and in our October Money Fund Intelligence newsletter.)
The Investment Company Institute published, "Worldwide Regulated Open-Fund Assets and Flows, Second Quarter 2022," which shows that money fund assets globally fell by $153.5 billion, or -1.8%, in Q2'22 to $8.482 trillion. The decreases were led by drops in money funds in the U.S., Ireland and Luxembourg. Meanwhile, money funds in China and Australia increased. MMF assets worldwide decreased by $83.0 billion, or -1.0%, in the 12 months through 6/30/22, and money funds in the U.S. represent 53.5% of worldwide assets. We review the latest Worldwide MMF totals, below. (Note: We hope to see you this week at our European Money Fund Symposium, which will take place Sept. 27-28 in Paris, France!)
Money fund assets jumped in the latest week after declining in 6 of the past 8 weeks; it was their biggest gain since late April. The Investment Company Institute's latest weekly "Money Market Fund Assets" report shows assets down by $121 billion, or -2.6%, year-to-date, with Institutional MMFs down $172 billion, or -5.3% and Retail MMFs up $50 billion, or 3.4%. Over the past 52 weeks, money fund assets are up by $69 billion, or 1.5%, with Retail MMFs rising by $88 billion (6.2%) and Inst MMFs falling by $19 billion (-0.6%). (For the month of Sept. through 9/22, MMF assets increased by $25.4 billion to $5.053 trillion according to Crane's MFI XLS, which tracks a broader universe of funds than ICI. Crane Data's Prime asset total is currently $963.6 billion.)
The Federal Reserve raised short-term interest rates for the 5th time this year and hiked by 75 basis points for the third time in a row. The Federal funds target rate is now in a range from 3.0% to 3.25%, its highest level since 2008. Money fund yields should surge in coming days and should break 2.5% on average and approach 3.0% in coming weeks. The Fed's FOMC statement says, "Recent indicators point to modest growth in spending and production. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures."
Late last week, SIFMA, the Securities Industry and Financial Markets Association (formerly the more easily recognizable Bond Market Association), posted a letter to the SEC on money fund reforms authored by its Asset Management Group and the Investment Company Institute. Entitled, "Securities Industry and Financial Markets Association Comments on Money Market Fund Reforms," the letter states, "The Asset Management Group of the Securities Industry and Financial Markets Association ('SIFMA AMG') and the Investment Company Institute ('ICI') welcome the opportunity to provide additional information to the U.S. Securities and Exchange Commission with respect to the Commission's proposed amendments to Rule 2a-7 that govern money market funds under the Investment Company Act of 1940, and related proposed amendments to Form N-MFP, Form N-CR and Form N-1A." (See the "Comments on Money Market Fund Reforms" posted to the SEC's website here, and see our Sept. 6 News, "Funds Doing Last-Minute Lobbying to SEC Says Ignites; Germain on RDM.")
The Securities and Exchange Commission's latest monthly "Money Market Fund Statistics" summary shows that total money fund assets increased by $3.5 billion in August to $5.105 trillion. The SEC shows that Prime MMFs increased by $43.5 billion in August to $960.1 billion, Govt & Treasury funds decreased $47.1 billion to $4.034 trillion and Tax Exempt funds increased $7.1 billion to $111.2 billion. Taxable yields jumped again in August after surging in July. The SEC's Division of Investment Management summarizes monthly Form N-MFP data and includes asset totals and averages for yields, liquidity levels, WAMs, WALs, holdings, and other money market fund trends. We review their latest numbers below. (Note: We look forward to seeing some of you next week at our European Money Fund Symposium, which will take place Sept. 27-28 in Paris, France!)
A Prospectus Supplement filing for State Street ESG Liquid Reserves Fund states, "The Trust's Board of Trustees has approved a Plan of Liquidation and Termination of Series with respect to the Fund, pursuant to which the Fund is expected to be liquidated and terminated on or about October 28, 2022. The Plan authorizes the Fund and its investment adviser, SSGA Funds Management, Inc., to engage in such transactions as may be appropriate for the Fund's liquidation and dissolution, including, without limitation, the sale of Fund assets and payment of, and provision for, Fund liabilities in anticipation of the liquidation. Accordingly, during the period between the effective date of the Plan (September 15, 2022) and the Liquidation Date, the Fund will engage in business and activities solely for the purposes of winding down its business and affairs and making a distribution of its assets to shareholders, and it is possible the Fund will not pursue or achieve its investment objective. Furthermore, it is anticipated that during all, or a portion of, the Liquidation Period the Fund’s assets will be held exclusively in cash and/or cash equivalents." (For more on ESG & Social Money Market Funds, see our May 12 Crane Data News (and hotlinks at the end of that story), "UBS AM Explains Sustainability in Liquidity; Federated Adds SGD Shares.")
Crane Data's latest Money Fund Intelligence International shows that assets in European or "offshore" money market mutual funds jumped over the past month to $973.6 billion led by US dollar funds. But European MMF assets remain below their record high of $1.101 trillion in mid-December 2021. These U.S.-style money funds, domiciled in Ireland or Luxembourg but denominated in US Dollars, Pound Sterling and Euros, increased by $9.5 billion over the 30 days through 9/14. (Note that the increase in the U.S. dollar has caused Euro and Sterling totals to decline when they're translated back into dollars.) The totals are down $89.4 billion (-8.4%) year-to-date. (Note: For more on "offshore" money funds, join us for our upcoming European Money Fund Symposium, Sept. 27-28, in Paris, France.)
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