Link of The Day
T. Rowe on Stable Value vs. MMFs
T. Rowe Price published an article called, "Resetting expectations: Why stable value makes sense in today's dynamic markets," which tells us, "The debate between stable value portfolios and money market funds has reignited, as defined contribution (DC) consultants expect increased plan sponsor interest in reviewing/revisiting their plans' capital preservation investment options. This is largely driven by today's interest rate environment, in which money market fund yields have outpaced stable value crediting rates over the past three years -- a dynamic rarely seen over the past three decades. As the interest rate cycle enters a more uncertain phase, we believe now is the time for plan sponsors to consider stable value and its place as a long term capital preservation strategy in a plan lineup." The brief continues, "With increased uncertainty over the path of interest rates going forward, plan sponsors should reexamine the trade‑offs between capital preservation options. Money market funds and stable value strategies both play important roles in DC plan lineups, and many plans offer both options to participants. However, the two have historically behaved differently throughout changes in the interest rate cycle." It adds, "The key difference is how fast yields respond to changes in interest rates. Historically, when rates rose, money market funds benefited because their yields can increase in a short period of time. They tend to respond almost immediately to changes in the federal funds rate because they must invest in very short‑term securities that mature and reset frequently. That same dynamic can be a detriment for money markets in a falling rate or low rate environment as money market yields reprice lower. Stable value typically reacts more slowly because portfolios are longer duration, and wrap contracts are intended to help reduce day‑to‑day volatility and smooth changes in the interest rate investors earn. Crediting‑rate resets are heavily influenced by portfolio yields, market‑to‑book relationships, and participant cash flows."
JPM Update on July Portfolio Holdings
Last week, J.P. Morgan wrote in its "JPM Mid-Week US Short Duration Update," that, "July was a muted month for MMFs, with inflows totaling just $15bn, the weakest July inflows since 2021.... However, beneath the surface, `MMFs absorbed a large share of the nearly $300bn increase in net T-bill supply to private investors in July. Indeed, MMFs increased their T-bill allocations by $264bn last month, absorbing nearly 88% of the issuance. Against this backdrop of muted inflows but heavy T-bill absorption, MMFs rotated out of repo, with total repo allocations declining by $124bn, bringing their allocation as a share of portfolio holdings down to 35%, the lowest since October of last year." They tell us, "Unsurprisingly, most of the decline in repo exposure came from the FICC-cleared repo, likely reflecting a reversal of June quarter-end balance sheet effects. At the same time, MMFs' dealer repo exposure surged, rising $101bn and bringing total dealer repo exposure to nearly $2.1tn.... Within dealer repo, exposure to U.S. banks increased by $75bn to $979bn, taking the year-to-date repo increase to $187bn. In contrast, exposure to Canadian dealers declined by $100bn in July, likely reflecting balance sheet adjustments around Canadian bank quarter-end. Outside of repo, government MMFs have also trimmed other exposures; allocations to Treasury coupons and FRNs declined by $89bn, consistent with a rotation into T-bills this month. Government MMFs' allocations to agencies rose, modestly, to $1.18tn, driven by FRNs.... Looking ahead, as we enter a period of negative T-bill supply in September, we expect funding markets to remain contained outside of modest pressures on the corporate tax date and quarter-end." The brief adds, "Meanwhile, MMFs appear to have maintained a defensive tone, with MMF WAMs continuing to shorten. Prime WAMs fell 1.7 days in July after declining 1.4 days in June.... This preference for liquidity is also evident in the holdings: prime funds increased repo exposure by $32bn. This defensive tone is prominent amid a time of elevated policy uncertainty as 1y1y OIS has moved in a wide 28bp range during July alone. At the same time, prime funds continued to add credit exposure by $16bn in July, taking total credit exposure up $72bn year to date.... Nearly half of this growth has been driven by both ABCP and non-financials, which is consistent with the surge in supply this year (ABCP outstandings $100bn YTD; non-financial outstandings $125bn YTD).... Looking ahead, we continue to believe that if the growth in ABCP supply continues, prime MMFs should be able to absorb the issuance on the margin, especially given the typical seasonal trend higher in MMF balances over the next four months. That said, issuer concentration remains a key risk and continues to be a potential constraint."
Bloomberg on Guggenheim CP Unit
Bloomberg writes "Guggenheim Seeks to Reassure Clients of Commercial-Paper Unit." They state, "A Guggenheim subsidiary sought to reassure investors that it remains a viable issuer of short-term financing known as commercial paper as regulators and federal prosecutors continue to probe the company's founder Mark Walter. Guggenheim Treasury Services 'is not a target of the investigations and continues to operate business as usual,' the company said in a message to investors seen by Bloomberg. 'GTS has a 30-year operating history, having issued and repaid over $12 trillion of commercial paper.'" The piece explains, "Guggenheim's commercial paper issuers operate 'as bankruptcy-remote entities, which are not owned by any of the targeted entities under investigation,' according to the Aug. 20 message. 'In the unlikely event that GTS does not perform its managerial duties,' the company said, it would appoint an independent agent to repay its obligations." Discussing commercial paper, Bloomberg adds, "Money‑market funds were once the dominant buyers, but today account for only about 20% of the market, with the rest held by banks, corporates and other cash investors. Within that market, Guggenheim Treasury Services operates asset‑backed commercial paper conduits -- structures that issue short‑term notes backed by secured loans. Unlike during the financial crisis, a majority of such paper is now usually backed by repurchase agreements rather than pools of receivables. Such entities have long been used by major banks and finance companies to raise short‑term funding."
CAG on Tier 2 Commercial Paper
A blog posted on "Linked In" by Capital Advisors Group titled, "Getting Under the Hood," tells us, "Tier-2 commercial paper may offer a potential for additional yield. But realizing that opportunity requires looking beyond the rating to understand the underlying credit quality and assessing whether the incremental yield is appropriate given the additional risk. As money market reforms continue to influence cash investment strategies and drive more money toward Government and Treasury money market funds, A2/P2 -- or Tier-2 -- commercial paper may offer institutional investors an alternative investment option and potential for additional yield." They write, "At first glance, the opportunity may seem straightforward: take on somewhat more credit risk in exchange for additional yield. But the rating is only the starting point. Tier-2 commercial paper continues to be a viable investment for cash portfolios and a possible alternative to MMF investments. However, the underlying business dynamics of issuers can vary considerably. Our focus is on corporate issuers rather than financial issuers within the A2/P2 universe. We then evaluate these corporate issuers to identify those that we believe exhibit characteristics consistent with what we call 'Tier-2 by rating, Tier-1 by quality.'" The post adds, "The additional yield only tells part of the story. The more important question is what's driving it -- and whether the underlying credit fundamentals and business dynamics support the pickup in yield."
BNY MMF Changes NAV Calc Times
A Prospectus Supplement filing for BNY Dreyfus Treasury and Agency Liquidity Money Market Fund tells us, "Effective September 1, 2026, the fund's net asset value (NAV) will be generally calculated every hour on the hour from 8:00 a.m. to 5:00 p.m., Eastern time, each day the fund accepts purchase orders and redemption requests (each such time, the trading deadline for orders "in proper form"). An order in proper form received and accepted after 5:00 p.m. will be priced at the NAV first determined on the following business day and will begin to accrue dividends on such business day." See too the press release, "First Fully Onchain Repo Transaction Completed Using a Sovereign Digital Bond," which says, "Virtu Financial, M1X Global and Tradeweb today announced the completion of the first fully onchain repo transaction in which the securities leg was a sovereign digital bond. Executed on the Canton network, every element of the transaction -- securities delivery, cash leg and return -- settled atomically onchain. The transaction is the first known instance of a natively issued sovereign digital security functioning as collateral in a repo executed through a major institutional electronic trading venue without prime broker intermediation.... USDM1, the securities leg of the transaction, is a sovereign bond issued natively onchain by the Republic of the Marshall Islands, structured under New York law in the style of a fully collateralized Brady bond.... Unlike digital cash instruments, USDM1 pays a coupon when used as margin or collateral. The instrument is available through Tradeweb with institutional custody through Anchorage, BitGo and tZERO. It is also supported by FDIC-insured Bank of Guam."
MMF Assets Inch Higher for 3rd Week
The Investment Company Institute's latest weekly "Money Market Fund Assets" report shows money fund assets rising $6.1 billion to $7.935 trillion. Assets rose $900 million the previous week and increased $18.3 billion the week before this. MMF assets are up by $728 billion, or 10.1%, over the past 52 weeks (through 8/26/26), with Institutional MMFs up $571 billion, or 13.4% and Retail MMFs up $157 billion, or 5.3%. Year-to-date in 2026, MMF assets are up by $201 billion, or 2.6%, with Institutional MMFs up $176 billion, or 3.8% and Retail MMFs up $25 billion, or 0.8%. ICI's weekly release says, "Total money market fund assets increased by $6.11 billion to $7.93 trillion for the week ended Wednesday, August 26, the Investment Company Institute reported.... Among taxable money market funds, government funds increased by $6.31 billion and prime funds decreased by $834 million. Tax-exempt money market funds increased by $633 million. "ICI's stats show Institutional MMFs increasing $9.5 billion and Retail MMFs decreasing $3.4 billion in the latest week. Total Government MMF assets, including Treasury funds, were $6.547 trillion (82.5% of all money funds), while Total Prime MMFs were $1.237 trillion (15.6%). Tax Exempt MMFs totaled $149.9 billion (1.9%). It explains, "Assets of retail money market funds decreased by $3.39 billion to $3.10 trillion. Among retail funds, government money market fund assets decreased by $2.17 billion to $1.98 trillion, prime money market fund assets decreased by $1.59 billion to $990.39 billion, and tax-exempt fund assets increased by $371 million to $137.35 billion." Retail assets account for 39.1% of the total, and Government Retail assets make up 63.7% of all Retail MMFs. They add, "Assets of institutional money market funds increased by $9.50 billion to $4.83 trillion. Among institutional funds, government money market fund assets increased by $8.49 billion to $4.57 trillion, prime money market fund assets increased by $754 million to $246.86 billion,and tax-exempt fund assets increased by $263 million to $12.53 billion." Institutional assets accounted for 60.9% 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 $69.3 billion to $8.358 trillion month-to-date in August (as of 8/26), assets reached an all-time high of $8.404 trillion on July 6. Assets decreased $61.4 billion in July, increased $58.6 billion in June, $208.6 billion in May, decreased by $108.8 billion in April, $49.3 billion in March, increased $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 last August. 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.
FDIC: Deposits Inch Higher in Q2
A press release, entitled, "FDIC-Insured Institutions Reported Return on Assets of 1.37 Percent and Net Income of $90.1 Billion in Second Quarter 2026," comments, "The Federal Deposit Insurance Corporation (FDIC) ... released the results of its latest `Quarterly Banking Profile, a comprehensive summary of financial results based on reports from 4,238 insured commercial banks and savings institutions <b:>`_. In second quarter 2026, FDIC-insured institutions reported a return on assets (ROA) ratio of 1.37 percent and aggregate net income of $90.1 billion, an increase of $9.7 billion (12.0 percent) from the prior quarter. The banking industry continued to maintain strong capital and liquidity levels, which support lending and protect against potential losses." The FDIC Quarterly Banking Profile Second Quarter 2026 statement says, "The primary drivers of the industry's $9.7 billion increase in net income were higher noninterest income (up $5.5 billion, or 6.1 percent), mostly due to trading revenues given continued market volatility and higher fee income, and securities gains, primarily from one-time gains on equity security transactions (up $5.5 billion). Net interest income (up $5.3 billion, or 2.8 percent) also contributed to the increase in net income. Industry gains were partially offset by higher noninterest expense, which increased $4.4 billion, or 2.8 percent.... The industry's NIM increased to 3.32 percent, up 1 basis point from the prior quarter and up 6 basis points from the year-ago quarter…. During the quarter, the yield on earning assets increased slightly more than the cost of funds, resulting in a 1 basis point increase in the industry’s NIM." The release continues, "Domestic deposits increased for the eighth consecutive quarter, rising 0.8 percent during the second quarter. Estimated uninsured domestic deposits accounted for all of the increase in domestic deposits from the prior quarter, as insured deposits decreased slightly." It adds, "The Deposit Insurance Fund (DIF) was $161.1 billion on June 30, 2026, up $3.7 billion from the first quarter..... The reserve ratio, which is calculated as the ratio of the DIF to estimated insured deposits, increased 5 basis points in the second quarter to 1.48 percent and was 12 basis points higher than the year-ago quarter. In conclusion, the banking industry continued to show resilience in second quarter 2026. The industry saw robust loan and deposit growth during the quarter. Strong capital and liquidity levels continued to support lending and protect against potential losses. However, the industry still faces weakness in certain loan portfolios and elevated unrealized losses. These issues will remain matters of ongoing supervisory attention by the FDIC."
European Money Fund Symposium
With just under a month to go, we're finalizing preparations for our 12th Annual European Money Fund Symposium, which will take place Sept. 24-25 at the Pullman Hotel in Paris, France. The latest agenda is available and registrations are still being taken for our European money market mutual fund event. We provide more details on the show below. Our 2025 European Symposium event in Dublin attracted almost 200 money fund professionals, sponsors and speakers. Given the continued growth in money fund assets, trends like tokenization and expectations for another round of regulatory changes in Europe, we expect our show in Paris to once again be the largest gathering of money market professionals outside the U.S. Registration for European Money Fund Symposium is $1,000 USD. EMFS will be held at the Hotel Pullman Paris La Defense. Hotel rooms must be booked before August 3 to receive our discounted rate of E250. Visit www.craneeurosymposium.com to register, and contact us to request the PDF brochure. (Let us know too if you'd like information on sponsorships or speaking in future years too.) Also, we're making plans for our next "basic training" event, Crane's Money Fund University, which will be held in Greenwich, Conn., Dec. 17-18, 2026. Money Fund University covers the history of money funds, interest rates, regulations (Rule 2a-7), ratings, rankings, money market instruments such as commercial paper, CDs and Treasuries, and portfolio construction and credit analysis. We also include segments on offshore money funds and ultra-short bond funds. Money Fund University's comprehensive program is good for both beginners and experienced professionals looking for a refresher. Mark your calendars too for our next Bond Fund Symposium, which will be held in Philadelphia on March 22-23, 2027. (Click here to see last year's agenda.) Bond Fund Symposium is the only conference devoted entirely to bond mutual funds, bringing together bond fund managers, marketers, and professionals with fixed-income issuers, investors and service providers. The majority of the content is aimed at the growing ultra-short and conservative ultra-short bond fund marketplace. Finally, Crane Data will begin preparations this fall for our next big show, Money Fund Symposium, which is scheduled for June 23-25, 2027 in Philadelphia, Pa. The 2027 MFS agenda will be released late this year and registration will open in the fall.
Money Fund Yields Flat Again at 3.49%
Money fund yields (7-day, annualized, simple, net) were unchanged at 3.49% on average during the week ended Friday, August 21 (as measured by our Crane 100 Money Fund Index), after going unchanged the week prior. Fund yields have rebounded slightly in recent weeks, but they are down from a recent high of 5.20% in November 2023. They should remain flat in coming days (and weeks) unless and until the Fed moves rates higher. Yields were 3.49% on 7/31/26, 3.47% on 6/30 and on 3/31, 3.58% on 12/31/25, 4.13% on 6/30/25 and 4.28% on average on 12/31/24. MMFs averaged 5.20% on 12/31/23. The broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (currently 725), shows a 7-day yield of 3.40%, up 1 bp in the week through Friday. Prime Inst money fund yields were up 1 bp at 3.60% in the latest week. Government Inst MFs were up 1 bp at 3.49%. Treasury Inst MFs were up 1 bp at 3.48%. Treasury Retail MFs currently yield 3.25%, Government Retail MFs yield 3.21% and Prime Retail MFs yield 3.38%, Tax-exempt MF 7-day yields were up 3 bps to 2.06%. Money market mutual fund assets hit an all-time record high of $8.404 trillion on July 6, according to our Money Fund Intelligence Daily. But assets have decreased $43.6 billion in the week through Friday, and they've increased by $59.4 billion in August month-to-date (through 8/21). MMF assets decreased by $61.4 billion in July, increased by $58.6 billion in June, $208.6 billion in May, decreased by $108.8 billion in April, $49.3 billion in March, 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 last August. Weighted average maturities were at 38 days for the Crane MFA and 39 days the Crane 100 Money Fund Index. According to Monday's Money Fund Intelligence Daily, with data as of Friday (8/21), just 160 money funds (out of 836 total) yield under 3.0% with $191.2 billion in assets, or 2.3%, while the vast majority (676) of funds yield between 3.00% and 3.99% ($8.157 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 0.29%, after falling 1 bp thirteen weeks prior. The latest Brokerage Sweep Intelligence, with data as of August 21, 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.
Non-Centrally Cleared Bilateral Repo
The U.S. Treasury's OFR, or Office of Financial Research published "A Closer Look at the U.S. NCCBR Market," which reviews the non-centrally cleared bilateral repurchase agreement market. They write, "The U.S. non-centrally cleared bilateral repurchase agreement (NCCBR) market has $5 trillion in outstanding repos. This market is becoming more transparent to the public due to more data collection. The data show that this market segment has a distinctive mix of collateral and tenor. Compared to the cleared and tri-party segments, NCCBR is the only segment using foreign sovereign bonds ($1.3 trillion) and is the only segment that is predominantly term ($2.7 trillion). The clearing mandate may move $1.5 trillion of NCCBR into the cleared segment, assuming no changes in participant behavior, though most NCCBR will likely remain uncleared due to the use of open term, foreign collateral and the current affiliate exemption." The brief explains, "Non-centrally cleared bilateral repos (NCCBR) are repos that are settled without the use of a clearing house or settlement agency. While these utilities have benefits, such as netting and automation, the added costs and limitations are significant enough that many repos remain fully bilateral. Bilateral settlement allows parties to flexibly negotiate a repo's terms, collateral, currency, and haircuts to fit the needs of each deal. As a result, the NCCBR market accommodates a variety of repos, such as those with private sector or foreign collateral, with special terms like optionality, or with market participants that may not have access to clearing infrastructure and thus fill many niches in the financial system." The piece adds, "The Office of Financial Research (OFR) began collecting data on NCCBR transactions in December 2024. This brief uses the data to summarize the NCCBR market by examining market concentration and mapping the bilateral exposure network to show the channels of possible risk transmission. It characterizes the distinctive features of NCCBR transactions that differentiate this market's risk profile from the cleared and tri-party alternatives. Lastly, it gives figures related to the ongoing transition of certain NCCBR to central clearing."
PFII Says LGIPs Seek New Markets
The Public Funds Investment Institute's Marty Margolis writes that, "LGIPs Seek New Markets." He tells us, "Local Government Investment Pools were originally designed to help local governments -- you know, cities, counties, school districts, etc. -- invest their funds. But times change and enterprising funds seek opportunities to expand their offerings. An interesting example is a new program that the Illinois Treasurer is poised to open for Illinois-based non-profits. The new portfolio will be an addition to the $20 billion Illinois Funds pool managed by the Treasurer. It relies on recently enacted legislation for standing; The offering will build on the notion that these entities that provide services akin to those provided by governments should get assistance; While the main focus of the LGIP industry is governments, narrowly defined, Massachusetts and Pennsylvania, have LGIP programs that are designed specifically to manage funds for non-profits; Some LGIPs also have accommodated organizations that might not seem to be governments but perform activities that are expected of governments. These LGIPs accept investments from entities that offer health services, education, library services, etc.; Some LGIPs also have accepted investments from non-profits that operate as direct extensions of governments with their boards controlled entirely by a government entity." The brief states, "Illinois Treasurer Michael Frerichs worked with the Illinois legislature for several years to gain authority to create the new pool. The result, Senate Bill 2968, authorizes creation of the Non-Profit Investment Pool to accept investments from Illinois-based non-profits that provide healthcare, education, affordable housing, food assistance, environmental protection, cultural arts, job training, services to seniors and similar services." The PFII adds, "Massachusetts and Pennsylvania are two states that have LGIPs that reach beyond the narrow definition of 'government.' The Massachusetts STAR Fund, offered by the Massachusetts Development Finance Agency since the 1990s, accepts investment from non-profits that are borrowers through the Agency's borrowing programs.... The program is managed by PFM Asset Management/U.S. Bancorp Asset Management. It is separate from the Massachusetts Municipal Depository Trust, one of the nation's early LGIPs. The Pennsylvania Treasurer has offered a Community Pool as part of its state LGIP program (InvestPA) for a number of years.... It is separate from the Invest PA Daily Pool that is offered to local governments. Both are managed by Federated Hermes."
Latest Fed Minutes Lean Hawkish
The latest "Minutes of the Federal Open Market Committee (FOMC) for the Fed's July 28-29 Meeting tell us, "Nominal Treasury yields rose 25 to 30 basis points, driven by corresponding increases in real interest rates. Market pricing and outreach indicated that, while investors expected no action at the July FOMC meeting as a base case, the market priced in about a one-in-three chance of an increase in the target range for the federal funds rate. At longer horizons, the market was fully pricing in a 25 basis point hike by the September meeting and another one by the end of the first quarter of next year. The median respondent to the Desk survey, by contrast, expected no change in the policy rate this year or the next but expected a rate cut in early 2028." The Minutes explain, "The manager observed that money markets remained generally stable. Repurchase agreement (repo) rates again went through a brief period of softness earlier in the period and temporarily dragged the effective federal funds rate (EFFR) down 1 basis point. Repo rates recovered quickly, the EFFR returned to its earlier level, and money market rates generally ended the period little changed, on net, and close to the interest rate on reserve balances." They comment, "Over the intermeeting period, both the market-implied expected path of the federal funds rate and nominal Treasury yields moved up somewhat, in part reflecting FOMC communications that were perceived as more restrictive than expected amid an economic outlook that was little changed. The market-implied policy rate path shifted moderately higher, as did option-implied probability distributions of short-term interest rates. Market-implied measures of interest rate volatility remained largely unchanged, on net. Nominal Treasury yields rose, driven by increases in real yields. Short-term inflation compensation declined notably, largely reflecting technical factors related to indexation lags and the passage of time. Market-based measures of longer-term inflation compensation and survey based measures of inflation expectations remained well anchored." The Fed's Minutes add, "In support of the Committee's dual-mandate goals, nine members agreed to maintain the target range for the federal funds rate at 3.5 to 3.75 percent and also reaffirmed the FOMC's policy of maintaining ample reserves in the banking system. Members noted that the unemployment rate was largely unchanged and that solid growth in economic activity had continued, while inflation remained elevated relative to the Committee’s 2 percent goal. In June, the Committee had underlined its continuing resolve to achieve its dual-mandate goals by indicating in its postmeeting statement that it 'will deliver price stability.' Almost all members agreed that it was appropriate to retain this language in July's postmeeting statement. Three members voted against the decision to maintain the target range for the federal funds rate, preferring an increase of 25 basis points in the target range at this meeting."
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