Money Fund Intelligence XLS

Money Fund Intelligence XLS Sample

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Money Fund Intelligence XLS News

Jul 13

Crane Data released its July Money Fund Portfolio Holdings Friday, and our most recent collection, with data as of June 30, 2020, shows another increase in Treasuries and big drops in Government Agency Debt and Repo last month. Money market securities held by Taxable U.S. money funds (tracked by Crane Data) decreased by $159.1 billion to $4.963 trillion last month, after increasing $31.6 billion in May, a staggering $529.4 billion in April and $725.6 billion in March (and $5.0 billion in February). Treasury securities broke the $2.5 trillion level, and remained the largest portfolio segment, followed by Repo, then Agencies. CP remained fourth, ahead of CDs, Other/Time Deposits and VRDNs. Below, we review our latest Money Fund Portfolio Holdings statistics. (Visit our Content center to download the latest files, or contact us to see our latest Portfolio Holdings reports.)

Among taxable money funds, Treasury securities increased by $60.8 billion (2.5%) to $2.544 trillion, or 51.3% of holdings, after increasing $355.9 billion in May, $795.7 billion in April and $303.1 billion in March. Repurchase Agreements (repo) decreased by $124.3 billion (-11.6%) to $946.6 billion, or 19.1% of holdings, after decreasing $216.7 billion in May, $238.4 billion in April and increasing $225.1 billion in March. Government Agency Debt decreased by $65.2 billion (-6.9%) to $879.2 billion, or 17.7% of holdings, after decreasing $99.8 billion in May, increasing $6.9 billion in April and $292.5 billion in March. Repo, Treasuries and Agencies totaled $4.370 trillion, representing a massive 88.1% of all taxable holdings.

Money funds' holdings of CP, CDs, Other (mainly Time Deposits) and VDRNs all fell in June. Commercial Paper (CP) decreased $6.5 billion (-2.2%) to $286.8 billion, or 5.8% of holdings, after increasing $5.2 billion in May and decreasing $11.9 billion in April and $24.1 billion in March. Certificates of Deposit (CDs) fell by $9.1 billion (-4.2%) to $208.2 billion, or 4.2% of taxable assets, after decreasing $7.4 billion in May, increasing $12.6 billion in April and falling $74.3 billion in March. Other holdings, primarily Time Deposits, decreased $13.7 billion (-14.9%) to $78.0 billion, or 1.6% of holdings, after decreasing by $5.7 billion in May, $5.7 billion in April and $8.0 billion in March. VRDNs decreased to $19.4 billion, or 0.4% of assets, from $20.6 billion the previous month. (Note: This total is VRDNs for taxable funds only. We will publish Tax Exempt MMF holdings separately late Monday.)

Prime money fund assets tracked by Crane Data increased $19.0 billion to $1.154 trillion, or 23.3% of taxable money funds' $4.963 trillion total. Among Prime money funds, CDs represent 18.0% (down from 19.1% a month ago), while Commercial Paper accounted for 24.8% (down from 25.7%). The CP totals are comprised of: Financial Company CP, which makes up 14.2% of total holdings, Asset-Backed CP, which accounts for 6.0%, and Non-Financial Company CP, which makes up 4.6%. Prime funds also hold 6.7% in US Govt Agency Debt, 29.6% in US Treasury Debt, 3.4% in US Treasury Repo, 0.7% in Other Instruments, 3.7% in Non-Negotiable Time Deposits, 4.2% in Other Repo, 5.6% in US Government Agency Repo and 0.9% in VRDNs.

Government money fund portfolios totaled $2.558 trillion (51.5% of all MMF assets), down $98.0 billion from $2.656 trillion in June, while Treasury money fund assets totaled another $1.251 trillion (25.2%), down from $1.330 trillion the prior month. Government money fund portfolios were made up of 31.3% US Govt Agency Debt, 12.2% US Government Agency Repo, 44.3% US Treasury debt, 11.9% in US Treasury Repo, 0.2% in VRDNs and 0.1% in Investment Company. Treasury money funds were comprised of 85.6% US Treasury Debt, 14.3% in US Treasury Repo and 0.1% U.S. Government Agency Debt. Government and Treasury funds combined now total $3.809 trillion, or 76.7% of all taxable money fund assets.

European-affiliated holdings (including repo) fell by $92.3 billion in June to $546.9 billion; their share of holdings fell to 11.0% from last month's 12.5%. Eurozone-affiliated holdings fell to $353.5 billion from last month's $435.3 billion; they account for 7.1% of overall taxable money fund holdings. Asia & Pacific related holdings decreased $17.8 billion to $272.5 billion (5.5% of the total). Americas related holdings fell $49.0 billion to $4.136 trillion and now represent 83.4% of holdings.

The overall taxable fund Repo totals were made up of: US Treasury Repurchase Agreements (down $93.7 billion, or -15.2%, to $521.8 billion, or 10.5% of assets); US Government Agency Repurchase Agreements (down $30.2 billion, or -7.4%, to $376.1 billion, or 7.6% of total holdings), and Other Repurchase Agreements (down $0.5 billion, or -1.0%, from last month to $48.7 billion, or 1.0% of holdings). The Commercial Paper totals were comprised of Financial Company Commercial Paper (up $25.7 billion to $163.6 billion, or 3.3% of assets), Asset Backed Commercial Paper (up $1.2 billion to $69.7 billion, or 1.4%), and Non-Financial Company Commercial Paper (down $33.4 billion to $53.5 billion, or 1.1%).

The 20 largest Issuers to taxable money market funds as of June 30, 2020, include: the US Treasury ($2,544.4 billion, or 51.3%), Federal Home Loan Bank ($542.3B, 10.9%), Federal National Mortgage Association ($124.9B, 2.5%), Fixed Income Clearing Co ($111.3B, 2.2%), RBC ($109.1B, 2.2%), BNP Paribas ($106.8B, 2.2%), Federal Home Loan Mortgage Co ($103.7B, 2.1%), Federal Farm Credit Bank ($102.5B, 2.1%), JP Morgan ($86.3B, 1.7%), Mitsubishi UFJ Financial Group Inc ($62.4B, 1.3%), Citi ($55.8B, 1.1%), Sumitomo Mitsui Banking Co ($53.2B, 1.1%), Barclays ($51.7B, 1.0%), Toronto-Dominion Bank ($44.4B, 0.9%), Credit Agricole ($43.4B, 0.9%), Bank of Montreal ($39.7B, 0.8%), Bank of America ($37.2B, 0.7%), Canadian Imperial Bank of Commerce ($35.1B, 0.7%), Bank of Nova Scotia ($34.5B, 0.7%) and Societe Generale ($33.8B, 0.7%).

In the repo space, the 10 largest Repo counterparties (dealers) with the amount of repo outstanding and market share (among the money funds we track) include: Fixed Income Clearing Co ($111.1B, 11.7%), BNP Paribas ($95.3B, 10.1%), RBC ($78.9B, 8.3%), JP Morgan ($75.5B, 8.0%), Citi ($47.5B, 5.0%), Mitsubishi UFJ Financial Group ($41.9B, 4.4%), Barclays ($36.0B, 3.8%), Sumitomo Mitsui Banking Corp ($34.1B, 3.6%), Bank of America ($33.8B, 3.6%) and Credit Agricole ($32.1B, 3.4%). Fed Repo positions among MMFs on 6/30/20 still include only Franklin US Govt Money Market Fund ($1.0B).

The 10 largest issuers of "credit" -- CDs, CP and Other securities (including Time Deposits and Notes) combined -- include: RBC ($30.3B, 6.1%), Toronto-Dominion Bank ($29.2B, 5.9%), Mitsubishi UFJ Financial Group ($20.5B, 4.2%), Sumitomo Mitsui Banking Co ($19.1B, 3.9%), Canadian Imperial Bank of Commerce ($18.5B, 3.8%), Sumitomo Mitsui Trust Bank ($17.4B, 3.5%), Bank of Nova Scotia ($16.9B, 3.4%), Mizuho Corporate Bank Ltd ($16.7B, 3.4%), Barclays ($15.7B, 3.2%) and Credit Suisse ($13.3B, 2.7%).

The 10 largest CD issuers include: Sumitomo Mitsui Banking Co ($15.1B, 7.2%), Mitsubishi UFJ Financial Group Inc ($15.0B, 7.2%), Toronto-Dominion Bank ($13.1B, 6.3%), Sumitomo Mitsui Trust Bank ($12.3B, 5.9%) Bank of Montreal ($11.1B, 5.4%), Natixis ($9.4B, 4.5%), Bank of Nova Scotia ($9.2B, 4.4%), Mizuho Corporate Bank Ltd ($9.2B, 4.4%), Svenska Handelsbanken ($8.7B, 4.2%) and Canadian Imperial Bank of Commerce ($7.5B, 3.6%).

The 10 largest CP issuers (we include affiliated ABCP programs) include: RBC ($18.0B, 7.3%), Toronto-Dominion Bank ($15.7B, 6.3%), JP Morgan ($10.8B, 4.4%), Societe Generale ($9.9B, 4.0%), Canadian Imperial Bank of Commerce ($9.8B, 3.9%), Caisse des Depots et Consignations ($8.9B, 3.6%), ING Bank ($7.3B, 2.9%), Barclays PLC ($7.2B, 2.9%), Credit Suisse ($7.2B, 2.9%) and Credit Suisse ($7.0B, 2.8%).

The largest increases among Issuers include: the US Treasury (up $60.8B to $2.544 trillion), Toronto-Dominion Bank (up $5.2B to $44.4B), Citi (up $4.9B to $55.8B), Bank of Montreal (up $4.4B to $39.7B), Sumitomo Mitsui Trust Bank (up $4.1B to $23.0B), Federal Home Loan Mortgage Corp (up $2.2B to $103.7B), Skandinaviska Enskilda Banken AB (up $1.5B to $9.6B), Wells Fargo (up $1.4B to $29.2B), UBS AG (up $1.3B to $9.5B) and Caisse des Depots et Consignations (up $1.3B to $9.1B).

The largest decreases among Issuers of money market securities (including Repo) in June were shown by: Federal Home Loan Bank (down $64.1B to $542.3B), Fixed Income Clearing Corp (down $24.9B to $111.3B), BNP Paribas (down $21.5B to $106.8B), JP Morgan (down $13.5B to $86.3B), Societe Generale (down $12.4B to $33.8B), Credit Agricole (down $11.3B to $43.4B), Barclays PLC (down $8.3B to $51.7B), Natixis (down $7.4B to $26.6B), Deutsche Bank AG (down $7.0B to $13.7B) and RBC (down $6.6B to $109.1B).

The United States remained the largest segment of country-affiliations; it represents 77.7% of holdings, or $3.856 trillion. Canada (5.6%, $279.5B) was number two, and France (4.8%, $236.7B) was third. Japan (4.5%, $222.5B) occupied fourth place. The United Kingdom (2.3%, $114.7B) remained in fifth place. Germany (1.2%, $58.0B) was in sixth place, followed by The Netherlands (1.1%, $52.5B), Sweden (0.7%, $35.9B), Australia (0.7%, $32.2B) and Switzerland (0.6%, $30.2B). (Note: Crane Data attributes Treasury and Government repo to the dealer's parent country of origin, though money funds themselves "look-through" and consider these U.S. government securities. All money market securities must be U.S. dollar-denominated.)

As of June 30, 2020, Taxable money funds held 28.7% (down from 32.4%) of their assets in securities maturing Overnight, and another 9.2% maturing in 2-7 days (down from 10.3% last month). Thus, 37.9% in total matures in 1-7 days. Another 18.1% matures in 8-30 days, while 14.7% matures in 31-60 days. Note that over three-quarters, or 70.0% of securities, mature in 60 days or less (down slightly from last month), the dividing line for use of amortized cost accounting under SEC regulations. The next bucket, 61-90 days, holds 11.8% of taxable securities, while 14.9% matures in 91-180 days, and just 2.7% matures beyond 181 days.

Jul 08

The July issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Wednesday morning, features the articles: "Fidelity Exits Prime Inst Space, Though Assets Growing Nicely," which focuses on the closing of some institutional prime money market funds; "T. Rowe Price's Lynagh Says Stay True to MMF Mandate," which profiles the VP and leader of TRP's cash business; and, "AFP Liquidity Survey: Safety, Bank Relationships Still Key," which reviews the latest preferences of corporate treasurers. We've also updated our Money Fund Wisdom database with June 30 statistics, and we sent out our MFI XLS spreadsheet Wednesday a.m. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our July Money Fund Portfolio Holdings are scheduled to ship on Friday, July 10, and our July Bond Fund Intelligence is scheduled to go out Wednesday, July 15.

MFI's "Fidelity Exits" article says, 'Fidelity Investments recently announced its 'Fidelity Institutional Prime Money Market Funds Liquidation,' telling us, 'We have decided to liquidate our two institutional prime money market funds: Fidelity Investments Money Market (FIMM) Prime Money Market Portfolio and Fidelity Investments Money Market (FIMM) Prime Reserves Portfolio. Both funds will remain fully accessible to investors until their liquidation on or about August 14, 2020.... It is important to note that this decision does not affect any of our other money market funds -- institutional or retail -- and there is no need to take immediate action. We are committed to working with our institutional clients to determine alternative liquidity investment products that best suit their needs by August 12.'"

The announcement continues, "Our decision to liquidate these two funds was made after thoughtful review and consideration of our experience with investor behavior in institutional prime money market funds during periods of market stress, evolving institutional investor preferences, and our broader money market business. We are choosing to exit the institutional prime segment of the marketplace because we believe we can better meet institutional investors' needs with other cash management products."

Our "Profile" reads, "This month, MFI interviews T. Rowe Price Group Vice President Joseph Lynagh, who runs T. Rowe's cash management operation, and also its ultra-short bond strategies. Lynagh will be retiring early next year after three decades at the Baltimore-based fund manager. We ask him about the recent market turmoil (and past episodes), and he tells us about the firm's history, the latest crisis, fee waivers and a number of other issues. He says we'll have to 'buckle down' again to make it through the latest zero yield environment. Our Q&A follows."

MFI says, "Give us some history." Lynagh tells us, "T. Rowe has been involved in money funds since 1976.... The Prime Reserve Fund was our flagship fund. It was in place ... when interest rates really spiked and money funds were quite the story, posting yields of 10-11 percent. Against the context of today, that sounds like a completely different universe.... We later launched the Tax-Exempt Money Fund to give us a presence in the muni space.... We added a U.S. Treasury Money Fund [and] state-specific funds on the muni side, California, New York and later Maryland. We then introduced what at the time was a low-fee product in our 'Summit' line of funds."

The "Survey" article tells readers, "The Association for Financial Professionals recently released its 'AFP Liquidity Survey,’ and a press release entitled, 'Companies Turn to Bank Deposits as COVID-19 Crisis Continues.' The latter says, 'Companies are holding their short-term investments in banks due to concerns over the economy, according to the 2020 AFP Liquidity Survey, underwritten by Invesco.' It shows that '51% of respondents revealed that they increased their short-term investments in banks. This is the highest percentage in three years and a reversal of a downward trend that began in 2015. Although the survey was taken before the full effect of liquidity preservation efforts had set in due to the COVID-19 outbreak, this flight to caution likely reflects concerns that the pandemic poses a critical threat to the global economy.'"

AFP, which just cancelled its October conference in Las Vegas (see here), explains, "Safety continues to be the most-valued short-term investment objective for 62% of organizations, followed by liquidity at 34% and yield at a distant third with 4%. Given the current recession, we should probably expect larger shares of companies opting for safety in the future. As the crisis surrounding the pandemic unfolds, trust in banking partners will be paramount as the survey reflects. Ninety-three percent of respondents consider the overall relationship with their banks to be the primary driver in bank deposit selection. Seventy-three percent indicated that the credit quality of a bank is a deciding factor in determining where to maintain balances."

The latest MFI also includes the News brief, "Money Fund Assets Plunge in June," which says, "Assets fell by $113.0 billion in June to $5.050 trillion, but they're still up $1.092 trillion YTD. ICI also shows assets falling for 6 straight weeks after 15 straight weeks of inflows. (Assets have rebounded this week though, according to our MFI Daily.)

A second News piece titled, "Money Fund Yields Bottoming," says, "Our flagship Crane 100 inched down by 3 basis points to 0.11% last month, and expense ratios continue to inch lower as fee waivers increase. Watch for our revised MFI XLS and craneindexes.xlsx with updated expense info on 7/9."

Our July MFI XLS, with June 30 data, shows total assets decreased by $113.0 billion in June to $5.050 trillion, after increasing $31.6 billion in May, jumping $417.9 billion in April and skyrocketing $688.1 billion in March. Our broad Crane Money Fund Average 7-Day Yield fell 2 bps to 0.07% during the month, while our Crane 100 Money Fund Index (the 100 largest taxable funds) was down 3 bps to 0.11%.

On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA was down 2 bps at 0.33% and the Crane 100 also fell to 0.32%. Charged Expenses averaged 0.26% (unchanged from last month) and 0.21% (unchanged from the previous month), respectively for the Crane MFA and Crane 100. The average WAM (weighted average maturity) for the Crane MFA and Crane 100 was 40 (down 1 day) and 43 days (down 2 days) respectively. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)

Jun 05

The June issue of our flagship Money Fund Intelligence newsletter, which was sent out to subscribers Friday morning, features the articles: "MFs Begin Waiving Expenses to Avoid Negative Yields," which focuses on fee waivers as money fund yields approach zero; "Invesco's Brignac on Time-Tested Process, Client Care," which profiles the CIO for Invesco Global Liquidity; and, "NY Fed Blog Reviews MMLF, CPFF, PDCF Fed Support Plans," which looks at the Fed's lending facilities. We've also updated our Money Fund Wisdom database with May 31 statistics, and was sent out our MFI XLS spreadsheet Friday a.m. (MFI, MFI XLS and our Crane Index products are all available to subscribers via our Content center.) Our June Money Fund Portfolio Holdings are scheduled to ship on Tuesday, June 9, and our June Bond Fund Intelligence is scheduled to go out Friday, June 12.

MFI's "Waiving Expenses" article says, "Money funds have stabilized at a record $5.2 trillion following a harrowing March and a surprisingly robust recovery in April and May. While CP market turmoil, the Prime asset drop and recovery and the Government MMF asset bonanza are still stories, the big issue facing funds is now zero and perhaps negative yields, along with fee waivers and reduced expenses. Yields have fallen to 0.15% on average and over 25% of assets (and 50% of funds) are now on the 0.00%-0.01% floor."

It continues, "During the last zero yield era (2009-2015), funds basically waived half of their fees, cutting expenses from roughly 0.35% to 0.17%. While it's difficult to get timely and accurate expense and waiver data, it's clear that waivers are starting to bite and expenses are moving downwards. (We update ours using the SEC's Form N-MFP info, but we don't update until the 6th business day -- so see our June MFI XLS and craneindexes.xlsx file on the website on Monday for the latest.)"

Our "Profile" reads, "This month, Money Fund Intelligence interviews Laurie Brignac, Chief Investment Officer for Invesco Global Liquidity, which will celebrate its 40th birthday this year. (Money funds will celebrate their 50th this October.) Brignac tells us about Invesco's history, about the events of the last several months and the issues facing money fund managers for the remainder of 2020. Our Q&A follows."

MFI says, "Give us a little history. Brignac tells us, "We launched our first money market fund back in 1980 and at that time we were known as AIM Investments. AIM merged with Invesco in the late '90s, but we're proud of the fact that we have the same investment process that we used on that first day in 1980. I don't know if many people can say that. The process has stood the test of time and worked very well for our clients over multiple interest rate and credit cycles. We're very proud of the fact that we have never had to buy securities or support any of our money market funds, even through the financial crisis. We've been able to honor all purchases and redemptions on T-0 basis."

The "NY Fed Blog" article tells readers, "The Federal Reserve Bank of New York posted a series of 'Liberty Street Economics' blogs reviewing the Fed's recent support facilities, including 'The Money Market Mutual Fund Liquidity Facility,' 'The Primary Dealer Credit Facility' and 'The Commercial Paper Funding Facility.' The MMLF piece tells us, 'Over the first three weeks of March, as uncertainty surrounding the COVID19 pandemic increased, prime and municipal (muni) money market funds (MMFs) faced large redemption pressures. Similarly to past episodes of industry dislocation, such as the 2008 financial crisis and the 2011 European bank crisis, outflows from prime and muni MMFs were mirrored by large inflows into govt MMFs.'"

The post explains, "To prevent outflows from prime and muni MMFs from turning into an industry-wide run, as happened in September 2008 when one prime MMF 'broke the buck,' the Federal Reserve announced the establishment of the Money Market Mutual Fund Liquidity Facility, or MMLF, on March 18. Under this facility, the Federal Reserve Bank of Boston provides loans to eligible borrowers ... taking as collateral eligible securities purchased from prime and muni MMFs. The U.S. Treasury provides $10 billion of credit protection to the Federal Reserve from the Treasury's Exchange Stabilization Fund."

The latest MFI also includes the News brief, "Money Fund Assets Up in May But Down in June," which writes, "MMF assets increased by $31.6 billion in May to a record $5.163 trillion according to Crane's MFI XLS. ICI's latest weekly shows assets falling by $36.3 billion in the latest week to $4.752 trillion."

A second News piece titled, "Northern Liquidating Prime Obligs," says, "Northern Institutional Funds filed to liquidate its $1.7 billion Northern Prime Obligations Portfolio. The filing says, 'The Board ... has determined ... that the Portfolio be liquidated and terminated on or about July 10, 2020.' See Bloomberg's 'Northern Trust to Shutter Money-Market Fund After Redemptions.'"

Our June MFI XLS, with May 31 data, shows total assets increased by $31.6 billion in May to $5.163 trillion, after jumping $417.9 billion in April, $688.1 billion in March and $23.4 billion in February. Our broad Crane Money Fund Average 7-Day Yield fell 8 bps to 0.11% during the month, while our Crane 100 Money Fund Index (the 100 largest taxable funds) was down 11 bps to 0.15%.

On a Gross Yield Basis (7-Day) (before expenses are taken out), the Crane MFA was down 8 bps at 0.41% and the Crane 100 fell to 0.38%. Charged Expenses averaged 0.30% (down 4 bps from last month) and 0.23% (down two from the previous month), respectively for the Crane MFA and Crane 100. The average WAM (weighted average maturity) for the Crane MFA and Crane 100 was 41 (up 2 days) and 44 days (up 3 days) respectively. (See our Crane Index or craneindexes.xlsx history file for more on our averages.)

May 26

For those of you who might have missed it, we hosted our first webinar, entitled, "Crane's Money Fund Update & Training," last Thursday. It featured Peter Crane reviewing recent events and trends involving money market mutual funds for 30 minutes, including discussions of asset flows, negative yield and a number of other topics. The webinar also included a brief, 15 minute tutorial on our Money Fund Intelligence Daily product. Below, we review Crane's latest comments, and we also include links to the recordings and Powerpoint. (See the bottom of our "Content" page for all of our Webinar and conference materials.) Mark your calendars and watch for details on our next webinar, which will be held June 25 at 2pm, and bear with us as we ramp up our virtual event capabilities over the next couple of months.

On record money fund asset growth, Crane comments, "The ICI series is hitting $4.8 trillion. Crane Data's [series] has hit $5 trillion already. We're saying money fund assets are over $5 trillion because we're counting funds that ICI is not. (Crane Data tracks internal money market funds like American Funds Central Cash, Fidelity Cash Central Fund and Vanguard Market Liquidity Fund.) The inflows into government funds were just gigantic, so, it's been quite a huge buildup. Looking at the month-by-month numbers, it has certainly tapered off. And in the last few days, you've even seen outflows."

He continues, "The ICI's weekly numbers are going to come out this afternoon, they'll probably show a little increase. We're about to see a decrease in assets for almost the first time this year, but ... the flows have been incredible.... Government funds have seen $1.16 trillion in assets the last two and a half, three months. In March, they saw $790 billion. In April, they saw $362 billion. Then month-to-date in May, it's been interesting because Prime has been taking the lion's share. Prime funds saw about $160 billion of outflows in March. In April, they saw an $82 billion inflow. And in May, they've seen an $82 billion inflow. So, the inflows into prime funds have recovered all of the outflows from March, which is just amazing."

Crane explains, "You probably saw the news on Northern liquidating its Prime. That was a little bit of an anomaly and a leftover from what had already happened there during March, when one of the funds went below the 30% weekly liquid assets. But the asset inflows have been incredible.... Looking at ICI's number, they're up $1.2 trillion, 31.8% year-to-date, and that's after a 20% gain in 2019. The 52 week [changes] are up 54%. It has been incredible, the buildup."

He says "I'm guessing we're going to see a flattening out [of asset growth]. But this cash war chest that you've seen raised -- no cash bucket is big enough for the coronavirus or is big enough, for individuals, governments, institutions. It's like everybody's got to plan for operating for two months, three months, six months, two years. Who knows? With no revenue coming in, with no cash coming in. So, there's been this just mad raising of cash. And of course, that's the giant spikes that we've seen. I don't think it's going out anytime soon. I think that you're basically going to have people spending down the cash as they have to meet payrolls and expenses. But as they turn revenue on, and they're going to be converting other cash and trying to protect themselves because they were just taught a painful lesson that you shouldn't just have a couple of days of spending money in the kitty. You better have a couple of months. And who knows? Maybe even a couple of years."

Crane also comments, "The Fed support programs were awesome. We'll be arguing about how necessary they were. But from my standpoint, they were a godsend. It certainly was a real dangerous scenario. You’ve probably heard other fund companies talking about the Money Market Liquidity Facility, the Primary Dealer Credit Facility, the Commercial Paper Funding Facility, they were all good in ways and helped support the market in general. And putting pricing under those Commercial Paper and CD markets was key because at the time, in that week in the middle of March, you didn't know what to price things at. And of course, if you want to sell something, good luck with that. Now things have stabilized, Prime is back and things are doing fine."

He tells us, "As an aside, the Treasury Guarantee Program was never used, never implemented, but it was part of that first big CARES Act. Back in that nail-biting week, it looked as if it might be necessary. Who knows how it would have been structured, whether it would have been like it was in 2008. Everybody went to the 2008 playbook and assumed that's where you start.... Unfortunately, with the coronavirus they don't have a playbook for that yet, we're writing it out. So, it certainly helps if you've been through this before."

Crane continues, "Looking at the deposit numbers too … bank deposits were up $1 trillion as well. That has been an absolute crazy side effect, too. If you look at the overall cash. I like adding the Fed's H.6 series. I'll take their money fund stats and add them to their deposit, their money market deposit accounts from banks and thrifts. Those two are now $15 trillion, so you've seen this $2.2 plus trillion surge in cash, in both money funds and bank deposits. That's usually a rarity, they're usually sort of battling against each other and taking market share against each other. But bank deposits have been absolutely gigantic as well. The cash build up has been immense."

On yields, he states, "The big thing is the yields already had been declining going into 2020. You saw yields roughly at 2.0% at the start of 2019, 1.5% at the start at 2020 and then during March with that big 100 basis point Fed cut to zero. You're seeing money funds digest those and come down. Money fund yields on average went through 1.0% in March, through 0.5%, and now are 0.17% according to the Crane 100, as of yesterday. That's the hundred largest money funds and is really representative of what the market's yielding.... The average Prime institutional fund is 0.31%, as of yesterday. The average government institutional fund is 0.11%, with the treasury at 0.8%. So, you’ve got 20 basis points or so of spread in there. As yields are being crushed to zero, you do see this migration and push out of risk and struggle for yield on the curve. So, expect to see more of that."

Crane adds, "You've probably heard about the Treasury soft closings; they're not liquidating the funds, they just restricted tempered new money coming in. Fidelity did that first and then Vanguard did that with a Treasury fund. None of the other big providers have done that. And the negative yields on T-bills have gone away for now and have been alleviated."

He continues, "What you're looking at now is when you had this period of zero yields before in 2009 through 2015, you had, in effect, fund companies waive fees to maintain a positive yield. And if you look at funds with fee waivers now, they change them day to day so they're hard to spot. The easiest way to spot who's waiving fees is to look at the yield and say, 'Is their yield 0.00 or 0.01%?' And right now, brokerage sweep accounts are all, across all the tiers, 0.01%, so they've hit the floor. Money funds, you have 20% of assets at 0.00 to 0.01%, which is usually the floor. So, they pay a tiny token dividend just so they're not mistaken as an n/a and it stays positive. So, 20% is at zero already and so it's starting to get hit by fee waivers. Another 20% is at 10 basis points to 0.01%, and that percentage is getting crushed in. You’re soon going to have 40% of the assets at zero and starting to waive fees that can be felt."

Crane says, "Money fund managers and others have said the Fed doesn't want to go negative. The Fed has said they don't want to go negative. But we've seen the last couple of years, couple of decades, that the Fed does what the market tells it to do and the government does what the market tells it to do. So, though people say it's unlikely, you know, people are starting to gear up and say, what happens if we might go negative? From a theoretical standpoint, it's no big deal. In Europe, in euro, you have $100 billion. If you look at the euro money funds, which are much smaller, they're different, they're institutional, but they're yielding negative 0.5%. These numbers are all annualized realize, of course. It's been that way for five years and they're hitting record asset levels; they got a big surge from the coronavirus panic as well. I think it's merely jumping through some regulatory hoops and dealing with some issues. Money funds might even prefer to go negative and to have negative yields because then they don't have the waive expenses."

He explains, "Though it's unlikely, negative yields do not mean investors are going to take their cash away. I mean, in this scenario, it's the old Will Rogers comment about return of principal, instead a return on principal, that always applies to cash. And of course, if people are worried, they're nervous, they're panicked if they have to pay payrolls, if they have to meet expenses, what do you care what rate you're getting? The rate is nice, it drives money around the margin, but it's not going to make a big dent in that gigantic $5 trillion balance. So, I don't see the money fleeing."

Crane asks, "If you go negative, how would you do it? That’s the question. But I think that problem can be solved as well, whether you do a reverse distribution mechanism or a share cancelation mechanism like euro money funds used to do before they changed the regulations. Some people think you have got to have an S.E.C. change to do that. The S.E.C. might even be able to do it through a no action letter, or it might be something that doesn't require a big regulatory change. That's unclear. Or, you could even have government funds going and filing and saying we're going floating and going to a four-digit NAV, and just having that gradual small erosion. But negative yield is not breaking the buck, is not losing money. People aren't losing the money if they're paying you the fee. They're aware of what that charge is, of what that cost is, and I believe they're going to be more than happy to pay it."

He also states, "Regulatory changes are something that people are asking about, they're a big issue. I don't think money funds are destined for dramatic reforms, but people are dusting off their copies of the President's Working Group or ICI Working Group and seeing what kind of crazy ideas might come out of the woodwork again.... We went through and settled on modest incremental changes last time. This time you're going to blame the coronavirus and not mortgage backed securities and complex securities and the financial system. But of course, a lot does depend on what regulators are looking at and who wins the election. If Elizabeth Warren gets in there, she's probably going to want to regulate something. But who knows what's going to happen? Regulators have a lot of bigger fish to fry and other issues, but I'm sure it is going to be talked about again."

Crane adds, "If you, like me, lived through the last set of regulatory discussions and issues you realize in 2007/2008, the subprime liquidity crisis, there was no clear answer to any of this stuff. And again, I think you're going to have that same problem and issue. Do you want to kill the money funds to save them? Do you want to change radically? And I think we're destined for a stalemate and perhaps minor tweaks again. So, I'd bet against regulatory issues and changes. The one big thing that you could argue worked was the prime space was half the size that it was in 2008. It was a trillion dollars in the CP markets, in the prime markets, versus $2 trillion plus back then. So, your problem was smaller and the fact that everybody's got government money funds, and that tier of government fund liquidity certainly may have helped. I think Prime survives. I think credit survives, but that's something that people will be talking about."

Again, watch for more webinars in coming months, and we still remain hopeful that travel will resume later this summer and that we'll be able to host our annual Money Fund Symposium and European Money Fund Symposium. Crane's Money Fund Symposium is scheduled for August 24-26, 2020 at the Hyatt Regency Minneapolis. We'll continue to monitor events carefully in coming weeks, and we'll be prepared to move, to cancel, and/or to webcast if our client base deems it unsafe. Meanwhile, we'll be preparing for the show and taking steps to spread out and make the event safer. (Note: We'll offer full refunds or credits for any cancellations.) Our next European Money Fund Symposium is now scheduled for Nov. 19-20, 2020 in Paris, France. Also, mark your calendars for next year's Money Fund University, which is scheduled for Jan. 21-22, 2021, in Pittsburgh, Pa, and our next Bond Fund Symposium, which is scheduled for March 25-26, 2021 in Newport Beach, Calif. Watch for details in coming months, and we'll keep you posted on our upcoming virtual, and live, events.