Link of The Day
ECB Posts Stablecoin Working Paper
The European Central Bank (ECB) recently published a working paper titled, "Stablecoins and monetary policy transmission." Its summary states, "Digital assets are becoming an increasingly visible part of the financial system. Among them, stablecoins, i.e. crypto-assets designed to maintain a stable value, usually by being linked to a major currency such as the U.S. dollar or the euro, have grown rapidly. Unlike volatile crypto-assets such as Bitcoin, stablecoins are often marketed as digital equivalents of bank deposits. Currently, their use is primarily linked to increasing demand for the settlement of tokenised assets, reflecting the growth of crypto-asset trading ecosystems. While stablecoins promise faster and cheaper payments and greater financial innovation, their broader use as a means of payment or as a store of value raises important questions about financial stability, the role of banks, and the effectiveness of monetary policy. This study examines these issues with a focus on the euro area." The ECB asks, "How do stablecoins affect banks? The first key finding is that growing use of stablecoins can lead people and firms to move money out of traditional bank deposits and into digital assets. Banks rely heavily on deposits as a stable and low-cost source of funding to support lending to households and businesses. When deposits decline, banks may be forced to rely more on wholesale or market-based funding, which is typically more expensive and less stable. Our analysis shows that increasing interest in and attention toward stablecoins are associated with a measurable decline in retail bank deposits and a reduction in bank lending to firms. In other words, stablecoins can reduce the amount of credit banks provide to the real economy. Importantly, these effects are nonlinear and depend critically on the scale of stablecoin adoption, their design features, and their regulatory treatment." They comment, "What does this mean for monetary policy? The second finding concerns how monetary policy works. In the euro area, banks play a central role in transmitting interest rate changes to households and firms. When deposits shift into stablecoins, this transmission mechanism changes. We find that stablecoin adoption interfere with multiple monetary policy transmission channels, potentially weakening the predictability of policy actions." The summary concludes, "These findings highlight the importance of thoughtful regulation. Measures such as stronger transparency requirements for stablecoin reserves, robust redemption guarantees, adequate capital buffer to absorb losses and effective oversight can reduce financial risks. At the same time, initiatives such as central bank digital currencies may offer a public alternative that preserves monetary sovereignty while supporting innovation. Design choices are central to understanding the structural differences between these instruments. In the European context, for example, holding limits crystallize the distinction between stablecoins and a digital euro. By capping individual holdings, the digital euro is explicitly framed as a transactional instrument, thereby protecting commercial bank deposits and reinforcing financial stability. These limits reduce the risk of large-scale deposit migration into central bank money during periods of stress and help preserve the effectiveness of monetary policy transmission."
Fitch Ratings' Q4'25 LGIP Update
Fitch Ratings published "U.S. Local Government Investment Pools Monitor: 4Q25," which tells us, "Fitch Ratings' two local government investment pool (LGIP) indices experienced asset increases in the fourth quarter of 2025 (4Q25). Total assets for the Fitch Liquidity LGIP Index and the Fitch Short-Term LGIP Index were $661.1 billion at quarter end, marking an increase of $34.7 billion QoQ and $13.9 billion YoY. While total assets for the indices continue to reach new highs, YoY percentage growth rates have continued to slow, dropping from double-digit increases in pre-2024 to low single-digit growth as of year-end. The Fitch Liquidity LGIP Index rose by 5.2% QoQ and the Fitch Short-Term LGIP Index by 6.2% QoQ, consistent with average fourth quarter increases of 6.8% and 10.3%, respectively, over the past three years." The update continues, “Both Fitch indices ended the quarter with decreased average yield profiles, as net yields averaged 3.84% for the Liquidity Index and 3.99% for the Short-Term Index, a decline of 34 bps and 10 bps, respectively. This drop reflects the impact of the Federal Reserve's cumulative 75-basis point rate cuts in October and December, which lowered the target range to 3.50%-3.75% by year end. Weighted average maturities (WAMs) remained largely stable in 4Q25, as managers responded to ongoing rate cuts by moderately extending durations in an effort to preserve current yields ahead of anticipated further declines. The WAM for the Fitch Liquidity LGIP Index eased to 39 days in Q4 from 40 days in Q2, remaining above prime '2a-7' money market funds (MMFs) at 31 days. The Fitch Short Term LGIP Index ended the quarter with a duration of 1.30 years, down 2% since last quarter." The brief adds, "The Fitch Liquidity LGIP Index increased exposure to repurchase agreements by 3.1% while reducing exposure to Commercial Paper by 4.5% QoQ. This is consistent with allocation shifts in prime '2a-7' MMFs in Q4, driven by investor flows and supply in the repo market, as well as tighter spreads and lower supply in commercial paper, at year-end. These allocation changes highlight LGIPs' active approach to maintaining liquidity."
Money Fund Yields Inch down to 3.48%
Money fund yields (7-day, annualized, simple, net) were down 1 basis point to 3.48% on average during the week ended Friday, March 6 (as measured by our Crane 100 Money Fund Index), after decreasing 1 basis point the week prior. Fund yields haven't been below 3.5% since November 2022, and they are down from a recent high of 5.20% in November 2023. They should remain flat in coming days (and weeks) since the Fed left short-term rates unchanged six weeks ago. Yields were 3.58% on 12/31/25, 3.78% on 11/30, 3.90% on 10/31, 3.94% on 9/30, 4.11% on 8/31, 4.12% on 7/31, 4.13% on 6/30, 4.14% on 3/31/25 and 4.28% on average on 12/31/24. MMFs averaged 4.75% on 9/30/24, 5.10% on 6/28/24, 5.14% on 3/31/24 and 5.20% on 12/31/23. The broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 681), shows a 7-day yield of 3.38%, down 1 bp in the week through Friday. Prime Inst money fund yields were unchanged at 3.60% in the latest week. Government Inst MFs were down 1 bp at 3.48%. Treasury Inst MFs were down 1 bp at 3.44%. Treasury Retail MFs currently yield 3.21%, Government Retail MFs yield 3.20% and Prime Retail MFs yield 3.38%, Tax-exempt MF 7-day yields were down 24 bps to 1.53%. Money market mutual fund assets have paused since hitting a record high of $8.271 trillion on March 3, according to our Money Fund Intelligence Daily. Assets have risen $3.8 billion in the week through Friday, and they've increased by $3.8 billion in March month-to-date (through 3/6). MMF assets increased by $99.5 billion in February, $32.9 billion in January, $126.3 billion in December, $132.8 billion in November, $142.1 billion in October, $105.2 billion in September and $132.0 billion in August. They rose by $63.7 billion in July, $6.7 billion in June and $100.9 billion in May. But MMFs decreased $24.4 billion in April. Assets increased by $2.8 billion in March, and $94.2 billion last February. Weighted average maturities were at 42 days for the Crane MFA and 43 days the Crane 100 Money Fund Index. According to Monday's Money Fund Intelligence Daily, with data as of Friday (3/6), just 159 money funds (out of 791 total) yield under 3.0% with $190.9 billion in assets, or 2.3%, while the vast majority (632) of funds yield between 3.00% and 3.99% ($8.054 trillion, or 97.7%). No funds yield over 4.0%. Our Brokerage Sweep Intelligence Index, an average of FDIC-insured cash options from major brokerages, was unchanged at 0.30%, after falling 1 basis point eleven weeks prior. The latest Brokerage Sweep Intelligence, with data as of March 6, shows no changes over the past week. Four of the 10 major brokerages tracked by our BSI offer rates of 0.01% for balances of $100K (and lower tiers). These include: E*Trade, Merrill Lynch, Morgan Stanley and Schwab.
Airwallex Offers JPM USD MMF
A press release titled, "Airwallex Expands High-Yield Treasury Offering to U.S. Businesses; Surpasses US$1 Billion in Global Assets Under Administration," tells us, "Airwallex, a leading global financial platform for modern businesses, ... announced the U.S. launch of Yield, a treasury solution designed to help businesses optimize returns on idle cash. With Yield, customers can quickly and seamlessly move funds from their Airwallex cash balances into a AAA-rated money market fund managed by J.P. Morgan Asset Management, with the opportunity to earn returns that outperform traditional bank savings." It explains, "Since its initial debut in Australia just over two years ago, Yield has seen rapid global adoption, recently surpassing US$1 billion in global assets under administration. Usage data highlights the specific drivers behind this growth: SME Market Traction: This momentum is driven by small-to-medium enterprises with less than $10M in annual revenue, demonstrating that institutional-grade returns are a critical priority for the segment. Operational Simplicity: Customers are using Yield as a 'set and forget' account, treating it with the ease of a traditional savings account to ensure their idle funds are consistently productive. Managing Global Volatility: The majority of these funds are held in USD, as companies increasingly seek to protect capital against local currency volatility and macro-economic uncertainty." Jack Zhang, co-founder and CEO of Airwallex, comments, "Topping $1 billion is a testament to the demand for a new kind of banking experience -- one that is global, digital-first, and institutional-grade. With the launch of Yield in the U.S., we are closing the gap in the market for a unified platform. We are giving U.S. businesses a seamless way to operate across currencies, while ensuring their working capital is actively generating value, not sitting in an idle account." The release adds, "Airwallex Yield offers U.S. businesses a sophisticated alternative to traditional savings accounts, which often offer negligible returns. By providing seamless access to an AAA-rated money market fund managed by J.P. Morgan Asset Management, Airwallex enables finance teams to optimize their USD balances with the liquidity required for daily operations."
ICI: MMF Assets Hit Record $7.8 Tril.
The Investment Company Institute published its weekly "Money Market Fund Assets" on Thursday. The report shows money fund assets increasing by $20.1 billion to a record high $7.817 trillion, after rising by $5.7 billion the previous week. Eight weeks ago, assets hit their previous record $7.804 trillion. Assets have risen in 19 of the last 24 weeks and 27 of the past 33 weeks. MMF assets are up by $791 billion, or 11.3%, over the past 52 weeks (through 3/4/26), with Institutional MMFs up $550 billion, or 13.1% and Retail MMFs up $242 billion, or 8.5%. Year-to-date in 2026, MMF assets are up by $84 billion, or 1.1%, with Institutional MMFs up $79 billion, or 1.7% and Retail MMFs up $4 billion, or 0.1%. ICI's weekly release says, "Total money market fund assets increased by $20.11 billion to $7.82 trillion for the week ended Wednesday, March 4, the Investment Company Institute reported.... Among taxable money market funds, government funds increased by $18.68 billion and prime funds increased by $3.41 billion. Tax-exempt money market funds decreased by $1.98 billion." ICI's stats show Institutional MMFs increasing $10.1 billion and Retail MMFs increasing $10.1 billion in the latest week. Total Government MMF assets, including Treasury funds, were $6.430 trillion (82.3% of all money funds), while Total Prime MMFs were $1.244 trillion (15.9%). Tax Exempt MMFs totaled $142.2 billion (1.8%). It explains, "Assets of retail money market funds increased by $10.05 billion to $3.08 trillion. Among retail funds, government money market fund assets increased by $9.24 billion to $1.95 trillion, prime money market fund assets increased by $2.43 billion to $1.00 trillion, and tax-exempt fund assets decreased by $1.62 billion to $128.97 billion." Retail assets account for 39.4% of the total, and Government Retail assets make up 63.3% of all Retail MMFs. They add, "Assets of institutional money market funds increased by $10.06 billion to $4.73 trillion. Among institutional funds, government money market fund assets increased by $9.44 billion to $4.48 trillion, prime money market fund assets increased by $981 million to $243.05 billion, and tax-exempt fund assets decreased by $366 million to $13.21 billion." Institutional assets accounted for 60.6% of all MMF assets, with Government Institutional assets making up 94.6% of all institutional MMF totals. According to Crane Data's separate Money Fund Intelligence Daily series, money fund assets have increased by $300 million to $8.241 trillion month-to-date in March (as of 3/4), assets hit a record high the day prior (3/3) of $8.271 trillion. (Our asset series previous record high, $8.253 trillion, was set on 3/2/26.) Assets increased by $99.5 billion in February, $32.9 billion in January, $126.3 billion in December, $132.8 billion in November, $142.1 billion in October, $105.2 billion in September and $132.0 billion in August. They rose $63.7 billion in July, $6.7 billion in June and $100.9 billion in May. MMFs fell by $24.4 billion in April, but rose $2.8 trillion in March and $94.2 billion last February. 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.
ICI on Repo Market and Mutual Funds
The Investment Company Institute recently posted a "Viewpoint" titled, "The Repo Market Has Vulnerabilities. Mutual Funds Aren't One of Them." The brief tells us, "The repo market is essential to government bond markets and the broader financial system. It also finances leveraged trading strategies that are overwhelmingly undertaken by hedge funds, not regulated mutual funds. Yet recent concerns expressed by policymakers, including the Financial Stability Board and the European Central Bank, increasingly draw regulated funds into the scope of the debate simply because they appear as counterparties in repo transactions. Acting as a counterparty does not make a mutual fund the source of leverage or the driver of repo financed strategies. What matters is not who participates in repo transactions, but how vulnerabilities are generated." It continues, "The real vulnerabilities lie in structural leverage, heavy reliance on short-term funding, and concentrated intermediation. The latest report on government bond-backed repo markets, covering roughly $16 trillion in activity, illustrates exactly how those vulnerabilities arise. It points to dependence on overnight funding, concentrated clearing and dealer capacity, and leverage embedded in financing channels as key amplifiers of stress. About half of repo transactions are financed overnight, meaning that funding can disappear precisely when markets come under strain. These are structural vulnerabilities. They are not created by the presence of regulated mutual funds on the other side of a trade." ICI adds, "In repo markets, regulated funds typically act as counterparties and liquidity providers, not as sources of fragility. Conflating constrained, regulated fund activity with leveraged financing strategies risks obscuring the real problem and targeting the wrong mechanisms altogether.... The risk does not arise from price-alignment strategies themselves. It arises from how those strategies are financed -- through significant leverage, short-term funding, and reliance on concentrated intermediaries. Targeting regulated funds does nothing to address those financing mechanics." (See also the OFR's, "Hedge Fund Participation in Cleared Repo.")
Fitch U.S. MMF Monitor: 4Q25
Fitch Ratings recently published, "U.S. Money Market Funds Monitor: 4Q25." It states, "Total taxable money market fund (MMF) assets increased by $386.5 billion, a 5.1% rise since the prior quarter, and grew by $918.2 billion over the year to a record high of $7.95 trillion, representing a 13% YoY increase, according to Crane Data. Government and Treasury MMFs gained $213.9 and $159.8 billion in assets during the quarter, while Prime MMFs saw more modest inflows of just $12.8 billion. These flows continue the trends seen in the first three quarters of 2025, reflecting investors' appetite for safety and liquidity amid mixed economic signals, geopolitical risks, and spread compression in credit alternatives." Fitch's update continues, "Taxable MMFs increased exposure to Treasuries by $290.8 billion and Repos by $219.2 billion over the quarter. FICC-cleared repos accounted for $155.2 billion of repo volume, reaching a record high of $1.3 trillion in December. Meanwhile, commercial paper decreased by $24 billion, according to Crane Data. This shift in allocations reflects managers' preference for liquidity and credit quality, even as two Fed rate cuts in Q4 provided incentives to capture higher yields. Increased Treasury allocations allowed MMFs to lock in yields as rates declined, while repos offered flexibility and access to liquidity during seasonal, year-end flows and narrower spreads muted appetite for credit." It adds, "Throughout 2025, the Federal Reserve implemented three rate cuts totaling 75 basis points, bringing the federal funds target down to 3.50-3.75% by year-end. These actions, driven by moderating inflation and a softening labor market, set the stage for declining money market fund yields. Institutional government and prime MMF net yields dropped by 36 basis points in Q4, ending the year at 3.59% and 3.69%, respectively. Looking ahead, further but more gradual easing is expected in 2026. This will likely keep MMF yields on a downward path, though investor demand is expected to remain strong given expectations for a moderate neutral rate range."
Money Fund Yields Still Hover at 3.49%
Money fund yields (7-day, annualized, simple, net) were down 1 basis point to 3.49% on average during the week ended Friday, February 27 (as measured by our Crane 100 Money Fund Index), after increasing 1 basis point the week prior. Fund yields haven't been below 3.5% since November 2022, and they are down from a recent high of 5.20% in November 2023. They should remain flat in coming days (and weeks) since the Fed left short-term rates unchanged five weeks ago. Yields were 3.58% on 12/31/25, 3.78% on 11/30, 3.90% on 10/31, 3.94% on 9/30, 4.11% on 8/31, 4.12% on 7/31, 4.13% on 6/30, 4.14% on 3/31/25 and 4.28% on average on 12/31/24. MMFs averaged 4.75% on 9/30/24, 5.10% on 6/28/24, 5.14% on 3/31/24 and 5.20% on 12/31/23. The broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 681), shows a 7-day yield of 3.39%, unchanged in the week through Friday. Prime Inst money fund yields were down 1 bp at 3.60% in the latest week. Government Inst MFs were unchanged at 3.49%. Treasury Inst MFs were unchanged at 3.45%. Treasury Retail MFs currently yield 3.21%, Government Retail MFs yield 3.19% and Prime Retail MFs yield 3.39%, Tax-exempt MF 7-day yields were down 28 bps to 1.76%. Money market mutual fund assets have paused since hitting a record high of $8.246 trillion on February 26, according to our Money Fund Intelligence Daily. Assets have risen $26.9 billion in the week through Friday, and they've increased by $99.5 billion in February month-to-date (through 2/27). MMF assets increased by $32.9 billion in January, $126.3 billion in December, $132.8 billion in November, $142.1 billion in October, $105.2 billion in September and $132.0 billion in August. They rose by $63.7 billion in July, $6.7 billion in June and $100.9 billion in May. But MMFs decreased $24.4 billion in April. Assets increased by $2.8 billion in March, and $94.2 billion last February. Weighted average maturities were at 41 days for the Crane MFA and 42 days the Crane 100 Money Fund Index. According to Monday's Money Fund Intelligence Daily, with data as of Friday (2/27), just 158 money funds (out of 791 total) yield under 3.0% with $192.2 billion in assets, or 2.3%, while the vast majority (633) of funds yield between 3.00% and 3.99% ($8.049 trillion, or 97.7%). No funds yield over 4.0%. Our Brokerage Sweep Intelligence Index, an average of FDIC-insured cash options from major brokerages, was unchanged at 0.30%, after falling 1 basis point ten weeks prior. The latest Brokerage Sweep Intelligence, with data as of February 27, shows no changes over the past week. Four of the 10 major brokerages tracked by our BSI offer rates of 0.01% for balances of $100K (and lower tiers). These include: E*Trade, Merrill Lynch, Morgan Stanley and Schwab.
Bloomberg: OCC, Stablecoin Rewards
Bloomberg writes, "Federal Bank Regulator Moves to Restrict US Stablecoin Rewards." The article explains, "The Office of the Comptroller of the Currency proposed rules that would restrict companies from launching branded stablecoins through white-label platforms and offering rewards tied to them, the agency's first major attempt to implement the federal cryptocurrency law signed by President Donald Trump in July. The proposed rulemaking, introduced this week, takes aim at stablecoin-as-a-service platforms operated by firms like Paxos, Stripe Inc.’s Bridge and Anchorage Digital Bank that allow technology companies to issue their own branded stablecoins -- arrangements the banking industry has warned could siphon deposits from traditional lenders. The OCC is attempting to address the banking industry's concerns." The piece quotes Jonathan Gould, head of the OCC, from a Senate Banking Committee hearing, "If you look in our proposal, which we released yesterday, we have hard wired a number of things into our proposal that we believe would tend to reduce the probability of deposit flight. If deposit flight were to occur, I think we would notice it, meaning it wouldn't occur under cover of darkness, where no one would see it and fail to react to it." Bloomberg adds, "The OCC is considering and requesting comment on plans to restrict each permitted payment stablecoin issuer to offer only one brand of stablecoin. If that restriction is put in place, the regulator would streamline the process for approving applications to become permitted payment stablecoin issuers. Paxos' arrangement issuing PayPal Holdings Inc.'s PYUSD coin, which offers 4% rewards on customer balances, for example, would likely not be able to continue if the current language stands."
ProShares' MM ETF Jumps to $17 Bil.
The Serrari Group writes, "ProShares' $17 Billion Debut Signals the Next Battle in Cash: Money Market ETFs, Stablecoins, and the Tokenization Race." The piece explains, "ProShares' record-breaking launch of its Genius Money Market ETF (IQMM) has sent a powerful signal across Wall Street: the competition for cash is intensifying -- and it is no longer confined to traditional asset managers. The actively managed fund, which primarily holds short-duration U.S. government securities, generated approximately $17 billion in first-day trading volume -- an unprecedented figure for a newly launched exchange-traded fund. Bloomberg ETF analyst Eric Balchunas highlighted the magnitude of the debut, noting that IQMM's first-day volume dwarfed other high-profile ETF launches. By comparison, BlackRock's iShares Bitcoin Trust (IBIT) saw roughly $1 billion in first-day trading, while a BlackRock ESG-focused ETF seeded by pension investors recorded around $2 billion." The piece says, "Although ProShares confirmed that much of IQMM's initial activity reflected internal reallocations -- shifting cash from existing funds into the new vehicle for treasury management purposes -- the launch still carries structural significance. It underscores how issuers are increasingly using ETF wrappers to optimize liquidity management and operational efficiency.... The stablecoin industry is undergoing regulatory maturation in the United States, particularly under the evolving GENIUS Act framework. As compliance standards solidify, U.S.-based stablecoin issuers will require transparent, liquid, high-quality reserve assets -- and money market ETFs could emerge as a strategic reserve solution." It adds, "The convergence between traditional money market products and tokenized cash instruments is no longer theoretical. It is becoming operational." For more, see Crane Data's Feb. 23 News, "ProShares Genius Money Market ETF Goes Live; NY Fed on Stablecoins."
ETF Trends: iShares Short Bond ETFs
ETF Trends writes that "iShares Moves Short-Term Bond ETFs to the Big Board." The article comments, "As the hunt for yield and stability remains a cornerstone of portfolios in 2026, a group of iShares short-term bond ETFs have made a strategic move to the Big Board.... Four prominent short-term fixed-income vehicles have officially transitioned their primary listing to the New York Stock Exchange (NYSE). The move involves the $75 billion iShares 0-3 Month Treasury Bond ETF (SGOV), the $20 billion iShares 0-1 Year Treasury Bond ETF (SHV), the $470 million iShares Prime Money Market ETF (PMMF), and the $95 million iShares Government Money Market ETF (GMMF)." It continues, "This shift means the ETFs are moving from the purely electronic NYSE Arca platform to the NYSE's hybrid model. This model utilizes a Designated Market Maker (DMM) to oversee trading. This is a 'human in the loop' approach increasingly favored for high-volume fixed-income or money-market-style funds <b:>`_." ETF Trends adds, "The demand for these ultra-short instruments has been significant throughout the first several weeks of this year. SGOV has already attracted approximately $6 billion in new money in 2026 as investors prioritize liquidity. This follows a record-breaking 2025 for the ETF industry, where fixed-income products served as a vital component in portfolios. PMMF and GMMF are both money market ETFs, with both funds sharing a goal of generating income while maintaining liquidity and stability of principal. However, PMMF seeks higher relative yields by investing in corporate debt and commercial paper, while GMMF offers a more conservative stance by sticking strictly to U.S. government and agency obligations. Meanwhile, SGOV and SHV provide pure-play Treasury exposure. The primary difference there lies in duration. SGOV targets the immediate zero- to three-month front end of the curve, while SHV extends slightly further to the one-year mark."
TheStreet.com on Tokenized MMFs
TheStreet.com published a brief titled, "Tokenized Money Market Funds Gain Privacy Layer on Public Blockchain Infrastructure." They write, "Silent Data, the programmable privacy Ethereum Layer 2 developed by Applied Blockchain, is now powering regulated tokenized money market funds from some of the world's largest asset managers. The network is hosting fund products issued by Archax, including interests in money market funds from Aberdeen, BlackRock, Fidelity International, and State Street. According to the companies, this is the first time regulated tokenized fund products have operated on public blockchain infrastructure with hardware-enforced privacy embedded at the execution layer." The piece says, "The distinction lies not in the tokenization itself, but in how information is processed. Traditional public blockchain environments allow transaction details and wallet balances to be inspected by network participants. For decentralized ecosystems, that visibility underpins trust. For regulated financial institutions, it presents a structural obstacle." It adds, "Money market funds have emerged as one of the more widely adopted real-world asset categories within blockchain-based finance. Their structure and yield profile make them a relatively conservative bridge between traditional capital markets and digital infrastructure."
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