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ICI released its latest monthly "Trends in Mutual Fund Investing" and "Month-​End Portfolio Holdings of Taxable Money Funds" for May 2022 Wednesday. The "Trends" report shows that money fund assets decreased $​8.​0 billion in May to $​4.​515 trillion. This follows a decrease of $​71.​0 billion in April, an increase of $​9.​6 billion in March, a decrease of $​38.​3 billion in February, a decrease of $​136.​1 billion in January and increase of $​136.​1 billion in December (​coincidentally the exact same size as January'​s decline). For the 12 months through May 31, 2022, money fund assets decreased by $​92.​4 billion, or -​2.​0%.

The monthly release states, "The combined assets of the nation'​s mutual funds decreased by $​98.​96 billion, or 0.​4 percent, to $​23.​63 trillion in May, according to the Investment Company Institute'​s official survey of the mutual fund industry. In the survey, mutual fund companies report actual assets, sales, and redemptions to ICI.... Bond funds had an outflow of $​85.​74 billion in May, compared with an outflow of $​56.​14 billion in April..... Money market funds had an outflow of $​8.​86 billion in May, compared with an outflow of $​67.​69 billion in April. In May funds offered primarily to institutions had an outflow of $​28.​96 billion and funds offered primarily to individuals had an inflow of $​20.​10 billion."

The Institute'​s latest statistics show that Taxable funds and Tax Exempt MMFs moved in different directions last month. Taxable MMFs decreased by $​15.​1 billion in May to $​4.​415 trillion. Tax-​Exempt MMFs increased $​7.​2 billion to $​99.​8 billion. Taxable MMF assets decreased year-​over-​year by $​99.​3 billion (-​2.​2%), and Tax-​Exempt funds rose by $​6.​9 billion over the past year (​7.​4%). Bond fund assets decreased by $​73.​1 billion in May to a $​4.​970 trillion, and they'​ve decreased by $​470.​5 billion (-​8.​6%) over the past year.

Money funds represent 19.​1% of all mutual fund assets (​up 0.​1% from the previous month), while bond funds account for 21.​0%, according to ICI. The total number of money market funds was 300, down 1 from the prior month and down from 316 a year ago. Taxable money funds numbered 241 funds, and tax-​exempt money funds numbered 59 funds.

ICI'​s "Month-​End Portfolio Holdings" confirms another plunge in Treasuries and jump in Repo last month. Repurchase Agreements remained the largest composition segment in May, increasing $​51.​6 billion, or 2.​4%, to $​2.​228 trillion, or 50.​5% of holdings. Repo holdings have increased $​877.​3 billion, or 65.​0%, over the past year. (​See our June 10 News, "June MF Portfolio Holdings: NY Fed Repo Now Bigger Than US Treasuries.)

Treasury holdings in Taxable money funds fell sharply again last month, though they remained the second largest composition segment. Treasury holdings decreased $​110.​3 billion, or -​7.​1%, to $​1.​450 trillion, or 32.​8% of holdings. Treasury securities have decreased by $​768.​2 billion, or -​34.​6%, over the past 12 months. U.​S. Government Agency securities were the third largest segment; they increased $​28.​4 billion, or 8.​0%, to $​385.​4 billion, or 8.​7% of holdings. Agency holdings have fallen by $​155.​0 billion, or -​28.​7%, over the past 12 months.

Certificates of Deposit (​CDs) remained in fourth place; they dropped by $​4.​9 billion, or -​2.​8%, to $​168.​6 billion (​3.​8% of assets). CDs held by money funds shrank by $​25.​1 billion, or -​13.​0%, over 12 months. Commercial Paper remained in fifth place, up $​777 million, or 0.​6%, to $​128.​6 billion (​2.​9% of assets). CP has decreased by $​40.​0 billion, or -​23.​7%, over one year. Other holdings decreased to $​22.​5 billion (​0.​5% of assets), while Notes (​including Corporate and Bank) rose to $​2.​5 billion (​0.​1% of assets).

The Number of Accounts Outstanding in ICI'​s series for taxable money funds increased to 57.​503 million, while the Number of Funds decreased by one this past month to 241. Over the past 12 months, the number of accounts rose by 13.​569 million and the number of funds decreased by 10. The Average Maturity of Portfolios was a record low 28 days, unchanged from April. Over the past 12 months, WAMs of Taxable money have decreased by 9.

In other news, a press release entitled, "MSRB Research Reveals Significant Shifts in Municipal Securities Ownership," explains, "In its latest research report, the Municipal Securities Rulemaking Board (​MSRB) examines trends in municipal securities ownership since 2004, revealing a continuous decline in individual investor direct ownership of municipal securities while ownership through funds has steadily risen. Looking at Federal Reserve data from 2004 through the first quarter of 2022, the MSRB found that ownership among banks, insurance companies, money market funds and foreign investors has also shifted, with various factors driving these trends, including changes in U.​S. tax law, the prevailing interest rate environment, and the availability of taxable securities, among other changes."

It tells us, "While gaining approximately 47% since 2004, overall growth of the municipal securities market has slowed substantially in recent years. Ownership of municipal securities has changed significantly during that time period, with ownership through funds -- primarily mutual funds and exchange-​traded funds (​ETFs) -- taking a significant share from direct ownership as individual investor product preferences have shifted.... Other key developments since 2004 include: A substantial decline in money market fund ownership of municipal securities, from an all-​time high of 15.​6% of the market in 2008 to just 2.​5% of the market in 2022."

The full report, "Trends in Municipal Securities Ownership," says about "Money Market Funds," "​Many of the holding classes covered thus far have either increased their share of the municipal market over the past 17 years, or at least mostly retained their share. Some of the gains in these classes' municipal market share can be attributed to the massive decline in holdings of money market funds, a classification of mutual funds that are invested in securities that are liquid, have short-​term effective maturities and are viewed as having minimal credit risks. Tax-​exempt money market funds were developed as an option for investors to purchase a pool of securities that generally provided higher returns than interest-​bearing bank accounts, as well as exemption from certain income taxes."

It tells us, "Holdings of municipal securities by money market funds hit their all-​time high during Q4 of 2008 when they reached $​519 billion, or 15% of the total market. The period of 2005 through 2008 saw massive inflows from money market funds, totaling $​187 billion or an average of $​47 billion per year. This was by far the highest level of inflows for any holding class during the four-​year period, with the second-​strongest inflows coming from P&​C insurers at $​108 billion. Beginning in 2009, this trend reversed. During 12 of the past 13 years, money market funds have seen net losses of an average of $​31 billion per year, totaling $​399 billion. From 15.​6% of the market in 2008, money market funds now account for just 2.​5% of the municipal securities market."

The MSRB adds, "This trend has begun to reverse in Q4 of 2021 and Q1 of 2022, with money market funds' share growing by over $​7 billion during this period. According to ICI data, while mutual fund outflows have intensified during 2022, shedding $​78 billion between the weeks of January 5 and June 15, money market funds have seen net inflows, increasing their holdings by $​16 billion during the same time frame."

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We'​ve written twice already this month on the Association for Financial Professionals' "2022 AFP Liquidity Survey. (​See our June 22 News, "More AFP Liquidity Survey: Yield No. 1 Factor for Money Market Funds;" our June 17 News, "AFP'​​s 2022 Liquidity Shows Deposits, MMFs, T-​​Bills Still Kings of Cash;" our June 15 Link of the Day, "AFP Releases Liquidity Survey;" and AFP'​s press release.) Today, we finish the job and quote from the section on Environmental Social Governance Investments. (Note: Thanks again to those who attended our Money Fund Symposium last week in Minneapolis! The recordings and Powerpoints are available in our "Money Fund Symposium 2022 Download Center." Mark your calendars for next year'​s MFS, which is June 21-​23, 2023, in Atlanta!)

AFP'​s 2022 Survey says, "Twenty-​five percent of respondents consider ESG (​environmental, social and governance) investment parameters when managing operating cash -- an increase from 14 percent in 2019 and 17 percent in 2021. Sixty-​three percent do not consider ESG and 12 percent are unsure about taking ESG parameters into account."

It tells us, "The significant increase in the percentage of companies considering ESG investment parameters compared to 2021 was driven primarily by organizations that are publicly held, have at least $​1 billion in annual revenue or are investment grade net investors. The share of respondents indicating they are unsure if their companies took ESG parameters into account decreased from 18 percent to 12 percent. The increase in the percentage of organizations considering ESG investment parameters was largely offset by the percentage that shifted from being unsure."

AFP explains, "One possible reason for the shift was due to the increase in ESG-​focused money market funds. These funds have been waiving their fees to encourage investment from institutional holders. ESG money funds are Prime funds in nature and hold a high percentage of financial institutions in their portfolio across different asset classes. Many funds have underlying investments with qualifications of ESG and therefore are now ESG-​focused, even if their name hasn'​t changed to reflect the focus. The top-​yielding funds at the time of this writing were predominantly ESG-​focused funds."

Discussing the "Percentage of Operating Cash in ESG Investments," they comment, "Of those companies considering ESG investment parameters, nearly half (​48 percent) do not have any of their operating cash in ESG investments, 31 percent have less than five percent in ESG investments, 15 percent have 5-​10 percent and 6 percent have more than 10 percent of operating cash in ESG investments. While it appears that organizations are considering ESG investments, the pace at which they are investing in them appears to be slow and at smaller allocations as a way to invest into the space."

The AFP writes, "Forty-​seven percent of respondents indicate their organizations impose the same investment ESG parameters globally as domestically while 23 percent do not impose them the same; 30 percent are unsure.... Compared to last year'​s survey results, a smaller share of companies is imposing the same investment ESG parameters globally as domestically, while a greater percentage of practitioners is unsure."

They tell us, "Of those organizations investing in ESG investments, ESG money funds are most popular, with 43 percent of organizations choosing to invest in them. Separately Managed accounts rank second, with 23 percent of practitioners reporting their organizations are investing in them. Twenty percent of organizations are investing in minority-​owned broker (​defined as '​minority-​owned business,' '​women-​owned business' or '​business owned by a person with a disability' and could include Veteran-​owned as well) products -- a significant increase from the three percent that invested in these ESG vehicles in 2021."

Regarding Europe, they quote, "'The Sustainable Finance Disclosure Regulation (​SFDR) is a European regulation introduced to improve transparency in the market for sustainable investment products, to prevent greenwashing and to increase transparency around sustainability claims made by financial market participants.' The regulation primarily impacts financial services firms with more than 500 employees and requires them to report ESG metrics. It was initially set to take effect July 1, 2022, and is now pushed back to January 1, 2023. Very few respondents are aware if their organizations will require that funds be compliant with Article 8, Article 9 (​regulation noted above) or both if their organizations do invest in European funds. Only two percent indicate their organizations will require they be compliant with Article 8 and 14 percent report they will require compliance with both Articles 8 and 9."

The survey adds, "​Those organizations with cash and short-​term investment holdings outside of the U.​S. manage their cash holdings similarly as they do their domestic ones. Sixty-​nine percent of non-​U.​S. cash holdings are maintained in bank-​type investments (​including certificates of deposits, time deposits, etc.). This is a decrease from the 72 percent reported in last year'​s survey and similar to the 70 percent in 2020. Another 12 percent are held in money market mutual funds and 8 percent in government-​type securities."

The AFP report also tells us, "Banks continue to be major depositories for companies' U.​S.-​based cash and short-​term investment holdings. Survey results reveal an increase in the percentage of cash and short-​term investments being held currently at banks (​55 percent). Treasurers consider several factors when deciding where to place their organizations' cash and short-​term investments. A vast majority considers the overall relationship with their banks a determinant (​cited by 93 percent of survey respondents) while 72 percent indicate that the credit quality of a bank is a deciding factor, 8 percentage points higher than the 64 percent in last year'​s survey -- indicating a shift in credit focus from previous years. `​Nearly 50 percent of organizations consider compelling rates offered on deposits a determinant (​confirming the same theme as Safety, Liquidity and Yield). Additionally, practitioners also consider earnings credit rate (​ECR) and simplicity of working with banks when selecting their banking partners."

It explains, "Organizations rely on various bank instruments for their cash and short-​term investments. The most commonly used bank products are interest-​bearing deposit accounts and time deposits. Interest-​bearing deposit accounts are the most-​often cited bank product: 59 percent of treasury and finance professionals report their organizations use interest-​bearing deposit accounts. Time deposit products are being used by 42 percent of organizations, unchanged from results last year."

AFP continues, "While structured bank deposit products were the most-​often used investment vehicle in 2019 (​cited by 49 percent of respondents), their use decreased in both 2020 (​to 31 percent) and in 2021 (​to 26 percent) before increasing slightly to 28 percent in this year'​s survey. Thirty percent of organizations use non-​interest-​bearing accounts, compared to 33 percent last year, 22 percent in 2020 and 38 percent in 2019."

Finally, they state, "Organizations continue to place most of their short-​term investment holdings in instruments with very short maturities. On average, 48 percent of all short-​term investment holdings are in vehicles with maturities of one day or less, while 13 percent of all short-​term investment holdings are in vehicles with maturities of between 8 and 30 days. Another 7 percent of short-​term investments are held in vehicles with maturities between two and seven days." (​For more on ESG MMFs, see our June 3 News, "SEC Names Rule Proposal Could Impact or Ban ESG, Social Money Funds," and our May 12 News, "UBS AM Explains Sustainability in Liquidity; Federated Adds SGD Shares.")

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Money market fund yields have surged by 50 basis points since the Federal Reserve'​s 75-​basis-​point rate hike on June 15. The 7-​Day Yield Average for our flagship Crane 100 Money Fund Index rose by 27 basis points to 1.​15% in the week ended Friday, 6/​24, after rising by 23 basis points on June 16 and 17. Last week was the first time money funds yielded over 1.​0% since February 2020. The average has almost doubled from 0.​58% on May 31, and is up from 0.​21% on April 29, 0.​15% on March 31 and 0.​02% on February 28 (​where it had been for almost 2 years prior). Brokerage sweep rates also jumped over the past week as Fidelity more than doubled its FDIC insured sweep rates, and Raymond James and Schwab also moved rates higher. Our latest Brokerage Sweep Intelligence shows most brokerages now paying an average of 0.​11% or higher (​on FDIC insured deposits), up from 0.​04% a month ago. We review the latest money fund and brokerage sweep yields below.

The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (​currently 671), shows a 7-​day yield of 1.​00%, up 25 basis points in the week through Friday. The Crane Money Fund Average is up 53 bps from 0.​47% at the beginning of June. Prime Inst MFs were up 34 bps to 1.​23% in the latest week, and up 59 bps over the course of June. Government Inst MFs rose by 24 bps to 1.​08%, they are up 54 bps MTD. Treasury Inst MFs rose by 21 bps to 1.​01%, up 51 bps in June. Treasury Retail MFs currently yield 0.​76%, (​up 19 bps for the week, and up 46 bps in June), Government Retail MFs yield 0.​77% (​up 23 bp for the week, and up 51 bps in June), and Prime Retail MFs yield 1.​03% (​up 31 bps for the week, and up 55 bps for June), Tax-​exempt MF 7-​day yields rose by 13 bps to 0.​56%, they were up 16 bps in June.

Our Crane Brokerage Sweep Index, the average rate for brokerage sweep clients (​most of which are swept into FDIC insured accounts; only Fidelity sweeps to a money market fund), inched higher to 0.​11%. This follows increases over the past several weeks but also follows 2 straight years of yields at 0.​01%. Sweep yields were 0.​12% on average at the end of 2019 and 0.​28% on average at the end of 2018. The latest Brokerage Sweep Intelligence, with data as of June 24, shows numerous changes over the previous week.

Our latest Brokerage Sweep Intelligence reports that Fidelity hiked its FCash brokerage account and Cash Management Account rates to 0.​69% across all tiers. (Fidelity'​s Government Money Market Fund, also a default sweep option, yields 0.​97%, but we only include FDIC insured sweeps in our Brokerage Sweep Index.)

We also show that Raymond James increased rates to 0.​10% for balances under $​100K, to 0.​20% for balances between $​100K and $​250K, to 0.​35% for balances between $​250K and $​1 million, to 0.​45% for balances between $​1 million and $​2.​5 million and to 0.​55% for balances $​2.​5 million to $​5 million. Also, Schwab increased its sweep rates from 0.​01% to 0.​15% for the week ended June 24 and TD Ameritrade increased its sweep rates from 0.​01% to 0.​10% for the week ended June 24. Just four of 11 major brokerages still offer rates of 0.​01% for balances of $​100K (​and most other tiers). These include: E*​Trade, Merrill Lynch, Morgan Stanley, and UBS.

According to Monday'​s Money Fund Intelligence Daily, with data as of Friday (​6/​24), just 23 funds (​out of 818 total) still yield 0.​00% or 0.​01% with assets of $​10.​1 billion, or 0.​2% of total assets. (​This compares to 593 funds with $​2.​623 trillion yielding 0.​00% or 0.​01% at the beginning of the year.) There were 93 funds yielding between 0.​02% and 0.​49%, totaling $​72.​8B, or 1.​4% of assets; 329 funds yield between 0.​50% and 0.​99% with $​1.​177 trillion in assets, or 23.​7%; 191 funds yield between 1.​00% and 1.​24% with $​1.​244 trillion in assets or 25.​0%; 186 funds yielded between 1.​25% and 1.​49% with $​2.​299 or 46.​3%; and just 6 funds yielded over 1.​50% ($​162.​4 billion, or 3.​3%).

In related news, website JDSupra features a posting by law firm Seward & Kissel entitled, "FDIC Adopts Rule Prohibiting Misleading Statements About FDIC Insurance that Impacts a Broad Range of Deposit Placement Arrangements Offered by Brokers, Banks, and FinTechs." It tells us, "On May 17, 2022, the Board of Directors of the Federal Deposit Insurance Corporation ('​FDIC') adopted a final rule setting forth its procedures for investigating and enforcing false advertising, false or misleading representations about deposit insurance, or misuse of the FDIC'​s logo. A central target of the Rule are issuers of digital '​stablecoins,' some of which have made claims about the availability of FDIC insurance on bank deposits they hold at FDIC-​insured banks to back the coins. The Rule will also affect broker-​dealers, banks and other entities offering bank deposit '​sweep' programs, brokered CD programs, or other deposit placement programs relying on '​pass-​through' deposit insurance (​i.​e., insurance that passes through a fiduciary to an underlying depositor)."

The piece continues, "Because of its impact on programs like these, the Rule has broader implications than appear on the surface. Pursuant to the Rule, all persons or entities making claims about FDIC insurance -- regardless of whether they are insured depository institutions -- must have a basis for those claims. Critically, the Rule deems it a '​material omission' for a non-​bank entity not to identify banks at which depositor funds may be placed when making claims about the availability of pass-​through deposit insurance."

It also states, "Although identifying the names of the banks receiving deposits on a pass-​through basis is consistent with existing FDIC guidance on pass-​through deposit insurance, the new requirement applies to any '​statement regarding deposit insurance.' An entity offering a sweep program could, in many cases, maintain a bank list on a website and include a link to that list in their disclosure document concerning the program, but the language used in the Rule -- '​statement' -- could be read by the FDIC to apply much more broadly, to many other documents and communications."

It adds, "​Further, pass-​through deposit insurance remains available only when customers establish a bona fide agency relationship with the third party placing deposits and when the deposit accounts satisfy applicable titling requirements. That is, compliance with the Rule is not sufficient on its own in order for deposits to qualify for pass-​through treatment. The Rule was published in the Federal Register on June 2, 2022, and it will go into effect on July 2, 2022." (​See the full FDIC Financial Institution Letter here.)

Website AdvisorHub writes on another regulatory issue involving "​cash," in, "Wells Fargo Tightens Rules on Cash in Advisory Accounts." They tell us, "A policy change to further restrict the amount of cash that Wells Fargo Advisors brokers can hold in customers' advisory accounts has some of them hunting for safe alternatives in a turbulent market. Wells Fargo Advisors as of April 1 began counting money market funds toward a 25% limit on cash holdings in advisory accounts in several wrap fee programs, according to an internal notice. The firm previously counted only cash sweep deposits toward its tolerance threshold, according to the memo which was posted to broker workstations at the end of March."

They explain, "Customer accounts can be above the limit for a maximum of six months, according to the posting, which did not define a prior cap in at least one advisory program. The firm did not detail penalties, but a veteran broker at the firm said it appeared they would no longer receive payout on cash-​heavy accounts. The move aims to mitigate risk and matches standard practice at other firms, according to the notice. Many of Wells' peers already have similar restrictions aimed at avoiding the appearance of '​reverse churning' or improperly collecting fees on unmanaged funds."

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Crane Data hosted its 14th annual Money Fund Symposium conference in Minneapolis last week, which brought together over 420 money fund and cash investment professionals to discuss the latest involving rising rates, pending money fund reforms, and ESG/​D&​I money fund issues. As we do every year, we ended our opening day with the session, "Major Money Fund Issues 2022." Crane Data'​s Peter Crane moderated a discussion with Federated Hermes' Deborah Cunningham, Dreyfus' John Tobin and Northern Trust AM'​s Peter Yi, and D&​I money fund issues took center stage (​the show started on the Juneteenth Holiday, 6/​20). We excerpt from their comments below. (Note: Thanks again to those who attended and supported Money Fund Symposium! The recordings and Powerpoints are available in our "Money Fund Symposium 2022 Download Center" to attendees and subscribers. Watch for more coverage in coming days and in our MFI newsletter, and mark your calendars for next year'​s MFS, which is June 21-​23, 2023, in Atlanta.)

Yi says, "Northern Trust has had a really rich history in D&​I [​diversity & inclusion] and social impact strategies. We'​ve been doing diversity-​type exposures for probably 30, 40 years.... More relevant to money market mutual funds, ... back in 2014, we were fortunate enough to partner with Williams Capital at the time, now Siebert Williams Shank (​SWS), and it'​s been a great partnership. It'​s allowed our liquidity investors to help support these minority and women owned financial firms.... Those share classes have grown exponentially.... To your point, we'​ve been really focused on diversity, as well as equality and inclusion."

He continues, "​But then, you know, we think about ESG as well and the evolution of ESG.... The way we think about ESG is it'​s really about learning what the principles that investors really want exposure to. Quite frankly, we'​re not necessarily putting money into [​a] specific fund, but really focusing more on SMAs [​separately managed accounts]. We have a ton of assets where our investors are just basically coming to us, asking for us to put in some either filters, exclusionary lists or our proprietary credit scoring as it relates to ESG. So again, to your point, it is something that Northern Trust takes very seriously."

Cunningham discusses the integration of Hermes' social screens into Federated and comments, "[​We'​re] using the proprietary information that they provide for us now in a way that is part of our credit scoring system that we use internally.... As far as ... emphasis on different aspects of the E, S and G, depending on the particular issuers that we'​re looking at, we can have both quantitative and qualitative inputs to the credit scoring system. It is definitely something that we think we'​ve taken a step further now. Traditionally, we have thought about integration of Prime products. But we'​ve now included that integration into our Government money market products as well as our Municipal money market products. On the government side, engaging with the GSEs, making sure from a repo counterparty perspective, those aspects of ESG are associated with those counterparts as well. And on the Muni side, it'​s kind of a natural audience for that industry given the projects that are being funded through that marketplace.... So we’​re not looking at a cutoff or exclusionary ... [​but rather] integrative into all aspects of our money funds."

She adds, "​But then, further beyond that in the equity and longer-​term fixed-​income markets, there'​s also ... thematic products. Those are not ones that we have currently within our liquidity product lineup. But these could come at some point. We do have to do a D&​I broker aspect with our agency [​fund] and have been able to achieve about 75% of our trades with either veteran, minority or women-​owned businesses. Then, most recently have opened a 'SDG' Sustainable Development Goals class of shares within our largest government agency and repo fund as sort of a furthering of our path down this ESG front from a liquidity products standpoint."

Tobin tells us, "I think the way I think about it is ... there are three levers that you can pull and two of them we'​ve spoken about. One is, what are you buying in your portfolio? The credit overlay. You look at the ESG scores of issuers, and if they'​re doing the right thing ... you want more of it.... We all run hundreds of billions of dollars of funds, so these issuers listen to us and [​have a] huge incentive to do the right thing. The other thing is, 'Who are you doing business with?' D&​I funds [​are doing trades] through minority firms and veteran firms.... Then the third lever is, 'What are you doing with your revenue potentially? Are you taking some aspect of your revenue into voting towards something very specific or more broadly?" He describes Dreyfus' BOLD share class, which devotes some revenues to Howard University and historically black colleges and adds, "Our clients want to effect change with their cash investments."

On the Fed, Tobin says, "​What we just witnessed was a perfect storm ... no one expected 75 bps. We got perfect Fed guidance for six weeks [​that we were going to get 50 bps].... In the matter of two days, when we were guaranteed 50, we got 75.... So when you look at this past week, you'​re going to see there were so many different ways to play it. You'​re going to see some pretty wide dispersion in performance."

When asked about corporates and bank deposits, Cunningham replies, "​As far as corporates and what we'​re seeing from a portal standpoint or any type of direct investment into the products, people are taking note that we'​re again above zero. The difference between bank deposits and money market funds was so low for such a long period of time, we saw a huge number of go into deposit products. Now the banks don'​t want those deposits and actual market rates are increasing and administered rates (​i.​e. deposits) are not. So, you'​re seeing a variation."

She tells the Symposium crowd, "Generally speaking, as a cash manager in a rising rate environment, the best thing that can happen to you from a performance perspective is to get cash flow. So, cash flow in a rising rate environment is something that is extremely beneficial. Sometimes our salespeople get very annoyed with us in a declining rate environment because we say we don'​t really want cash flow. This is just going to take our yield down faster.... But getting positive cash flow out of deposits, getting positive cash flow from direct investors that are truly now feeling like they are getting something other than just safety of principle, but a bit of a return from their cash investments, is working out pretty well."

When asked about money fund reforms, Northern'​s Yi answers, "My guess SEC is still reading comment letters, trying to be thoughtful around, 'Does this make sense?' I think overwhelmingly ... swing pricing is universally disliked. It comes down to, at least for us, '​Is that going to be adopted?' ... If the SEC adopts what'​s proposed here, our big headline is: we'​re not going to re-​enter the Prime and Muni space. There are so many new complexities involved with swing pricing. And the reality is even some of the other considerations, like increasing weekly liquidity minimums, that'​s going to have an impact because it'​s going to likely compress the yields between a prime fund and a government fund."

He continues, "From our perspective, one of the foundational ... philosophies we have is that investors should be compensated for the risks that they take. So, again, for us, if things are adopted [​as proposed] we are not going to re-​enter the space. [​But] we have a lot of different wrappers. The reality is, if SEC does adopt these rules, this is all kind of isolated to '​40-​Act money market mutual funds. But at Northern Trust Asset Management, we manage a bunch of different wrappers, six collective investment trusts, offshore UCITS funds and of course SMAs. We still have a thriving business with credit as well as muni instruments and those type of investment products."

Cunningham adds, "As far as timing goes, we had originally thought that the staff would come out with their recommendations for the Commissioners sometime in the fourth quarter, with some sort of vote during that end of year timeframe. Then depending on what the ultimate rulemaking would be, implementation in '​23 and '​24. We'​re hearing now that, in fact, maybe that'​s moved up a little bit, and that Chair Gensler is really encouraging the staff to get their recommendations to the Commissioners by the end of the third quarter. So, we'​ll see if that speeds these things up or not." Finally, Tobin comments, "My prediction is that we will see it around year-​end and it will include swing pricing."

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Staff from the SEC'​s Division of Investment Management published a brief paper entitled, "Prime MMFs' Asset Composition and Asset Sales," which shows that Prime money market funds have increased their liquidity and exposure to government securities substantially over the past two years. Authors Viktoria Baklanova, Isaac Kuznits and Trevor Tatum summarize, "This study analyzes portfolio holdings data filed by prime money market funds (​MMFs) on Form N-​MFP to gain insights about these funds' portfolio composition in March 2020 through the present. The analysis also includes data filed on Form N-​CR, which is used for current reporting of MMFs' material events such as sales of securities to affiliated firms, and data about the Money Market Mutual Fund Liquidity Facility (​MMLF). The analysis shows that since March 2020 prime MMFs increased their holdings of government securities and repurchase agreements (​repos) overall. Allocations to credit-​related securities issued by banks and other types of firms may differ substantially among prime MMF categories." (Note: Thanks once again to those who attended our Money Fund Symposium in Minneapolis! Conference materials and recordings are now available in our "Money Fund Symposium 2022 Download Center." Also, mark your calendars for next year'​s Money Fund Symposium, which is June 21-​23, 2023, in Atlanta. See you next year!)

They explain, "​Prime MMFs invest in a broad range of short-​term, high quality fixed-​income instruments. Since 2010, the SEC has required all MMFs to report their portfolio holdings on a monthly basis and classify each holding in one of the 18 asset categories (​see Appendix A for a full list of asset categories). Historical filings show that prime MMFs typically hold a mix of securities across all 18 categories. As of February 2022, prime MMFs held most of their assets in repos (​22% of the total), followed by investments in financial CP (​19% of the total) and U.​S. government securities (​17% of the total)."

The report says, "Average portfolio compositions change over time in response to market events and other factors. For example, at the end of 2016, following implementation of the 2014 MMF reforms, prime MMFs held close to 30% of their total assets in CD and 15% of their total assets in U.​S. government securities. The share of government securities in prime MMFs increased markedly at the onset of the COVID-​19 pandemic in early 2020, reaching an all-​time high of 38% of these funds' portfolios in August 2020. On the other hand, the share of CD declined to 15% in August 2020 and was at 14% in February 2022."

It continues, "Filing data show that the portfolio composition of prime MMFs also depends on the type of shareholders of the fund. As of February 2022, prime retail MMFs -- those funds limiting their investors to natural persons -- invested the majority of their total assets (​74%) in securities issued by banks and other financial firms, including CD/​TD, financial CP, and ABCP.... Prime institutional MMFs offered to the public -- which are typically used by large institutions -- allocated over 70% of their total assets to securities of banks and other financial firms.... However, prime institutional MMFs that are not offered to the public and are managed to benefit affiliated funds and accounts invested close to 70% of their assets in U.​S. government securities and repos, a much larger share than that of other types of prime MMFs."

The SEC report also says, "​MMFs invest in securities that mature within 397 days and are required to maintain a dollar-​weighted average portfolio maturity (​WAM) that does not exceed 60 calendar days and a dollar-​weighted average portfolio life (​WAL) that does not exceed 120 calendar days. In practice, MMFs often maintain WAM and WAL well below the regulatory limits. For example, as of February 2022, prime retail MMFs had average WAM of 27 days and average WAL of 46 days, while prime institutional MMFs had average WAM of 23 days and average WAL of 45 days. Given the short-​term nature of MMF portfolios, most assets are held to maturity and the proceeds from maturing securities are normally reinvested in similar securities in the absence of redemption requests."

Discussing March 2020, the staffers tell us, "Estimates based on Form N-​MFP suggest that in March 2020 prime MMFs liquidated a higher than average proportion of assets. This is consistent with the reports of prime MMFs raising liquidity to meet incoming redemptions and to maintain weekly liquid assets above the regulatory threshold of 30% of total assets. The recent SEC Money Market Fund Reforms proposing release explains that in March 2020, publicly offered prime institutional MMFs disposed of 15% of their total investments prior to maturity, significantly higher than a 4% monthly average during the period from October 2016 through February 2020."

They continue, "However, estimates of asset liquidations are sensitive to assumptions and may result in a range of results. The current Form N-​MFP provides month-​end snapshots of portfolio holdings by MMFs, which does not provide visibility into purchases and sales of securities during the month and potentially under-​estimates asset sales. To facilitate monitoring of prime money market funds' liquidity management and secondary market activities, the SEC recently proposed to require prime MMFs to report information about the amount of portfolio securities sold or disposed of during the month, among other changes to MMF regulation."

The report adds, "Analysis of changes in prime MMF portfolio holdings in March 2020 suggests that CP and banks' CD were the largest asset classes not held to maturity. The SEC Money Market Fund Reforms proposing release provides the estimate that, based on Form N-​MFP filings, around $​24 billion in CD and around $​28 billion in CP were not held to maturity. In addition to potential sales in the secondary market, the reduction in CD and CP holdings includes sales of these assets to affiliated banks and sales under the terms of the Money Market Mutual Fund Liquidity Facility (​MMLF). The Federal Reserve established the MMLF on March 18, 2020 to provide loans on advantageous terms to financial institutions purchasing securities from money market funds. MMLF operations started on March 23, 2020, with the last transaction occurring on April 23, 2020."

The paper reveals, "Filings on Form N-​CR by three prime MMFs in March 2020 showed that these funds sold approximately $​4 billion of securities to affiliated banks, including around $​1.​2 billion of CP and around $​2.​8 billion of CD. In addition, in March 2020, 47 prime MMFs sold around $​33 billion of CP and $​16 billion of CD to financial institutions under the terms of the MMLF. These sales accounted for close to 85% of the $​58 billion in total MMLF loans extended during its time in operations."

It also states, "The Federal Reserve'​s recent disclosures concerning the MMLF and other lending facilities established in response to the COVID-​19 pandemic shows that all categories of eligible MMFs sold assets under the terms of the facility. Prime institutional MMF offered to the public accounted for the largest share of these sales (​73%), prime retail MMFs accounted for 24%, and prime institutional nonpublic MMFs accounted for only 1% of the sales."

Baklanova, et. al. comment, "For additional perspective, in February 2020, prime retail MMFs had the largest share of net assets ($​473 billion), followed by public prime institutional MMFs ($​386 billion), and by prime institutional nonpublic MMFs (​close to $​250 billion). Assets pledged to the MMLF accounted for a larger share of participating prime institutional public MMFs net assets (​12%), followed by prime retail MMFs (​7%). Tax-​exempt retail and institutional MMFs only accounted for a very small part of MMLF pledges, 2% and 0.​3%, respectively. It appears that estimates of prime MMF asset liquidation in March 2020 using February 2020 and March 2020 Form N-​MFP filings are close in size to the total sales to affiliated banks reported on Form N-​CR and the reported amount of MMLF loans."

Finally, they write, "However, a survey of prime MMFs conducted by an industry group provides a higher estimate of asset sales by prime MMFs in March 2020 as it includes daily data about CP and CD sales prior the MMLF operations. The survey showed that sales of these assets during the period from March 2 through March 18 amounted to $​23 billion. These sales together with the amount of reported sales to affiliated banks and reported MMLF loans exceed the estimates derived solely from Form N-​MFP underscoring the need for better, more granular data about assets sales by prime MMFs."

​

The Investment Company Institute published, "Worldwide Regulated Open-​Fund Assets and Flows, First Quarter 2022," which shows that money fund assets globally fell by $​198.​0 billion, or -​2.​2%, in Q1'​22 to $​8.​635 trillion. The decreases were led by drops in money funds in the U.​S., France and Luxembourg. Meanwhile, money funds in China and Brazil increased. MMF assets worldwide increased by $​156.​4 billion, or 1.​8%, in the 12 months through 3/​31/​22, and money funds in the U.​S. represent 53.​2% of worldwide assets. We review the latest Worldwide MMF totals, below. (Note: Thanks again to those who attended our Money Fund Symposium this week in Minneapolis! Conference materials are available in our "Money Fund Symposium 2022 Download Center," and recordings will be posted shortly.)

ICI'​s release says, "Worldwide regulated open-​end fund assets decreased 4.​6 percent to $​67.​80 trillion at the end of the first quarter of 2022, excluding funds of funds. Worldwide net cash inflow to all funds was $​81 billion in the first quarter, compared with $​1.​1 trillion of net inflows in the fourth quarter of 2021. The Investment Company Institute compiles worldwide regulated open-​end fund statistics on behalf of the International Investment Funds Association (​IIFA), the organization of national fund associations. The collection for the first quarter of 2022 contains statistics from 46 jurisdictions."

It explains, "The growth rate of total regulated open-​end fund assets reported in US dollars was decreased by US dollar appreciation over the first quarter of 2022. For example, on a US dollar–​denominated basis, fund assets in Europe decreased by 6.​5 percent in the first quarter, compared with a decrease of 4.​6 percent on a euro-​denominated basis."

ICI'​s quarterly continues, "​On a US dollar–​denominated basis, equity fund assets decreased by 5.​9 percent to $​31.​65 trillion at the end of the first quarter of 2022. Bond fund assets decreased by 4.​9 percent to $​13.​05 trillion in the first quarter. Balanced/​mixed fund assets decreased by 4.​7 percent to $​8.​37 trillion in the first quarter, while money market fund assets decreased by 2.​3 percent globally to $​8.​64 trillion."

The release also tells us, "At the end of the first quarter of 2022, 47 percent of worldwide regulated open-​end fund assets were held in equity funds. The asset share of bond funds was 19 percent and the asset share of balanced/​mixed funds was 12 percent. Money market fund assets represented 13 percent of the worldwide total. By region, 53 percent of worldwide assets were in the Americas in the first quarter of 2022, 32 percent were in Europe, and 15 percent were in Africa and the Asia-​Pacific regions."

ICI adds, "​Net sales of regulated open-​end funds worldwide were $​81 billion in the first quarter of 2022.... Globally, bond funds posted an outflow of $​56 billion in the first quarter of 2022, after recording an inflow of $​235 billion in the fourth quarter.... Money market funds worldwide experienced an outflow of $​210 billion in the first quarter of 2022 after registering an inflow of $​308 billion in the fourth quarter of 2021."

According to Crane Data'​s analysis of ICI'​s "​Worldwide" fund data, the U.​S. sustained its position as the largest money fund market in Q1'​22 with $​4.​592 trillion, or 53.​2% of all global MMF assets. U.​S. MMF assets decreased by $​163.​4 billion (-​3.​4%) in Q1'​22 but have increased by $​95.​4 billion (​2.​1%) in the 12 months through March 31, 2022. China remained in second place among countries overall. China saw assets jump $​89.​9 billion (​6.​0%) in Q1 to $​1.​579 trillion (​18.​3% of worldwide assets). Over the 12 months through March 31, 2022, Chinese MMF assets have surged by $​189.​4 billion, or 13.​6%.

Ireland remained third among country rankings, ending Q1 with $​678.​9 billion (​7.​9% of worldwide assets). Dublin-​based MMFs were down $​48.​2B for the quarter, or -​6.​6%, and down $​12.​1B, or -​1.​8%, over the last 12 months. Luxembourg remained in fourth place with $​448.​6 billion (​5.​2% of worldwide assets). Assets there decreased $​53.​7 billion, or -​10.​7%, in Q1, and were down $​32.​5 billion, or -​6.​8%, over one year. France was in fifth place with $​365.​8B, or 4.​2% of the total, down $​61.​5 billion in Q1 (-​14.​4%) and down $​77.​8B (-​17.​5%) over 12 months.

Australia was listed in sixth place with $​250.​0 billion, or 2.​9% of worldwide assets. Its MMFs increased by $​7.​8 billion, or 3.​2%, in Q1. Korea moved up to become the 7th ranked country and saw MMF assets increase $​12.​6 billion, or 11.​1%, in Q1'​22 to $​126.​9 billion (​1.​5% of the total); they'​ve increased $​15.​2 billion (​13.​6%) for the year. Brazil moved up to 8th place with $​112.​7 billion (​1.​3%); assets there grew $​24.​4 billion (​27.​6%) in Q1 and increased by $​15.​3 billion (​15.​7%) over 12 months. Japan fell to 9th place, as assets decreased $​8.​9 billion, or -​7.​4%, to 111.​9 billion (​1.​3% of total assets) in Q1. They'​ve decreased $​16.​8 billion (-​13.​0%) over the previous 12 months. ICI'​s statistics show Mexico remained in 10th place with $​74.​6B, or 0.​9% of total assets, up $​4.​9 billion (​7.​0%) for the quarter.

India was in 11th place, decreasing $​3.​3 billion, or -​5.​1%, to $​60.​7 billion (​0.​7% of total assets) in Q1 and increasing $​2.​4 billion (​4.​1%) over the previous 12 months. The United Kingdom ($​29.​3B, down $​500M and up $​954M over the quarter and year, respectively) ranked 12th ahead of Chinese Taipei. ($​28.​5B, down $​2.​4B and down $​9.​4B). Canada ($​27.​4B, up $​1.​4B and down $​1.​8B) and Chile ($​26.​6B up $​6M and up $​3.​3B), rank 14th and 15th, respectively. South Africa, Switzerland, Argentina, Norway and Germany round out the 20 largest countries with money market mutual funds.

ICI'​s quarterly series shows money fund assets in the Americas total $​4.​853 trillion, down $​198.​0 billion in Q1. Asian MMFs increased by $​96.​1 billion to $​2.​170 trillion, and Europe saw its money funds plunge $​162.​0 billion in Q1'​22 to $​1.​589 trillion. Africa saw its money funds increase $​740M to $​24.​1 billion.

Note that Ireland and Luxembourg'​s totals are primarily "​offshore" money funds marketed to global multinationals, while most of the other countries in the survey have mainly domestic money fund offerings. Contact us if you'​d like our latest "Largest Money Market Funds Markets Worldwide" spreadsheet, based on ICI'​s data. (Let us know too if you'​d like to see our latest Money Fund Intelligence International product, which tracks "​offshore" money market funds domiciled in Europe and outside the U.​S.)

​

We wrote last week about the Association for Financial Professionals' "2022 AFP Liquidity Survey. (​See AFP'​s press release; our June 17 News, "AFP'​​s 2022 Liquidity Shows Deposits, MMFs, T-​​Bills Still Kings of Cash;" and our June 15 Link of the Day, "AFP Releases Liquidity Survey.") Today, we quote from the section on Money Market Funds. (Note: Thank you to those who attended our Money Fund Symposium this week in Minneapolis! Conference materials are available in our "Money Fund Symposium 2022 Download Center," and recordings will be posted in coming days.)

The survey reports, "​There are various drivers that play a role in the selection of money market funds. The three factors that play the most important role are yield, fund ratings and fixed or floating NAV. The 11 factors listed in the survey are ranked exactly as they were last year. Sixty-​one percent of treasury and finance professionals cite yield as a primary driver (​among the top three drivers), while 57 percent cite fund ratings and 42 percent cite fixed or floating NAV as having a significant role when selecting a mutual fund."

It continues, "​To put some perspective on the weighting for type of money market funds, -- the vast majority of companies that invest in them choose Government money market funds almost three times more often than Prime funds. Government money market funds account for 14 percent of current allocations and Prime funds account for five percent. A logical conclusion is that the vast majority of organizations that viewed fixed or floating NAV as a dominant driver in the past now do not see that as a hurdle because the limited fund selections prevent organizations from investing in such funds as well as the larger update in ESG investing which might be a driver as well."

It explains, "Banks play a key role in supporting organizations in their cash and short-​term investment strategies by providing them with critical information on economic indicators and trends. The past year has been challenging for financial professionals (​as well as the current economic situation described earlier) to accurately predict the economic environment, and organizations are more likely to look to their banking partners for sound advice. This year'​s survey results substantiate this claim: 91 percent of financial professionals identify banks as resources their organizations use to access cash and short-​term investment holding information."

AFP'​s survey says, "Other resources used by treasury and finance professionals include: Investment research from brokers/​investment banks (​cited by 38 percent of respondents); Credit rating agencies (​32 percent); and, Money market fund portals (​30 percent). Over half the survey respondents (​51 percent) would prefer to receive information regarding operating cash and short-​term investment holdings electronically (​via email) and 49 percent from email, website, conference calls and in-​person."

It tells us, "The primary rationale for investing in U.​S. domestic Prime/ Floating NAV Funds is yield (​cited by 68 percent of respondents) followed by fund ratings/​credit quality (​37 percent). Other primary rationales noted by respondents are diversification of underlying instruments (​21 percent) and ease of transaction process (​21 percent). As discussed earlier in this report, the current allocation to Prime funds is five percent, so this perspective is probably more that of the opportunistic-​type investor with a higher risk tolerance or those taking advantage of ESG investing in funds."

AFP mentions, "For those organizations that do invest outside of the U.​S. and in a European MMF, the most popular type of fund invested in is a low volatility NAV short-​term MMF. Seventeen percent of respondents indicate their companies invest in this type of fund, 11 percentage points lower than the 28 percent reported in 2021. Fifty-​four percent of respondents are still researching a decision; that is a large contingency given the high allocation to euro-​denominated vehicles."

The survey continues, "Fifty-​six percent of respondents expect that with the advent of real-​time payments, the money market industry would provide 24/​7 liquidity while 19 percent do not anticipate that to be so. Last year 53 percent of respondents expected the money market industry would provide 24/​7 liquidity. A quarter of respondents is unsure if real-​time payments operating in a 24/​7 environment should require the money market industry to provide 24/​7 liquidity. In 2021 a slightly smaller share of respondents (​53 percent) expected that the money market industry would provide 24/​7 liquidity."

It states, "In December 2021, the SEC proposed the following changes to money market funds: Improved fund liquidity provisions for all money funds; Removing gates and fees altogether; Enhancing reporting requirements; and, Implementing '​swing pricing' for institutional Prime and tax-​exempt funds. Of these proposals, implementing '​swing pricing” is the most controversial and could spell trouble, primarily for Prime funds.

AFP comments, "Swing pricing would involve complex system changes and essentially require funds to price their underlying investments during the day -- which has never been done; it'​s always been done at close. During the day, it would require monitoring flows; if those flows impact a fund'​s liquidity buffers, it would need to implement an NAV cost adjustment to the holders to bring the NAV back to whole. It'​s difficult because it has to take into consideration the potential pricing impact; given an assumption of flows and the timing for the pricing of securities, fund managers may need to sell to support the liquidity in the fund."

They add, "​The comment period for the underlying proposed changes recently closed. While the SEC is still gathering information, it looks like there is support for removing gates and fees, but instead of '​swing pricing' placing redemption fees as an alternative solution. It'​s not clear the direction the SEC might take. Redemption fees would not be refundable to the client, but instead serve as a cash infusion to boost the NAV to benefit the current investors. There are varying opinions on this, but it is clear that Prime funds are likely to experience a downshift if the SEC rules on its swing pricing proposal and it moves forward."

Finally, the survey states, "Seventy percent of respondents report that if all the proposed revisions are enacted, they are unsure as to what they would do with their organizations' money fund allocations which are subject to the proposals. The remaining 30 percent have varied responses: 9 percent do not expect that SEC will pass these proposals, 8 percent will move out of Prime funds due to swing pricing, 10 percent will stay in Prime funds to allow the market to digest swing pricing, while only three percent would move into Prime funds if the gate provision were removed."

​

The Securities and Exchange Commission'​s latest monthly "Money Market Fund Statistics" summary shows that total money fund assets decreased by $​19.​7 billion in May to $​5.​018 trillion, after decreasing in April, increasing in March and declining sharply in Feb. The SEC shows that Prime MMFs increased by $​9.​4 billion in May to $​851.​5 billion, Govt & Treasury funds decreased $​36.​7 billion to $​4.​058 trillion and Tax Exempt funds increased $​7.​6 billion to $​107.​8 billion. Taxable yields jumped again in May. The SEC'​s Division of Investment Management summarizes monthly Form N-​MFP data and includes asset totals and averages for yields, liquidity levels, WAMs, WALs, holdings, and other money market fund trends. We review their latest numbers below. (Note: For those attending our Money Fund Symposium, June 20-​22, welcome to Minneapolis! Conference materials are available via our "Money Fund Symposium 2022 Download Center.")

May'​s asset decrease follows a decrease of $​63.​3 billion in April, an increase of $​40.​1 billion in March, and decreases of $​29.​3 billion in February and $​125.​1 billion in January. Assets gained $​122.​9 billion in December, $​53.​7 billion in November, $​7.​9 billion in October, $​19.​9 billion in September and $​24.​9 billion in August. MMFs saw decreases of $​39.​9 billion in July and $​86.​9 billion in June. Over the 12 months through 5/​31/​22, total MMF assets have decreased by $​94.​7 billion, according to the SEC'​s series. (Note that the SEC'​s series includes a number of internal money funds not tracked by ICI, though Crane Data includes most of these assets in its collections.)

The SEC'​s stats show that of the $​5.​018 trillion in assets, $​851.​5 billion was in Prime funds, up $​9.​4 billion in May. Prime assets were down $​11.​7 billion in April, up $​29.​5 billion in March, down $​2.​7 billion in February, up $​10.​7 billion in January, and down $​20.​5 billion in December, $​21 billion in November and $​12.​1 billion in October. This follows an increase of $​2.​6 billion in September, and a decrease of $​8.​1 billion in August and $​19.​4 billion in July. Prime funds represented 17.​0% of total assets at the end of May. They'​ve decreased by $​63.​0 billion, or -​6.​9%, over the past 12 months. (Month-​to-​date in June through 6/​16, total MMF assets have increased by $​1.​6 billion, according to our MFI Daily.)

Government & Treasury funds totaled $​4.​058 trillion, or 80.​9% of assets. They decreased by $​36.​7 billion in May, decreased $​57.​1 billion in April, increased $​8.​7 billion in March, decreased by $​25.​8 billion in February and $​135.​2 billion in January, after increasing by $​144.​4 billion in December, $​76.​0 billion in November, $​21.​0 billion in October, $​20.​4 billion in Sept. and $​32.​8 billion in August. Govt & Treasury MMFs are down $​38.​0 billion over 12 months, or -​0.​9%. Tax Exempt Funds increased $​7.​6 billion to $​107.​8 billion, or 2.​1% of all assets. The number of money funds was 308 in May, down 1 from the previous month and down 12 funds from a year earlier.

Yields for Taxable MMFs and Tax Exempt MMFs surged higher in May. The Weighted Average Gross 7-​Day Yield for Prime Institutional Funds on May 31 was 0.​88%, up 44 bps from the prior month. The Weighted Average Gross 7-​Day Yield for Prime Retail MMFs was 0.​96%, up 46 bps from the previous month. Gross yields were 0.​83% for Government Funds, up 43 basis points from last month. Gross yields for Treasury Funds were up 35 bps at 0.​81. Gross Yields for Tax Exempt Institutional MMFs were up 32 basis points to 0.​76% in May. Gross Yields for Tax Exempt Retail funds were up 33 bps to 0.​82%.

The Weighted Average 7-​Day Net Yield for Prime Institutional MMFs was 0.​83%, up 43 bps from the previous month and up 78 basis points from 5/​31/​21. The Average Net Yield for Prime Retail Funds was 0.​65%, up 44 bps from the previous month, and up 63 bps since 5/​31/​21. Net yields were 0.​59% for Government Funds, up 40 bps from last month. Net yields for Treasury Funds were also up 34 bps from the previous month at 0.​59%. Net Yields for Tax Exempt Institutional MMFs were up 32 bps from April to 0.​66%. Net Yields for Tax Exempt Retail funds were up 32 bps at 0.​56% in May. (​Note: These averages are asset-​weighted.)

WALs and WAMs were mostly lower in May. The average Weighted Average Life, or WAL, was 43.​0 days (​down 0.​7 days) for Prime Institutional funds, and 48.​1 days for Prime Retail funds (​up 4.​4 days). Government fund WALs averaged 71.​2 days (​down 1.​2 days) while Treasury fund WALs averaged 79.​1 days (​up 3.​4 days). Tax Exempt Institutional fund WALs were 7.​6 days (​down 2.​2 days), and Tax Exempt Retail MMF WALs averaged 16.​1 days (​down 1.​3 days).

The Weighted Average Maturity, or WAM, was 20.​3 days (​down 0.​3 days from the previous month) for Prime Institutional funds, 15.​2 days (​down 4.​0 days from the previous month) for Prime Retail funds, 25.​7 days (​down 0.​3 days from previous month) for Government funds, and 35.​7 days (​up 0.​6 days from previous month) for Treasury funds. Tax Exempt Inst WAMs were down 2.​2 days to 7.​5 days, while Tax Exempt Retail WAMs were down 1.​2 days from previous month at 15.​3 days.

Total Daily Liquid Assets for Prime Institutional funds were 51.​5% in May (​down 0.​6% from the previous month), and DLA for Prime Retail funds was 36.​7% (​up 3.​7% from previous month) as a percent of total assets. The average DLA was 80.​0% for Govt MMFs and 98.​5% for Treasury MMFs. Total Weekly Liquid Assets was 65.​1% (​down 4.​4% from the previous month) for Prime Institutional MMFs, and 49.​3% (​down 1.​5% from the previous month) for Prime Retail funds. Average WLA was 89.​8% for Govt MMFs and 99.​6% for Treasury MMFs.

In the SEC'​s "Prime Holdings of Bank-​Related Securities by Country table for May 2022," the largest entries included: Canada with $​83.​7 billion, Japan with $​63.​3 billion, France with $​63.​2 billion, the U.​S. with $​46.​7B, the Netherlands with $​35.​4B, Aust/​NZ with $​31.​5B, Germany with $​31.​4B, the U.​K. with $​30.​1B, and Switzerland with $​10.​8B. The gainers among the "Prime MMF Holdings by Country" included: the U.​S. (​up $​6.​0B), Japan (​up $​4.​0B), the Netherlands (​up $​2.​3B) and Aust/​NZ (​up $​1.​0B). Decreases were shown by: Switzerland (​down $​1.​5B), France (​down $​1.​0B) and the U.​K. (​down $​0.​9B).

The SEC'​s "Prime Holdings of Bank-​Related Securities by Region" table shows The Americas had $​130.​4 billion (​up $​6.​0B), while Asia Pacific had $​110.​9B (​up $​6.​8B). Eurozone subset had $​143.​6B (​up $​1.​2B), while Europe (​non-​Eurozone) had $​86.​9B (​down $​7.​0B from last month).

The "​Prime MMF Aggregate Product Exposures" chart shows that of the $​852.​3B billion in Prime MMF Portfolios as of May 31, $​333.​6B (​39.​1%) was in Government & Treasury securities (​direct and repo) (​up from $​317.​1B), $​210.​7B (​24.​7%) was in CDs and Time Deposits (​down from $​211.​6B), $​157.​5B (​18.​5%) was in Financial Company CP (​up from $​151.​5B), $​120.​3B (​14.​1%) was held in Non-​Financial CP and Other securities (​down from $​123.​4B), and $​30.​2B (​3.​5%) was in ABCP (​down from $​31.​2B).

The SEC'​s "Government and Treasury Funds Bank Repo Counterparties by Country" table shows the U.​S. with $​114.​0 billion, Canada with $​88.​6 billion, France with $​108.​3 billion, the U.​K. with $​46.​5 billion, Germany with $​10.​0 billion, Japan with $​106.​3 billion and Other with $​23.​8 billion. All MMF Repo with the Federal Reserve was up $​82.​8 billion in May to $​1.​753 trillion.

Finally, a "Percent of Securities with Greater than 179 Days to Maturity" table shows Prime Inst MMFs 6.​2%, Prime Retail MMFs with 6.​2%, Tax Exempt Inst MMFs with 0.​1%, Tax Exempt Retail MMFs with 1.​6%, Govt MMFs with 13.​2% and Treasury MMFs with 11.​9%.

​

The Association For Financial Professionals, a group representing corporate treasurers, published its "2022 AFP Liquidity Survey earlier this week. (​See AFP'​s press release and our June 15 Link of the Day, "AFP Releases Liquidity Survey.") The cover letter to the report says, "Invesco is proud to once again partner with AFP to sponsor the 2022 AFP Liquidity Survey, the 17th annual exploration of current and emerging corporate cash management trends. This marks the third year Invesco has underwritten this informative research, and what a remarkable period it has been in liquidity markets, from the early pandemic days in 2020 to the sharp inflation acceleration and aggressive shift to Federal Reserve monetary policy tightening in 2022." (Note: For those attending our Money Fund Symposium next week, June 20-​22, in Minneapolis, conference materials are being posted to our "Money Fund Symposium 2022 Download Center." See you all in Minnesota on Juneteenth!)

Invesco'​s Laurie Brignac explains, "This year'​s survey identified several interesting high-​level themes: Corporate liquidity reserves remain near record highs, though companies are generally beginning to plan on putting this cash to work. Companies are broadly preparing for higher interest rates, with markets pricing in a very aggressive hiking cycle. Caution around event risk remains high, elevated by uncertainties in geopolitical, inflationary, supply chain and labor pressures as companies adjust to higher rates and implement a return to the office."

The Introduction to the Comprehensive Report tells us, "A smaller share of organizations compared to last year plan on building cash reserves -- 37 versus 47 percent -- suggesting companies are being cautiously optimistic while shoring up liquidity to ease uncertainty. However, organizations are still heavily reliant on banking partners. Fifty-​five percent of survey respondents indicate that their organizations' cash and short-​term investment holdings were being maintained in bank deposits -- the highest figure since 2017 and an increase from the 46 percent reported in the 2019 survey report and the 51 percent in the 2020 survey. Looking ahead to the second and third quarters of 2022, 55 percent of respondents expect that their organizations' cash and short-​term investments will be unchanged, while 27 percent anticipate an increase and 18 percent expect a decrease."

It continues, "With the Federal Reserve expecting to raise interest rates to curb inflation, a majority of organizations (​57 percent) is preparing their portfolios ahead of the anticipated rate increase. They are employing various methods to do so, with one-​third of respondents indicating they are preparing by managing the duration of their companies' portfolios. Some are also considering investing in floating rate notes, creating bond maturity ladders or using a barbell approach with select securities."

Discussing "Cash and Short-​Term Investments/​Securities," the AFP says, "A significantly smaller percentage of respondents report an increase in cash and short-​term balances over the past year, suggesting that organizations are being cautiously optimistic and less constrained than they were in 2021. Thirty-​seven percent of corporate practitioners report an increase in their organizations' cash holdings within the U.​S. in the past 12 months -- 10 percentage points lower than the 47 percent reported in the 2021 AFP Liquidity Survey, but still 6 percentage points higher than the 31 percent reported in the 2020 AFP Liquidity Survey. Last year'​s percentage was the highest share ever reported in the 17 years AFP has been tracking this data, likely due to caution caused by the pandemic."

They write, "Fifty-​seven percent of respondents indicate that in the past 12 months (​through March 2022) their organizations' investments outside the U.​S. were unchanged -- similar to the 58 percent last year. Thirty-​three percent report an increase in cash and short-​term balances, slightly higher than the 31 percent in last year'​s survey. Ten percent report a decrease -- lower than the 11 percent in last year'​s survey.... Sixty-​two percent of organizations hold some amount of cash outside of the U.​S. -- similar to the 64 percent reported last year."

AFP continues, "[T]​he majority of cash and short-​term investments held outside the U.​S. is in U.​S. dollars (​50 percent), indicating that most companies are USD functional or choose to hold USD as a safety measure. The Canadian dollar and the Euro are the next most popular currencies held by organizations outside the U.​S. (​24 percent and 19 percent, respectively).... Nineteen percent of organizations' cash and short-​term investments outside the U.​S. are held in '​other' currencies including the Mexican Peso, Brazilian Real, Indian Rupee, Australian Dollar, Swedish Krona and Thailand Baht."

The survey also tells us, "Changes in cash holdings are driven by various factors. Thirty-​nine percent of survey respondents report that increased operating cash flow has had a significant impact on the increase in their organizations' cash holdings in the past 12 months (​ending in March 2022).... Other drivers contributing to increased cash holdings at organizations include pandemic planning and contingencies (​cited by 60 percent of survey respondents), increased debt outstanding/​accessed best markets (​41 percent), government stimulus (​40 percent) and acquired company/​subsidiary and/​or launched new operations (​31 percent)."

On the topic of "Objectives of Cash Investment Policy," the survey says, "​Organizations are continuously working to balance their desire for safety and liquidity against a competitive rate of return. Safety continues to be the most-​valued short-​term investment objective for 63 percent of organizations -- an increase of one percentage point from last year'​s survey. It isn'​t surprising that organizations are continuing to choose safety over liquidity given the uncertainty in the economy due to high inflation rates, anticipated actions by the Federal Reserve and geopolitical developments. Thirty-​four percent of survey respondents indicate their organizations' most important objective is liquidity -- slightly higher than the 32 percent reported in 2021, but equal to the 34 percent reported in 2020. Yield continues to be the least important objective of an organization'​s cash investment policy. The share of organizations ranking yield as most important has decreased by three percentage points -- from 6 percent in 2021 to three percent in 2022."

AFP comments, "Over 50 percent of organizations with investment policies call out and/​or separate cash holdings used for day-​to-​day liquidity from the rest of the company'​s cash and short-​term investment holding -- a one-​percentage-​point decrease from last year. Those policies include guidance stipulating the amount of cash holdings that is set aside for day-​to-​day liquidity versus other uses.... Thirty-​two percent of financial professionals report that their organizations have neither a percentage nor a dollar limit on short-​term investment holdings by asset manager or fund. Seventeen percent of companies impose dollar limits while 32 percent restrict short-​term investment with percentage limits; the remaining 19 percent have a mix of both dollar and percentage limits."

They also state, "A majority (​83 percent) of organizations' investment policies requires money market funds be rated. Thirty-​nine percent of organizations require at least one agency rating assign a AAA rating and 28 percent mandate that their money market funds earn a AAA rating from at least two agencies.... For the majority of respondents -- 82 percent -- the primary/​preferred rating agency for money funds is S&​P. The second most preferred primary/​preferred rating agency is Moody'​s (​59 percent) followed by Fitch (​29 percent)."

AFP explains, "The typical organization currently maintains 55 percent of its short-​term investments in bank deposits, slightly higher than the 52 percent reported in 2021 and 51 percent in 2020. This allocation also represents a 9-​percentage-​point increase from 2019 and a 6-​percentage-​point increase from 2018.... When interest rates dropped to zero at the beginning of the pandemic in the spring of 2020, bank relationships were key as organizations needed to draw down on liquidity. In the last 12 months there have been signs of recovery. With inflation relatively high, the Federal Reserve has already raised interest rates. Treasury professionals will continue to rely on relationships with their financial institutions as low yields provide little appetite for companies to move away from bank deposits. Companies maintain their investments in relatively few vehicles. Organizations invest in an average of 2.​5 vehicles for their cash and short-​term investments -- a figure unchanged from the 2.​5 reported in 2021."

They add, "The majority of organizations continues to allocate a large share of their short-​term investment balances -- an average of 81 percent—​in safe and liquid investment vehicles: bank deposits, money market funds (​MMFs) and Treasury securities. This is the highest figure on record since AFP began tracking the data. The allocation to Government/​Treasury money market funds is 14 percent, three percentage points lower than the 17 percent reported in last year'​s survey. The likely driver behind a 10-​year increase from 2012 is likely due to money fund reform. AFP now tracks two categories in its liquidity survey series: Government and Prime funds. As companies feel the need for stronger safety (​Stable Nav + underlying securities) they'​ve moved into government money market funds as their second vehicle of choice."

Finally, AFP comments, "[​A]​nticipated changes in investment mix are more likely to be observed in bank deposits; 23 percent of respondents anticipate an increase and 22 percent expect a decrease. Other investments likely to be impacted by shifts in an organization'​s investment mix are Government/​Treasury money market funds and Treasury bills. As stated earlier, the increase in the investment mix towards bank deposits and Government/​Treasury money funds not only reflects a flight to safety, but also as money funds durations shrink, there is additional yield to capture as rates are expected to increase and the shorter maturities will capture the rise in rates more quickly."

​

The Federal Reserve Board hiked short-​term interest rates by 75 basis points, its biggest hike in decades, to a range of 1.​50-​1.​75%. The FOMC statement tells us, "​Overall economic activity appears to have picked up after edging down in the first quarter. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures." Money market fund yields should jump in coming days as the new higher rate levels are passed through to funds. Our Crane 100 Money Fund Index, currently at 0.​64%, should jump over the 1% level next week and should be heading towards the 1.​40% level by the time the next Fed meeting rolls around later next month (​on July 27). (Note: For those attending our Money Fund Symposium next week, June 20-​22, in Minneapolis, conference materials are being posted to our "Money Fund Symposium 2022 Download Center." Watch for more Powerpoints soon, and for recordings to be posted next week after the show. See you Monday in Minnesota, and Happy Juneteenth!)

The Fed'​s release continues, "​The invasion of Ukraine by Russia is causing tremendous human and economic hardship. The invasion and related events are creating additional upward pressure on inflation and are weighing on global economic activity. In addition, COVID-​related lockdowns in China are likely to exacerbate supply chain disruptions. The Committee is highly attentive to inflation risks."

It explains, "​The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 1 1/​2 to 1-​3/​4 percent and anticipates that ongoing increases in the target range will be appropriate. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-​backed securities, as described in the Plans for Reducing the Size of the Federal Reserve'​s Balance Sheet that were issued in May. The Committee is strongly committed to returning inflation to its 2 percent objective."

The FOMC adds, "​In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee'​s goals. The Committee'​s assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments."

In other news, ICI released its latest monthly "Money Market Fund Holdings" summary, which reviews the aggregate daily and weekly liquid assets, regional exposure, and maturities (​WAM and WAL) for Prime and Government money market funds.

The MMF Holdings release says, "The Investment Company Institute (​ICI) reports that, as of the final Friday in May, prime money market funds held 32.​8 percent of their portfolios in daily liquid assets and 49.​4 percent in weekly liquid assets, while government money market funds held 86.​0 percent of their portfolios in daily liquid assets and 93.​0 percent in weekly liquid assets." Prime DLA was up from 30.​4% in April, and Prime WLA was down from 50.​8%. Govt MMFs' DLA decreased from 87.​7% in April and Govt WLA decreased from 94.​6% the previous month.

ICI explains, "At the end of May, prime funds had a weighted average maturity (​WAM) of 16 days and a weighted average life (​WAL) of 57 days. Average WAMs and WALs are asset-​weighted. Government money market funds had a WAM 29 days and a WAL of 74 days." Prime WAMs were three days shorter than April, while WALs were unchanged from the previous month. Govt WAMs were unchanged and WALs were unchanged from April, respectively.

Regarding Holdings by Region of Issuer, the release tells us, "Prime money market funds’ holdings attributable to the Americas rose from $​150.​60 billion in April to $​165.​23 billion in May. Government money market funds’ holdings attributable to the Americas declined from $​3,​694.​66 billion in April to $​3,​678.​54 billion in May."

The Prime Money Market Funds by Region of Issuer table shows Americas-​related holdings at $​165.​2 billion, or 39.​0; Asia and Pacific at $​82.​6 billion, or 19.​5%; Europe at $​171.​7billion, or 40.​5%; and, Other (​including Supranational) at $​4.​2 billion, or 1.​1%. The Government Money Market Funds by Region of Issuer table shows Americas at $​3.​679 trillion, or 92.​8%; Asia and Pacific at $​99.​7 billion, or 2.​5%; Europe at $​168.​5 billion, 4.​3%, and Other (​Including Supranational) at $​18.​0 billion, or 0.​5%.

Finally, the Investment Company Institute also published the release, "Retirement Assets Total $​37.​5 Trillion in First Quarter 2022." It includes data tables showing that money market funds held in retirement accounts rose to $​545 billion (​from $​529 billion) in total, or 12% of the total $​4.​590 trillion in money funds. MMFs represent just 4.​6% of the total $​11.​793 trillion of mutual funds in retirement accounts.

The release says, "Total US retirement assets were $​37.​5 trillion as of March 31, 2022, down 4.​5 percent from December 31, 2021. Retirement assets accounted for 32 percent of all household financial assets in the United States at the end of March 2022. Assets in individual retirement accounts (​IRAs) totaled $​13.​2 trillion at the end of the first quarter of 2022, a decrease of 5.​4 percent from the end of the fourth quarter of 2021. Defined contribution (​DC) plan assets were $​10.​4 trillion at the end of the first quarter, down 4.​8 percent from December 31, 2021. Government defined benefit (​DB) plans -- including federal, state, and local government plans -- held $​7.​9 trillion in assets as of the end of March 2022, a 1.​8 percent decrease from the end of December 2021. Private-​sector DB plans held $​3.​6 trillion in assets at the end of the first quarter of 2022, and annuity reserves outside of retirement accounts accounted for another $​2.​4 trillion."

The ICI tables also show money funds accounting for $​379 billion, or 7%, of the $​5.​823 trillion in IRA mutual fund assets and $​165 billion, or 3%, of the $​5.​970 trillion in defined contribution plan holdings. (Money funds in 401k plans totaled $​112 billion, or 2% of the $​4.​676 trillion of mutual funds in 401k'​s.)

​

Crane Data'​s latest MFI International shows that assets in European or "​offshore" money market mutual funds rose over the past month to $​969.​0 billion. European MMF assets have declined during the first 4 1/​2 months of 2022, after hitting a record high of $​1.​101 trillion in mid-​December. These U.​S.-​style money funds, domiciled in Ireland or Luxembourg but denominated in US Dollars, Pound Sterling and Euros, increased by $​6.​2 billion over the 30 days through 6/​13. They'​re down $​93.​9 billion (-​8.​8%) year-​to-​date. Offshore US Dollar money funds are up $​20.​1 billion over the last 30 days and are down $​12.​7 billion YTD to $​521.​7 billion. Euro funds rose E1.​5 billion over the past month. YTD they'​re down E26.​7 billion to E131.​7 billion. GBP money funds decreased L11.​6billion over 30 days; they are down by L26.​1 billion YTD to L221.​0B. U.​S. Dollar (​USD) money funds (​206) account for over half (​53.​8%) of the "​European" money fund total, while Euro (​EUR) money funds (​96) make up 15.​4% and Pound Sterling (​GBP) funds (​133) total 30.​8%. We summarize our latest "​offshore" money fund statistics and our Money Fund Intelligence International Portfolio Holdings (​which went out to subscribers Tuesday), below. (Note: For those attending our Money Fund Symposium, June 20-​22 in Minneapolis, Minn, conference materials are being posted to our "Money Fund Symposium 2022 Download Center." Watch for more Powerpoints later this week, and for recordings to be posted next week after the show.)

Offshore USD MMFs yield 0.​71% (​7-​Day) on average (​as of 6/​13/​22), up from 0.​59% a month earlier. Yields averaged 0.​03% on 12/​31/​21, 0.​05% on 12/​31/​20, 1.​59% on 12/​31/​19 and 2.​29% on 12/​31/​18. EUR MMFs yield -​0.​61% on average, up from -​0.​80% on 12/​31/​21. They averaged -​0.​71% at year-​end 2020, -​0.​59% at year-​end 2019 and -​0.​49% at year-​end 2018. Meanwhile, GBP MMFs yielded 0.​84%, up 10 bps from a month ago, and up from 0.​01% on 12/​31/​21. Sterling yields were 0.​00% on 12/​31/​20, 0.​64% on 12/​31/​19 and 0.​64% on 12/​31/​18. (​See our latest MFI International for more on the "​offshore" money fund marketplace. Note that these funds are only available to qualified, non-​U.​S. investors.)

Crane'​s March MFII Portfolio Holdings, with data as of 5/​31/​22, show that European-​domiciled US Dollar MMFs, on average, consist of 22% in Commercial Paper (​CP), 16% in Certificates of Deposit (​CDs), 25% in Repo, 19% in Treasury securities, 17% in Other securities (​primarily Time Deposits) and 1% in Government Agency securities. USD funds have on average 55.​8% of their portfolios maturing Overnight, 6.​3% maturing in 2-​7 Days, 10.​3% maturing in 8-​30 Days, 7.​3% maturing in 31-​60 Days, 6.​5% maturing in 61-​90 Days, 11.​2% maturing in 91-​180 Days and 2.​5% maturing beyond 181 Days. USD holdings are affiliated with the following countries: the US (​30.​8%), France (​16.​1%), Canada (​12.​6%), Japan (​9.​9%), Sweden (​6.​7%), the Netherlands (​4.​1%), Australia (​3.​6%), the U.​K. (​3.​6%), Germany (​2.​6%) and Switzerland (​2.​0%).

The 10 Largest Issuers to "​offshore" USD money funds include: the US Treasury with $​97.​3 billion (​18.​5% of total assets), RBC with $​25.​3B (​4.​8%), Credit Agricole with $​24.​1B (​4.​6%), BNP Paribas with $​21.​3B (​4.​1%), Fixed Income Clearing Corp with $​18.​7B (​3.​6%), Sumitomo Mitsui Banking Corp with $​15.​8B (​3.​0%), Federal Reserve Bank of New York with $​14.​0B (​2.​7%), Skandinaviska Enskilda Banken AB with $​12.​2B (​2.​3%), RaboBank with $​10.​8B (​2.​0%) and Toronto-​Dominion Bank with $​10.​7B (​2.​0%).

Euro MMFs tracked by Crane Data contain, on average 37% in CP, 23% in CDs, 27% in Other (​primarily Time Deposits), 11% in Repo, 2% in Treasuries and 0% in Agency securities. EUR funds have on average 36.​7% of their portfolios maturing Overnight, 7.​1% maturing in 2-​7 Days, 12.​9% maturing in 8-​30 Days, 23.​0% maturing in 31-​60 Days, 12.​0% maturing in 61-​90 Days, 7.​5% maturing in 91-​180 Days and 0.​9% maturing beyond 181 Days. EUR MMF holdings are affiliated with the following countries: France (​29.​8%), Japan (​12.​0%), the U.​S. (​8.​7%), Sweden (​6.​9%), Germany (​6.​3%), the U.​K. (​5.​8%), Austria (​5.​4%), Netherlands (​4.​9%), Switzerland (​4.​8%) and Canada (​4.​5%).

The 10 Largest Issuers to "​offshore" EUR money funds include: Credit Agricole with E7.​0B (​5.​4%), BNP Paribas with E5.​9B (​4.​5%), Societe Generale with E5.​8B (​4.​4%), BPCE NA with E5.​1B (​4.​0%), DZ Bank AG with E4.​6B (​3.​5%), Mizuho Corporate Bank Ltd with E4.​4B (​3.​4%), Natixis with E4.​2 (​3.​3%), ING Bank with E3.​8B (​2.​9%), Barclays PLC with E3.​8B (​2.​9%) and Nordea Bank with E3.​4B (​2.​6%).

The GBP funds tracked by MFI International contain, on average (​as of 5/​31/​22): 41% in CDs, 19% in CP, 20% in Other (​Time Deposits), 19% in Repo, 1% in Treasury and 0% in Agency. Sterling funds have on average 38.​0% of their portfolios maturing Overnight, 6.​1% maturing in 2-​7 Days, 11.​2% maturing in 8-​30 Days, 18.​2% maturing in 31-​60 Days, 10.​1% maturing in 61-​90 Days, 9.​5% maturing in 91-​180 Days and 7.​0% maturing beyond 181 Days. GBP MMF holdings are affiliated with the following countries: France (​17.​6%), Japan (​15.​0%), Canada (​14.​7%), the U.​K. (​14.​6%), Australia (​7.​3%), the Netherlands (​5.​1%), Sweden (​5.​1%), the U.​S. (​4.​7%), Germany (​3.​6%) and Spain (​2.​1%).

The 10 Largest Issuers to "​offshore" GBP money funds include: UK Treasury with L12.​4B (​6.​6%), Toronto-​Dominion Bank with L8.​1B (​4.​3%), BNP Paribas with L7.​8B (​4.​1%), Mitsubishi UFJ Financial Group Inc with L7.​5B (​4.​0%), Bank of Nova Scotia with L6.​8B (​3.​6%), Mizuho Corporate Bank Ltd with L6.​8B (​3.​6%), National Australia Bank Ltd with L6.​7B (​3.​6%), Nordea Bank with L6.​6B (​3.​5%), Credit Agricole with L6.​1B (​3.​3%), and Sumitomo Mitsui Trust Bank with L5.​8B (​3.​1%).

In other news, J.​P Morgan'​s latest "Short-​Term Market Outlook And Strategy features a section that asks, "How have yields of MMFs and bank deposits fared YTD?" They explain, "One key theme we have emphasized this year is the expected divergence between bank deposit yields and MMF yields. We posited that MMFs would display a much higher sensitivity to the fed funds rate than bank deposits as large banks would be hesitant to increase yields, similar to the period in 2017-​2019.... In the absence of SLR relief, large banks remain leverage-​constrained in the current environment, limiting their willingness to hold more deposits than needed."

The piece continues, "Indeed, using the cost of interest-​bearing transaction accounts at US GSIBs as a proxy for yields paid on operational deposits, yields of bank deposits barely budged as of 1Q22 even though the Fed raised rates by 25bp.... Meanwhile, net yields of government MMFs increased by 10bp to 0.​12%, showing a much higher beta to the funds rate (​40%) as they benefited from the aggressive shift in Fed market expectations. Current net yields of government MMFs are at 0.​58%."

It tells us, "​Interestingly, based on the last tightening cycle, we also posited that it would take about 3-​4 rate hikes before MMF managers pass on full rate hikes to end shareholders as funds look to recoup fee waivers provided during ZIRP. However, even as the Fed has raised rates by 75bp YTD, expense ratios at government MMFs are lower than where they were the last time the funds rate was at 1.​00%.... This seems to suggest that government MMFs are recouping less fee waivers and passing more of the increased yields to end shareholders earlier than normal, aggressively widening the spread between MMFs and bank deposits."

JPM also asks, "Will banks become more competitive? We think that is unlikely any time soon. As we noted, large banks continue to be leverage-​constrained, tying up excess capital on their balance sheets. The slow pace of Fed QT relative to the size of the Fed'​s balance sheet doesn'​t help (​Fed assets are estimated to decline by only $​470bn from the end of May to December). In fact, one CEO of a large US GSIB noted that he might want to shed non-​operational deposits to reallocate the banks' excess capital towards other uses, especially as we continue to head into an uncertain economic environment. Typically, non-​operational deposits find their way into MMFs. It'​s possible that the money could move to regional banks, which might be less leverage constrained, but based on their deposit rates, this doesn'​t seem likely.... The best deposit rates out there are those of online banks, which are primarily a retail savings product and not necessarily for institutional clients. All told, expect Fed RRP balances to remain high. What'​s $​2tn between friends?"

​

The June issue of our Bond Fund Intelligence, which was sent to subscribers Tuesday morning, features the lead story, "Bond Fund Outflows Continue, Accelerate 5th Straight Month," which reviews the continued slide in assets; and, "ICI'​s 2022 Fact Book Reviews '​21 Bond Fund Trends, Flows," which quotes from the Investment Company Institute'​s annual statistical update. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund returns rebounded in May while yields rose for the 8th straight month. We excerpt from the new issue below. (Contact us if you'​d like to see our latest Bond Fund Intelligence and BFI XLS spreadsheet, or our Bond Fund Portfolio Holdings data.)

Our "Bond Fund Outflows" piece reads, "Bond funds saw outflows for a 5th straight month and saw assets fall for a 6th straight month in May. Total assets declined by $​42.​8 billion to $​2.​898 trillion last month, according to our Bond Fund Intelligence. YTD, assets are down $​426.​9 billion (​through 5/​31/​22), and over 1-​year they'​ve fallen by $​383.​2, or 11.​7%."

It continues, "Though outflows paused in early June, we expect the ugliness to resume shortly. ICI'​s 'Combined Estimated Long-​Term Fund Flows and ETF Net Issuance' (​with data as of June 1) says, 'Bond funds had estimated inflows of $​652 million for the week, compared to estimated outflows of $​9.​84 billion during the previous week. Taxable bond funds saw estimated outflows of $​1.​26 billion, and municipal bond funds had estimated inflows of $​1.​91 billion.' Over 5 weeks, bond funds and ETFs saw outflows of $​54.​7B."

Our "Fact Book" piece states, “​The ICI recently published its '2022 Investment Company Fact Book,' which contains a review of the bond fund marketplace in 2021 and a wealth of statistics on bond funds. They write, 'In 2021, demand for bond funds increased across all regions. In the United States, net sales of bond funds were $​700 billion in 2021, up from $​552 billion in 2020; in Europe, net sales were $​172 billion in 2021, up from $​122 billion in 2020; and in the Asia-​Pacific region, net sales were $​207 billion in 2021, up from $​58 billion in 2020. Bond funds for the rest of the world received net inflows of $​115 billion in 2021 following net outflows of $​4 billion in 2020."

It continues, "ICI tells us, '`​Combined net sales of bond funds and mixed/​other funds have generally been strong over the past decade, usually outpacing net sales of equity funds. This trend can partially be explained by the aging global population.... Because returns on bonds tend to be less variable than those on stocks, returns on bond funds and some mixed/​other funds that hold substantial proportions of their total net assets in bonds also tend to be less variable than those of equity funds."

Our first News brief, "Returns Rebound; Yields Keep Rising," says, "Bond fund returns rose after 4 months of sharp declines, but yields rose for the 8th month in a row in May. Our BFI Total Index rose 0.​24% over 1-​month but fell 5.​61% over 12 months. The BFI 100 returned 0.​29% in May and -​5.​88% over 1-​year. Our BFI Conservative Ultra-​Short Index was up 0.​08% for 1-​month but down 0.​66% for 1-​year; Ultra-​Shorts declined 0.​12% and 1.​45%, respectively. Short-​Term returned 0.​19% and -​3.​63%, and Intm-​Term rose 0.​27% in May but fell 7.​33% over 1-​year. BFI'​s Long-​Term Index rose 0.​13% but fell 9.​34%. High Yield fell 0.​47% in May and 4.​16% over 1-​year."

A second News brief, "DoubleLine Liquidating Ultra-​Short BF," explains, "​An SEC filing for the DoubleLine Ultra Short Bond Fund tells us, 'The Board of Trustees of DoubleLine Funds Trust has approved a plan of liquidation for the Fund. The liquidation of the Fund is expected to take place on or about July 29, 2022. Effective after the close of business on June 14, 2022, the Fund'​s shares will no longer be available for purchase by new investors or existing investors."

We also write, "Morningstar says, 'Fixed-​Income Funds Headline Positive ETF Flows in May.'" The article tells us, "​After their first month of outflows since 2018 in April, U.​S. exchange-​traded funds rebounded with $​66.​6 billion of inflows in May. Stock ETFs course-​corrected, adding $​32.​6 billion of new money. But it was fixed-​income funds that led the way. The $​33.​4 billion they collected last month exceeded their haul over the previous four months combined.... It was a smoother run for the Morningstar U.​S. Core Bond Index, a portfolio of U.​S. government bonds and investment-​grade corporate debt, whose 0.​53% return snapped a streak of five consecutive months of losses. The index is still down 8.​97% for the YTD -- its worst start to a year in 22-​plus years of recorded performance."

Yet another News brief is: "Pimco Writes on 'Navigating the End of the Bond Bull Market." They comment, "​For many of the most seasoned professionals in the bond market, it feels like the end of an era. After a boom that has lasted at least three decades, the warning signs are everywhere. The highest levels of inflation in a generation and rising interest rates mean that yields are increasing, so bond investors can no longer assume the value of their holdings will automatically increase year on year."

A BFI sidebar, "NY Fed Blogs on Volatility," states, "​The Federal Reserve Bank of New York'​s Liberty Street Economics blog asks, "How Is the Corporate Bond Market Responding to Financial Market Volatility?" They write, "The Russian invasion of Ukraine increased uncertainty around the world. Although most U.​S. companies have limited direct exposure to Ukrainian and Russian trading partners, increased global uncertainty may still have an indirect effect on funding conditions through tightening financial conditions. In this post, we examine how conditions in the U.​S. corporate bond market have evolved since the start of the year through the lens of the U.​S. Corporate Bond Market Distress Index."

Finally, another sidebar is "PIMCO, PGIM Launch Funds." It says, "PIMCO Adds New ETF to Actively Managed Fixed Income Suite" says a press release. It tells us, "PIMCO ... is expanding its actively managed fixed income exchange-​traded fund suite with the addition of a new ETF that may help diversify fixed income allocations for investors concerned about rising rates."

​

The Federal Reserve released its latest quarterly "Z.​1 Financial Accounts of the United States" statistical survey (​a.​k.​a. "Flow of Funds") late last week. Among the 4 tables it includes on money market mutual funds, the First Quarter 2022 edition shows that Total MMF Assets decreased by $​115 billion to $​5.​091 trillion in Q1'​22. The Household Sector, by far the largest investor segment with $​2.​740 trillion, saw the biggest asset decrease in Q1. The second largest segment, Nonfinancial Corporate Businesses, also experienced a drop in assets. The Fed'​s latest Z.​1 numbers, which contain one of the few looks at money fund investor segments available, also shows asset decreases in MMF holdings for the Other Financial Business and Mutual Funds categories in Q1 2022. (Reminder: We'​re still taking registrations for our upcoming Money Fund Symposium in Minneapolis, Minnesota, June 20-​22. See you next week!)

State & Local Governments, Property-​Casualty Insurance, Life Insurance Companies, State & Local Govt Retirement and the Rest of the World categories all saw minor asset decreases last quarter. The Private Pension Funds and Nonfinancial Noncorporate Business categories saw small asset increases in Q1, while the Exchange-​traded Funds sector remained unchanged. Over the past 12 months, the Other Financial Business, Nonfinancial Noncorporate Business and Private Pension Funds categories showed the biggest asset increases, while Mutual Funds, Household sector and Property-​Casualty Insurance saw the biggest asset decreases.

The Fed'​s "​Table L.​206," "​Money Market Mutual Fund Shares," shows that total assets decreased by $​115 billion, or -​2.​2%, in the first quarter to $​5.​091 trillion. The largest segment, the Household sector, totals $​2.​740 trillion, or 53.​8% of assets. The Household Sector decreased by $​44 billion, or -​1.​6%, in the quarter. Over the past 12 months through March 31, 2022, Household assets were down $​34 billion, or -​1.​2%.

Nonfinancial Corporate Businesses, the second-​largest segment according to the Fed'​s data series, held $​785 billion, or 15.​4% of the total. Assets here decreased by $​29 billion in the quarter, or -​3.​5%, and they'​ve increased by $​38 billion, or 5.​0%, over the past year. Other Financial Business was the third-​largest investor segment with $​618 billion, or 12.​1% of money fund shares. This category dropped $​18 billion, or -​2.​8%, in the latest quarter. Other Financial Business, which we believe includes Securities Lending, has increased by $​127 billion, or 25.​9%, over the previous 12 months.

The fourth-​largest segment (​a new addition to the tables), Mutual Funds, held $​249 billion (​4.​9%). Private Pension Funds, was the 5th largest category with 4.​9% of money fund assets ($​248 billion); it was up by $​10 billion (​4.​1%) for the quarter and up $​26 billion, or 11.​7% over the last 12 months. The Rest of World remained sixth place in market share among investor segments with 2.​7%, or $​136 billion, while ` Nonfinancial Noncorporate Business <​b:>`​_ held $​120 billion (​2.​4%), Life Insurance Companies held $​62 billion (​1.​2%), State & Local Governments held $​53 billion (​1.​0%), Exchange-​traded Funds held $​39 billion (​0.​8%), Property-​Casualty Insurance held $​23 billion (​0.​5%), and State & Local Govt Retirement held $​18 billion (​0.​4%), according to the Fed'​s Z.​1 breakout.

The Fed'​s "​Flow of Funds" Table L.​121 shows "​Money Market Mutual Funds" largely invested in "​Debt Securities," or Credit Market Instruments, with $​2.​515 trillion, or 49.​3% of the total. Debt securities includes: Open market paper ($​233 billion, or 4.​6%; we assume this is CP), Treasury securities ($​1.​759 trillion, or 34.​6%), Agency and GSE-​backed securities ($​403 billion, or 7.​9%), Municipal securities ($​113 billion, or 2.​2%) and Corporate and foreign bonds ($​6 billion, or 0.​1%).

Other large holdings positions in the Fed'​s series include Security repurchase agreements ($​2.​377 trillion, or 46.​7% of total assets) and Time and savings deposits ($​175 billion, or 3.​4%). Money funds also hold minor positions in Miscellaneous assets ($​23 billion, or 0.​4%) and Foreign deposits ($​1 billion, 0.​0%). Note: The Fed also lists "Variable Annuity Money Funds," which currently total $​39 billion.

During Q1, Debt Securities were down $​54 billion. This subtotal included: Open Market Paper (​up $​7 billion), Treasury Securities (​down $​55 billion), Agency- and GSE-​backed Securities (​down $​7 billion), Corporate and Foreign Bonds (​down $​2 billion) and Municipal Securities (​up $​3 billion). In the first quarter of 2022, Security Repurchase Agreements were down $​119 billion, Foreign Deposits were up $​1 billion, Time and Savings Deposits were up by $​31 billion, and Miscellaneous Assets were down -​107.​0%.

Over the 12 months through 3/​31/​22, Debt Securities were down $​1.​091 trillion, which included Open Market Paper (​down $​43B), Treasury Securities (​down $​824B), Agencies (​down $​213B), Municipal Securities (​down $​4B), and Corporate and Foreign Bonds (​down $​8B). Foreign Deposits were down $​1B, Time and Savings Deposits were down $​40B, Securities repurchase agreements were up $​1.​182 trillion and Miscellaneous Assets were up $​60B.

The L.​121 table shows `​Stable NAV money market funds with $​4,​426 billion, or 86.​9% of the total (​down $​160.​6 or -​3.​5% in Q1 and up $​128B or 3.​0% over 1-​year), and Floating NAV money market funds with $​665 billion, or 13.​1% (​up $​45.​8B or 7.​4% in Q1 and down $​17B or -​2.​5% over 1-​year). Government money market funds total $​4.​152 trillion, or 81.​6% (​down $​152.​8B or -​3.​5% in Q1 and up $​193B or 4.​9% over 1-​year), Prime money market funds total $​845 billion, or 16.​6% (​up $​37.​5B or 4.​6% in Q1 and down $​69B or -​7.​6% over 1-​year) and Tax-​exempt money market funds $​95B, or 1.​9% (​up $​0.​5B or 0.​5% in Q1 and down $​14B or -​12.​5% last year).

Finally, the Federal Reserve made changes to the Z.​1 tables last quarter. Describing a "Money market funds sector data source change," the report says, "The money market mutual funds (​MMF) sector (​tables F.​121 and L.​121) has been revised beginning 2010:​Q4 to reflect a change in data source to Securities and Exchange Commission Form NMFP. The level of assets and shares outstanding of the sector have increased due to the inclusion of private placement MMFs in the source data. Changes in the level due to changes in the data source in 2010:​Q4 are recorded as other volume changes in the Financial Accounts."

On "Mutual funds sector holdings of money market funds," Z.​1 tells us, "​The mutual funds sector (​tables F.​122 and L.​122) has been revised beginning 2010:​Q4 to reflect holdings of money market funds not previously reported on the tables. In addition, holdings of repurchase agreements, commercial paper, corporate bonds, and miscellaneous assets have been revised. Additional and revised holdings are estimated using data from Morningstar and Investment Company Institute.... The exchange-​traded funds sector (​tables F.​124 and L.​124) has been revised beginning 2010:​Q4 to reflect holdings of money market funds not previously reported on the tables."

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Crane Data'​s June Money Fund Portfolio Holdings, with data as of May 31, 2022, show that Treasuries plunged again last month while Repo (​especially Fed repo) jumped once more. Money market securities held by Taxable U.​S. money funds (​tracked by Crane Data) decreased by $​58.​4 billion to $​4.​826 trillion in May, after decreasing $​55.​2 billion in April and decreasing $​40.​9 billion in March. Assets increased $​2.​9 billion in February but decreased $​108.​3 billion in January. Repo remained the largest portfolio segment, while Treasuries remained in the No. 2 spot. The Federal Reserve Bank of New York surpassed the U.​S. Treasury as the largest "​Issuer" to money market funds for the first time ever. Agencies were the third largest segment, CP remained fourth, ahead of CDs, Other/​Time Deposits and VRDNs. Below, we review our latest Money Fund Portfolio Holdings statistics. (Note: Last call for our Money Fund Symposium conference, June 20-​22 in Minneapolis, Minn!)

Among taxable money funds, Repurchase Agreements (​repo) increased $​52.​5 billion (​2.​2%) to $​2.​402 trillion, or 49.​8% of holdings, in May, after decreasing $​9.​9 billion in April, but increasing $​100.​9 billion in March. Treasury securities fell $​145.​4 billion (-​8.​7%) to $​1.​526 trillion, or 31.​6% of holdings, after decreasing $​78.​6 billion in April, $​79.​2 billion in March and $​17.​0 billion in February. Government Agency Debt was up $​35.​1 billion, or 9.​1%, to $​420.​9 billion, or 8.​7% of holdings, after decreasing $​1.​0 billion in April and $​4.​3 billion in March. Repo, Treasuries and Agency holdings totaled $​4.​349 trillion, representing a massive 90.​1% of all taxable holdings.

Money fund holdings of CP and CDs rose in May, while Other (​mainly Time Deposits) inched lower. Commercial Paper (​CP) increased $​5.​8 billion (​2.​6%) to $​229.​9 billion, or 4.​8% of holdings, after decreasing $​0.​1 billion in April and $​7.​2 billion in March. Certificates of Deposit (​CDs) increased $​3.​4 billion (​2.​9%) to $​119.​5 billion, or 2.​5% of taxable assets, after increasing $​7.​3 billion in April but decreasing $​5.​7 billion in March. Other holdings, primarily Time Deposits, decreased $​4.​7 billion (-​4.​0%) to $​112.​4 billion, or 2.​3% of holdings, after increasing $​28.​2 billion in April and decreasing $​47.​4 billion in March. VRDNs fell to $​14.​7 billion, or 0.​3% of assets. (​Note: This total is VRDNs for taxable funds only. We will post our Tax Exempt MMF holdings separately Friday around noon.)

Prime money fund assets tracked by Crane Data jumped to $​836 billion, or 17.​3% of taxable money funds' $​4.​826 trillion total. Among Prime money funds, CDs represent 14.​3% (​up from 14.​2% a month ago), while Commercial Paper accounted for 27.​5% (​up from 27.​4% in April). The CP totals are comprised of: Financial Company CP, which makes up 18.​6% of total holdings, Asset-​Backed CP, which accounts for 3.​5%, and Non-​Financial Company CP, which makes up 5.​4%. Prime funds also hold 5.​4% in US Govt Agency Debt, 7.​6% in US Treasury Debt, 23.​3% in US Treasury Repo, 0.​3% in Other Instruments, 10.​9% in Non-​Negotiable Time Deposits, 5.​6% in Other Repo, 2.​3% in US Government Agency Repo and 0.​8% in VRDNs.

Government money fund portfolios totaled $​2.​790 trillion (​57.​8% of all MMF assets), down from $​2.​808 trillion in April, while Treasury money fund assets totaled another $​1.​199 trillion (​24.​8%), down from $​1.​257 trillion the prior month. Government money fund portfolios were made up of 13.​5% US Govt Agency Debt, 10.​0% US Government Agency Repo, 24.​2% US Treasury Debt, 52.​0% in US Treasury Repo, 0.​0% in Other Instruments. Treasury money funds were comprised of 65.​6% US Treasury Debt and 34.​2% in US Treasury Repo. Government and Treasury funds combined now total $​3.​989 trillion, or 82.​7% of all taxable money fund assets.

European-​affiliated holdings (​including repo) decreased by $​34.​7 billion in May to $​456.​8 billion; their share of holdings dropped to 9.​5% from last month'​s 10.​1%. Eurozone-​affiliated holdings decreased to $​314.​3 billion from last month'​s $​330.​8 billion; they account for 6.​5% of overall taxable money fund holdings. Asia & Pacific related holdings inched lower to $​192.​2 billion (​4.​0% of the total) from last month'​s $​195.​3 billion. Americas related holdings fell to $​4.​172 trillion from last month'​s $​4.​193 trillion, and now represent 86.​5% of holdings.

The overall taxable fund Repo totals were made up of: US Treasury Repurchase Agreements (​up $​37.​6 billion, or 1.​9%, to $​2.​055 trillion, or 42.​6% of assets); US Government Agency Repurchase Agreements (​up $​14.​1 billion, or 5.​0%, to $​296.​9 billion, or 6.​2% of total holdings), and Other Repurchase Agreements (​up $​0.​8 billion, or 1.​6%, from last month to $​49.​9 billion, or 1.​0% of holdings). The Commercial Paper totals were comprised of Financial Company Commercial Paper (​up $​4.​9 billion to $​155.​7 billion, or 3.​2% of assets), Asset Backed Commercial Paper (​down $​0.​9 billion to $​29.​2 billion, or 0.​6%), and Non-​Financial Company Commercial Paper (​up $​1.​7 billion to $​45.​1 billion, or 0.​9%).

The 20 largest Issuers to taxable money market funds as of May 31, 2022, include: the Federal Reserve Bank of New York ($​1.​744T, 36.​1%), the US Treasury ($​1.​526 trillion, or 31.​6%), Federal Home Loan Bank ($​283.​2B, 5.​9%), Federal Farm Credit Bank ($​104.​0B, 2.​2%), BNP Paribas ($​95.​1B, 2.​0%), Fixed Income Clearing Corp ($​86.​8B, 1.​8%), RBC ($​70.​7B, 1.​5%), Sumitomo Mitsui Banking Co ($​52.​8B, 1.​1%), JP Morgan ($​48.​6B, 1.​0%), Mitsubishi UFJ Financial Group Inc ($​39.​7B, 0.​8%), Barclays ($​37.​3B, 0.​8%), Citi ($​35.​8B, 0.​7%), Bank of America ($​34.​0B, 0.​7%), Credit Agricole ($​32.​2B, 0.​7%), Toronto-​Dominion Bank ($​27.​3B, 0.​6%), Goldman Sachs ($​25.​1B, 0.​5%), Societe Generale ($​24.​6B, 0.​5%), Bank of Montreal ($​24.​4B, 0.​5%), Canadian Imperial Bank of Commerce ($​23.​9B, 0.​5%) and Mizuho Corporate Bank Ltd ($​23.​3B, 0.​5%).

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: Federal Reserve Bank of New York ($​1.​744T, 72.​6%), Fixed Income Clearing Corp ($​86.​8B, 3.​6%), BNP Paribas ($​85.​6B, 3.​6%), RBC ($​57.​0B, 2.​4%), JP Morgan ($​42.​4B, 1.​8%), Sumitomo Mitsui Banking Corp ($​41.​7B, 1.​7%), Citi ($​31.​8B, 1.​3%), Bank of America ($​30.​7B, 1.​3%), Mitsubishi UFJ Financial Group Inc ($​27.​3B, 1.​1%) and Goldman Sachs ($​21.​5B, 0.​9%). The largest users of the $​1.​744 trillion in Fed RRP include: Fidelity Govt Money Market ($​126.​3B), JPMorgan US Govt MM ($​125.​5B), Fidelity Govt Cash Reserves ($​114.​7B), Vanguard Federal Money Mkt Fund ($​114.​6B), Goldman Sachs FS Govt ($​105.​3B), Morgan Stanley Inst Liq Govt ($​91.​7B), BlackRock Lq FedFund ($​74.​1B), Dreyfus Govt Cash Mgmt ($​59.​5B), Fidelity Inv MM: Govt Port ($​56.​8B) and Federated Hermes Govt ObI ($​56.​0B).

The 10 largest issuers of "​credit" -- CDs, CP and Other securities (​including Time Deposits and Notes) combined -- include: Credit Agricole ($​17.​9B, 4.​6%), Barclays PLC ($​16.​8B, 4.​3%), Toronto-​Dominion Bank ($​16.​2B, 4.​1%), Mizuho Corporate Bank Ltd ($​15.​3B, 3.​9%), Skandinaviska Enskilda Banken AB ($​14.​2B, 3.​6%), RBC ($​13.​7B, 3.​5%), Rabobank ($​13.​3B, 3.​4%), Bank of Nova Scotia ($​13.​1B, 3.​3%), Bank of Montreal ($​12.​9B, 3.​3%) and Svenska Handelsbanken ($​12.​9B, 3.​3%).

The 10 largest CD issuers include: Mitsubishi UFJ Financial Group Inc ($​9.​0B, 7.​5%), Sumitomo Mitsui Banking Corp ($​9.​0B, 7.​5%), Canadian Imperial Bank of Commerce ($​8.​1B, 6.​7%), Landesbank Baden-​Wurttemberg ($​7.​7B, 6.​4%), Credit Agricole ($​7.​6B, 6.​3%), Toronto-​Dominion Bank ($​7.​0B, 5.​8%), Sumitomo Mitsui Trust Bank ($​6.​8B, 5.​7%), Bank of Nova Scotia ($​6.​7B, 5.​6%), Barclays PLC ($​6.​2B, 5.​2%) and Bank of Montreal ($​4.​5B, 3.​8%).

The 10 largest CP issuers (​we include affiliated ABCP programs) include: RBC ($​10.​5B, 5.​5%), Toronto-​Dominion Bank ($​8.​5B, 4.​5%), Bank of Montreal ($​7.​8B, 4.​1%), BNP Paribas ($​7.​1B, 3.​7%), National Australia Bank Ltd ($​6.​9B, 3.​7%), Bank of Nova Scotia ($​6.​3B, 3.​3%), JP Morgan ($​6.​2B, 3.​3%), Australia & New Zealand Banking Group Ltd ($​5.​7B, 3.​0%), UBS AG ($​5.​6B, 2.​9%) and Caisse d'​Amortissement de la Dette Sociale ($​5.​4B, 2.​8%).

The largest increases among Issuers include: Federal Reserve Bank of New York (​up $​81.​5B to $​1.​744T), Federal Home Loan Bank (​up $​52.​6B to $​283.​2B), Fixed Income Clearing Corp (​up $​20.​4B to $​86.​8B), JP Morgan (​up $​4.​9B to $​48.​6B), Mizuho Corporate Bank Ltd (​up $​2.​4B to $​23.​3B), Rabobank (​up $​2.​2B to $​13.​3B), BayernLB (​up $​1.​0B to $​8.​2B), ING Bank (​up $​1.​0B to $​19.​1B), Deutsche Bank AG (​up $​0.​9B to $​7.​7B) and Banco Santander (​up $​0.​7B to $​9.​8B).

The largest decreases among Issuers of money market securities (​including Repo) in May were shown by: the US Treasury (​down $​145.​4B to $​1.​526), Federal National Mortgage Association (​down $​13.​1B to $​12.​7B), Societe Generale (​down $​11.​7B to $​24.​6B), RBC (​down $​10.​6B to $​70.​7B), BNP Paribas (​down $​7.​0B to $​95.​1B), Barclays PLC (​down $​6.​7B to $​37.​3B), Federal Home Loan Mortgage Corp (​down $​4.​1B to $​18.​4B), Credit Agricole (​down $​3.​1B to $​32.​2B), Norinchukin Bank (​down $​2.​8B to $​10.​2B) and Goldman Sachs (​down $​2.​7B to $​25.​1B).

The United States remained the largest segment of country-​affiliations; it represents 82.​8% of holdings, or $​3.​993 trillion. France (​3.​7%, $​180.​1B) was in second place, while Canada (​3.​7%, $​178.​7B) was No. 3. Japan (​3.​6%, $​173.​2B) occupied fourth place. The United Kingdom (​1.​6%, $​76.​2B) remained in fifth place. Netherlands (​1.​0%, $​49.​4B) was in sixth place, followed by Sweden (​0.​9%, $​41.​6B) Germany (​0.​8%, $​40.​6B), Australia (​0.​7%, $​34.​3B) and Switzerland (​0.​4%, $​16.​7B). (​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. Note too: U.​S. money funds have never been allowed to invest in Russian debt or holdings, so there is no doubt no direct exposure there.)

As of May 31, 2022, Taxable money funds held 62.​4% (​up from 58.​5%) of their assets in securities maturing Overnight, and another 6.​8% maturing in 2-​7 days (​down from 10.​3%). Thus, 69.​2% in total matures in 1-​7 days. Another 8.​1% matures in 8-​30 days, while 6.​2% matures in 31-​60 days. Note that over three-​quarters, or 83.​5% of securities, mature in 60 days or less, the dividing line for use of amortized cost accounting under SEC regulations. The next bucket, 61-​90 days, holds 4.​6% of taxable securities, while 9.​0% matures in 91-​180 days, and just 2.​9% matures beyond 181 days. (​Visit our Content center to download, or contact us to request our latest Portfolio Holdings reports.)

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Crane Data'​s latest monthly Money Fund Portfolio Holdings statistics will be sent out Thursday, and we'​ll be writing our regular monthly update on the May 31 data for Friday'​s News. But we also uploaded a separate and broader Portfolio Holdings data set based on the SEC'​s Form N-​MFP filings on Wednesday. (​We continue to merge the two series, and the N-​MFP version is now available via our Holding file listings to Money Fund Wisdom subscribers.) Our new N-​MFP summary, with data as of May 31, includes holdings information from 997 money funds (​down 2 funds from last month), representing assets of $​4.​989 trillion (​down from $​5.​028 trillion). Prime MMFs now total $​852.​3 billion, or 17.​1% of the total. We review the new N-​MFP data, and we also look at our revised MMF expense data, which shows charged expenses moving higher again as fee waivers shrank to almost nothing in May, below.

Our latest Form N-​MFP Summary for All Funds (​taxable and tax-​exempt) shows Repurchase Agreement (​Repo) holdings in money market funds increased to $​2.​424 trillion (​up from $​2.​369 trillion), or 48.​6% of all assets. Treasury holdings totaled $​1.​539 trillion (​down from $​1.​674 trillion), or 30.​8% of all holdings, and Government Agency securities totaled $​436.​9 billion (​up from $​402.​6 billion), or 8.​8%. Holdings of Treasuries, Government agencies and Repo (​almost all of which is backed by Treasuries and agencies) combined total $​4.​400 trillion, or a massive 88.​2% of all holdings.

Commercial paper (​CP) totals $​238.​4 billion (​up from $​231.​0 billion), or 4.​8% of all holdings, and the Other category (​primarily Time Deposits) totals $​153.​7 billion (​down from $​158.​4 billion), or 3.​1%. Certificates of Deposit (​CDs) total $​119.​6 billion (​up from $​116.​1 billion), 2.​4%, and VRDNs account for $​77.​9 billion (​up from $​76.​6 billion last month), or 1.​6% of money fund securities.

Broken out into the SEC'​s more detailed categories, the CP totals were comprised of: $​157.​5 billion, or 3.​2%, in Financial Company Commercial Paper; $​29.​6 billion or 0.​6%, in Asset Backed Commercial Paper; and, $​51.​3 billion, or 1.​0%, in Non-​Financial Company Commercial Paper. The Repo totals were made up of: U.​S. Treasury Repo ($​2.​082 trillion, or 41.​7%), U.​S. Govt Agency Repo ($​294.​9B, or 5.​9%) and Other Repo ($​46.​9B, or 0.​9%).

The N-​MFP Holdings summary for the Prime Money Market Funds shows: CP holdings of $​234.​3 billion (​up from $​228.​4 billion), or 27.​5%; Repo holdings of $​262.​8 billion (​up from $​234.​8 billion), or 30.​8%; Treasury holdings of $​69.​9 billion (​down from $​88.​4 billion), or 8.​2%; CD holdings of $​119.​6 billion (​up from $​116.​1 billion), or 14.​0%; Other (​primarily Time Deposits) holdings of $​110.​8 billion (​down from $​115.​5 billion), or 13.​0%; Government Agency holdings of $​47.​7 billion (​up from $​42.​9 billion), or 5.​6% and VRDN holdings of $​7.​1 billion (​down from $​9.​7 billion), or 0.​8%.

The SEC'​s more detailed categories show CP in Prime MMFs made up of: $​157.​5 billion (​up from $​151.​5 billion), or 18.​5%, in Financial Company Commercial Paper; $​29.​6 billion (​down from $​30.​5 billion), or 3.​5%, in Asset Backed Commercial Paper; and $​47.​2 billion (​up from $​45.​4 billion), or 5.​5%, in Non-​Financial Company Commercial Paper. The Repo totals include: U.​S. Treasury Repo ($​197.​1 billion, or 23.​1%), U.​S. Govt Agency Repo ($​18.​9 billion, or 2.​2%), and Other Repo ($​46.​8 billion, or 5.​5%).

In related news, money fund charged expense ratios (​Exp%) rose again in May (​after surging in April) to 0.​38% from 0.​29% the prior month. Charged expenses hit a record low of 0.​06% in May 2021 but remained at 0.​07% for most the second half of 2021. Our Crane 100 Money Fund Index and Crane Money Fund Average were 0.​26% and 0.​38%, respectively, as of May 31, 2022. Crane Data revises its monthly expense data and gross yield information after the SEC updates its latest Form N-​MFP data the morning of the 6th business day of the new month. (​They posted this info Wednesday morning, so we revised our monthly MFI XLS spreadsheet and historical craneindexes.​xlsx averages file to reflect the latest expenses, gross yields, portfolio composition and maturity breakout yesterday.) Visit our "Content" page for the latest files.

Our Crane 100 Money Fund Index, a simple average of the 100 largest taxable money funds, shows an average charged expense ratio of 0.​26%, 4 basis points higher than last month'​s level (​and 20 bps higher than May'​s record low 0.​06%). The average is still down from 0.​27% on Dec. 31, 2019, so we estimate that funds are now waiving just 1 bp, or 3.​7% of normally charged expenses. The Crane Money Fund Average, a simple average of all taxable MMFs, showed a charged expense ratio of 0.​38% as of May 31, 2022, 9 bps higher than the month prior but still down from 0.​40% at year-​end 2019.

Prime Inst MFs expense ratios (​annualized) average 0.​32% (​up 5 bps from last month), Government Inst MFs expenses average 0.​26% (​up 4 bps from previous month), Treasury Inst MFs expenses average 0.​30% (​up 3 bps from last month). Treasury Retail MFs expenses currently sit at 0.​49%, (​up 11 bps from last month), Government Retail MFs expenses yield 0.​51% (​up 18 bps from last month). Prime Retail MF expenses averaged 0.​49% (​up 10 bps). Tax-​exempt expenses were up 5 bps at 0.​39% on average.

Gross 7-​day yields rose again during the month ended May 31, 2022 (​after jumping on the first Fed hike in March). (​Yields should jump again this month if, as expected, the Fed hikes by 50 bps next Wednesday.) The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (​currently 738), shows a 7-​day gross yield of 0.​84%, up 40 bps from the prior month. The Crane Money Fund Average is down from 1.​72% at the end of 2019 and up from 0.​15% the end of 2020. Our Crane 100'​s 7-​day gross yield was up 42 bps, ending the month at 0.​85%.

According to our revised MFI XLS and Crane Index numbers, we now estimate that annualized revenue for all money funds is approximately $​12.​937 billion (​as of 5/​31/​22). Our estimated annualized revenue totals increased from $​10.​984B last month and from $​10.​331B two months ago, and they are now more than quadruple May'​s record low $​2.​927B level. Annualized MMF revenues have now surpassed their record $​11.​996 level from April 2020). Charged expenses and gross yields are driven by a number of variables, but revenues should continue rising in coming months as the Federal Reserve continues raising interest rates and MMF start seeing inflows.

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Crane Data'​s latest monthly Money Fund Market Share rankings show assets were lower among the majority of the largest U.​S. money fund complexes in May. Money market fund assets decreased $​10.​7 billion, or -​0.​2%, last month to $​4.​967 trillion. Assets decreased by $​40.​4 billion, or -​0.​8%, over the past 3 months, and they'​ve decreased by $​94.​5 billion, or -​1.​9%, over the past 12 months through May 31. The largest increases among the 25 largest managers last month were seen by JPMorgan, SSGA, Morgan Stanley, Schwab and HSBC, which grew assets by $​17.​5 billion, $​13.​6B, $​10.​0B, $​7.​4B and $​7.​4B, respectively. The largest declines in April were seen by Invesco, Goldman Sachs, DWS, Allspring and BlackRock, which decreased by $​29.​2 billion, $​19.​1B, $​7.​6B, $​7.​5B and $​5.​0B, respectively. Our domestic U.​S. "Family" rankings are available in our MFI XLS product, our global rankings are available in our MFI International product. The combined "​Family & Global Rankings" are available to Money Fund Wisdom subscribers. We review the latest market share totals, and look at money fund yields, which rose again in May, below. (Note: Register and make hotel reservations ASAP for our upcoming Money Fund Symposium, which is June 20-​22, in Minneapolis, Minn.)

Over the past year through May 31, 2022, American Funds (​up $​31.​6B, or 21.​6%), SSGA (​up $​21.​2B, or 14.​2%), Morgan Stanley (​up $​16.​2B, or 6.​1%), Fidelity (​up $​9.​5B, or 1.​1%) and Goldman Sachs (​up $​6.​9B, or 1.​9%) were the largest gainers. American Funds, SSGA, JPMorgan, Vanguard and BlackRock had the largest asset increases over the past 3 months, rising by $​25.​9B, $​24.​4B, $​21.​4B, $​9.​6B and $​9.​1B, respectively. The largest decliners over 12 months were seen by: Allspring (​down $​45.​6B), Federated Hermes (​down $​27.​8B), BlackRock (​down $​25.​8B), Vanguard (​down $​19.​9B) and UBS (​down $​18.​7B). The largest decliners over 3 months included: Northern (​down $​32.​4B), Fidelity (​down $​26.​8B), Federated Hermes (​down $​16.​1B), Dreyfus (​down $​12.​5B) and Allspring (​down $​11.​3B).

Our latest domestic U.​S. Money Fund Family Rankings show that Fidelity Investments remains the largest money fund manager with $​900.​3 billion, or 18.​1% of all assets. Fidelity was up $​2.​8B in May, down $​26.​8 billion over 3 mos., and up $​9.​5B over 12 months. BlackRock ranked second with $​524.​9 billion, or 10.​6% market share (​down $​5.​0B, up $​9.​1B and down $​25.​8B for the past 1-​month, 3-​mos. and 12-​mos., respectively). JPMorgan ranked in third place with $​471.​1 billion, or 9.​5% of assets (​up $​17.​5B, up $​21.​4B and down $​2.​7B). Vanguard ranked fourth with $​462.​5 billion, or 9.​3% market share (​up $​3.​7B, up $​9.​6B and down $​19.​9B), while Goldman Sachs was the fifth largest MMF manager with $​363.​9 billion, or 7.​3% of assets (​down $​19.​1, down $​3.​5B and up $​6.​9B for the past 1-​month, 3-​mos. and 12-​mos.).

Federated Hermes was in sixth place with $​308.​8 billion, or 6.​2% (​up $​3.​2B, down $​16.​1B and down $​27.​8B), while Morgan Stanley was in seventh place with $​280.​0 billion, or 5.​6% of assets (​up $​10.​0B, up $​802M and up $​16.​2B). Dreyfus ($​232.​3B, or 4.​7%) was in eighth place (​down $​205M, down $​12.​5B and down $​3.​7B), followed by American Funds ($​178.​3B, or 3.​6%; up $​0.​0B, up $​25.​9B and up $​31.​6B). Northern was in 10th place ($​170.​7B, or 3.​4%; down $​2.​9B, down $​32.​4B and down $​9.​3B).

The 11th through 20th-​largest U.​S. money fund managers (​in order) include: SSGA ($​170.​5B, or 3.​4%), Allspring (​formerly Wells Fargo) ($​162.​3B, or 3.​3%), Schwab ($​147.​4B, or 3.​0%), First American ($​119.​7B, or 2.​4%), Invesco ($​90.​6B, or 1.​8%), T. Rowe Price ($​50.​7B, or 1.​0%), HSBC ($​45.​0B, or 0.​9%), UBS ($​40.​0B, or 0.​8%), Western ($​30.​5B, or 0.​6%) and DWS ($​29.​1B, or 0.​6%). Crane Data currently tracks 61 U.​S. MMF managers, down 1 from last month.

When European and "​offshore" money fund assets -- those domiciled in places like Ireland, Luxembourg and the Cayman Islands -- are included, the top 10 managers are the same as the domestic list, except Goldman moves up to the No. 4 spot and Vanguard moves to the No. 5 spot, Morgan Stanley moves up to the No. 6 spot while Federated Hermes moves down one spot to No. 7, and SSGA replaces American Funds at No. 9. Global Money Fund Manager Rankings include the combined market share assets of our MFI XLS (​domestic U.​S.) and our MFI International ("​offshore") products.

The largest Global money market fund families include: Fidelity ($​911.​9 billion), BlackRock ($​711.​2B), JP Morgan ($​651.​4B), Goldman Sachs ($​495.​1B) and Vanguard ($​462.​5B). Morgan Stanley ($​334.​3B) was in sixth, Federated Hermes ($​315.​7B) was seventh, followed by Dreyfus/​BNY Mellon ($​253.​3B), SSGA ($​203.​6B) and Northern ($​197.​6B), which round out the top 10. These totals include "​offshore" U.​S. Dollar money funds, as well as Euro and Pound Sterling (​GBP) funds converted into U.​S. dollar totals.

The June issue of our Money Fund Intelligence and MFI XLS, with data as of 5/​31/​22, shows that yields rose again in May for our Crane Money Fund Indexes. The Crane Money Fund Average, which includes all taxable funds covered by Crane Data (​currently 738), rose to 0.​43% (​up 29 bps) for the 7-​Day Yield (​annualized, net) Average, the 30-​Day Yield increased to 0.​37% (​up 24 bps). The MFA'​s Gross 7-​Day Yield rose to 0.​72% (​up 28 bps), and the Gross 30-​Day Yield also moved up to 0.​66% (​up 24 bps). (Gross yields will be revised Wednesday afternoon, though, once we download the SEC'​s Form N-​MFP data for 5/​31/​22. We expect the revised expense and gross data to increase again.)

Our Crane 100 Money Fund Index shows an average 7-​Day (​Net) Yield of 0.​57% (​up 36 bps) and an average 30-​Day Yield at 0.​51% (​up 32 bps). The Crane 100 shows a Gross 7-​Day Yield of 0.​79% (​up 36 bps), and a Gross 30-​Day Yield of 0.​73% (​up 31 bps). Our Prime Institutional MF Index (​7-​day) yielded 0.​60% (​up 37 bps) as of May 31. The Crane Govt Inst Index was at 0.​49% (​up 32 bps) and the Treasury Inst Index was at 0.​50% (​up 31 bps). Thus, the spread between Prime funds and Treasury funds is 10 basis points, and the spread between Prime funds and Govt funds is 11 basis points. The Crane Prime Retail Index yielded 0.​46% (​up 33 bps), while the Govt Retail Index was 0.​22% (​up 17 bps), the Treasury Retail Index was 0.​29% (​up 23 bps from the month prior). The Crane Tax Exempt MF Index yielded 0.​40% (​up 26 bps) as of May 31.

Gross 7-​Day Yields for these indexes to end May were: Prime Inst 0.​87% (​up 36 bps), Govt Inst 0.​71% (​up 32 bps), Treasury Inst 0.​76% (​up 30 bps), Prime Retail 0.​85% (​up 33 bps), Govt Retail 0.​55% (​up 17 bps) and Treasury Retail 0.​67% (​up 23 bps). The Crane Tax Exempt Index jumped to 0.​65% (​up 22 bps). The Crane 100 MF Index returned on average 0.​04% over 1-​month, 0.​07% over 3-​months, 0.​05% YTD, 0.​07% over the past 1-​year, 0.​52% over 3-​years (​annualized), 0.​93% over 5-​years, and 0.​52% over 10-​years.

The total number of funds, including taxable and tax-​exempt, dropped by 6 in May to 888. There are currently 738 taxable funds, down 6 from the previous month, and 150 tax-​exempt money funds (​unchanged from last month). (Contact us if you'​d like to see our latest MFI XLS, Crane Indexes or Market Share report.)

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The June issue of our flagship Money Fund Intelligence newsletter, which was sent to subscribers Tuesday morning, features the articles: "Money Fund Yields Climb, Pulling Sweeps, Deposits Up," which discusses the jump in money fund rates; "ICI 2022 Fact Book Shows Money Fund Trends in '​21," which covers the Investment Company Institute'​s annual statistical guide; and, "Bank of England, FCA Paper Reviews Money Funds in UK," which reviews regulatory discussions in Europe. We also sent out our MFI XLS spreadsheet Tuesday morning, and we'​ve updated our database with 5/​31/​22 data. Our June Money Fund Portfolio Holdings are scheduled to ship on Thursday, June 9, and our June Bond Fund Intelligence is scheduled to go out on Tuesday, June 14. (Note: Our MFI, MFI XLS and Crane Index products are all available to subscribers via our Content center.)

MFI'​s "Yields Climb article says, "Money market fund yields continue to inch higher after a surge in early May following the Fed'​s 50-​basis-​point move. Our flagship Crane 100 Money Fund Index, which ended May at 0.​57%, rose to 0.​​59% in the week ended Friday, June 3. The average had been 0.​​55% the prior week, 0.​​21% on April 29, 0.​​15% on March 31 and 0.​​02% on February 28 (​​where it had been for almost 2 years prior)."

It continues, "Brokerage sweep deposit rates have also begun inching higher, with Fidelity Investments hiking its FDIC-​insured brokerage sweep rate to 0.​25% from 0.​01% last month. Our latest Brokerage Sweep Intelligence shows the average rate (​​on FDIC insured deposits) inched up to 0.​05%, up from 0.​​01% a month ago. Money fund yields should jump higher again next month if, as expected, the Fed raises rates by another 50 bps. Whether bank deposits keep pace, and how much money begins flowing info money funds, are now the major questions in the space."

Our "ICI 2022 Fact Book" excerpts explain, "​The Investment Company Institute released its '2022 Investment Company Fact Book,' an annual compilation of statistics and commentary on the mutual fund space. Subtitled, 'A Review of Trends and Activities in the Investment Company Industry,' the latest edition reports that equity, bond fund and money market funds all saw assets increase nicely in 2021 (​though 2022 year-​to-​date has been another matter). Overall, money funds assets were $​4.​756 trillion at year-​end 2021, making up 17.​6% of the $​27.​0 trillion in overall mutual fund assets. Retail investors held $​1.​480 trillion, while institutional investors held $​3.​276 trillion. We excerpt from the latest 'Fact Book' below."

It continues, "​Discussing 'Worldwide' mutual funds (​page 5), ICI writes, 'Money market funds -- which are generally defined throughout the world as regulated funds that are restricted to holding short-​term, high-​quality debt instruments -- saw their total net assets increase from $​8.​3 trillion to $​8.​8 trillion (​6.​2%). At year-​end 2021, equity funds remained the largest category of worldwide regulated funds, accounting for 47% of net assets. Bond funds accounted for 19% of net assets, mixed/​other funds for 21%, and money market funds for 12%.'

Our "BofE, FCA" piece states, "​The Bank of England and Financial Conduct Authority published a discussion paper entitled, '​Resilience of Money Market Funds <​i:​https://​www.​fca.​org.​uk/​publication/​discussion/​dp22-​1.​pdf>`​_,' which reviews money funds in the U.​K. and pending European money fund regulatory reforms. The paper says, 'This Discussion Paper (​DP) is a contribution to an assessment of the vulnerabilities in MMFs and how much they contribute to risks to UK financial stability and investor protection. It aims to contribute to the debate about how to reduce such risks while also ensuring that the structure of the financial system and UK market support the needs of the real economy in a sustainable and robust way. It aims to gather views to inform the UK authorities’ development of MMF reform proposals, and where possible, to set out the UK authorities’ initial views on the possible effectiveness and proportionality of some reform options."

The paper continues, "​In relation to MMFs, UK authorities aim to adopt policy measures following feedback received from this DP that will: i. Strengthen the resilience of MMFs and the financial system in supporting the UK economy. ii. Reduce the need for future extraordinary central bank interventions of the kind that occurred in March 2020 [​and] iii. Support the provision of sustainable and robust cash management financial services that meet the needs of users including at times of financial stress."

MFI also includes the News brief, "Assets Down Slightly in May. MFI XLS shows assets falling $​10.​7 billion in May to $​4.​968 trillion (​after falling $​74.​3 billion in April). ICI'​s weekly 'Money Market Fund Assets' shows assets flat after jumping the prior week (​and declining 2 weeks before this)."

Another News brief, "May MF Portfolio Holdings: Treasuries Plummet, Time Deposits Higher. Our April 30 data show that Treasuries plunged again last month while Other (​mostly Time Deposits) jumped. Repo remained the largest portfolio segment, while Treasuries remained in the No. 2 spot. (​Fed repo inched higher to $​1.​662 trillion.) Agencies were the third largest segment, CP remained fourth, ahead of Other/​Time Deposits, CDs and VRDNs."

A sidebar, "CAG'​s Pan on Prime MMFs," states, 'Capital Advisors Group’​s Lance Pan asks, 'Will There Be a Renaissance for Prime Money Market Funds?.' He explains, 'April 11 marked the end of the comment period for the new round of money market fund (​MMF) reforms proposed by the Securities and Exchange Commission (​SEC). As the Fed is poised to hike rates aggressively in coming meetings, institutional cash investors are keenly aware that their deposit rates are not likely to keep pace. Might prime MMFs be an alternative? Will the amendments alter the utility and attractiveness of prime funds to institutional cash investors? Should investors plunge in before the new rules take effect?"

Finally, another sidebar, "Dreyfus' Tobin on Yields," explains, "Dreyfus recently hosted a webinar entitled, 'Money Market Funds, Rising Rates and Geopolitical Turmoil,' which featured CIO John Tobin and Credit Head Keith Lawler discussing rising rates, Treasury funds and bank deposits. Tobin tells us, '​I think the reason you'​re seeing a lot of dispersion is one, fund positioning, [​and, two] cash flows. [​Y]​ou saw several funds extend in late Feb. and early March. [​This was] still when ... we thought we were just going to get a series of 25'​s. [​I]​n a pretty dramatic twist or, ... hawkish pivot all of a sudden, this idea of going 50 and maybe multiple 50 [​bps became the consensus] ... with the backdrop of, hey, we need to hit neutral rates by year end at a minimum. [​It was an] unbelievable change of events in a matter of two months. So that'​s why I think you'​ve seen as much dispersion in performance as we have ever seen."

Our June MFI XLS, with May 31 data, shows total assets decreased $​10.​7 billion to $​4.​968 trillion, after decreasing $​74.​3 billion in April, increasing $​24.​1 billion in March, decreasing $​34.​6 billion in February and decreasing $​128.​1 billion in January. Assets increased $​104.​6 billion in December, $​49.​7 billion in November and $​20.​5 billion October. MMFs also increased $​878 million in September and $​27.​9 billion in August. Our broad Crane Money Fund Average 7-​Day Yield was up 29 bps to 0.​43%, and our Crane 100 Money Fund Index (​the 100 largest taxable funds) was up 36 bps to 0.​57% in May.

On a Gross Yield Basis (​7-​Day) (​before expenses are taken out), the Crane MFA and the Crane 100 both were both higher at 0.​72% and 0.​79%, respectively. Charged Expenses averaged 0.​29% and 0.​22% for the Crane MFA and the Crane 100. (​We'​ll revise expenses Wednesday once we upload the SEC'​s Form N-​MFP data for 5/​31/​22.) The average WAM (​weighted average maturity) for the Crane MFA was 25 days (​down 1 day from previous month) while the Crane 100 WAM stayed at 26 days. (​See our Crane Index or craneindexes.​xlsx history file for more on our averages.)

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With just 2 weeks to go until Crane'​s Money Fund Symposium, which will be held in Minneapolis, June 20-​22, we are also starting preparations for our 8th Annual European Money Fund Symposium. It'​ll be the third straight year that we'​re trying to host the event in Paris, but it looks like the third time will be the charm. The preliminary agenda has been released and registrations are now being taken for this year'​s European event, which will take place Sept. 27-​28 at the Renaissance Paris La Defense in Paris, France. We provide more details on both shows below, and feel free to contact us for more information. (Note: If you haven'​t registered yet for the U.​S. Money Fund Symposium, you can still do so via www.​moneyfundsymposium.​com. We look forward to seeing many of you in Minneapolis in 2 weeks, or in Paris this fall!)

Our 2019 European Symposium event in Dublin attracted over 110 money fund professionals, sponsors and speakers. Given the return of live events, rising rates 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. "European Money Fund Symposium offers European, global and "​offshore" money market portfolio managers, investors, issuers, dealers and service providers a concentrated and affordable educational experience, and an excellent and informal networking venue," says Crane Data President, Peter Crane. "Our mission is to deliver the best possible conference content at an affordable price to money market fund professionals," he adds.

Registration for our 2022 Crane'​s European Money Fund Symposium is $​1,​000 USD. EMFS will be held at the The Renaissane Paris La Defense. Hotel rooms must be booked before August 5 to receive the discounted rate of E259. Visit www.​euromfs.​com to register, and contact us to request the PDF brochure. (​Let us know too if you'​d like information on speaking or sponsorship pricing.)

The EMFS agenda features sessions conducted by many of the leading authorities on money funds in Europe and worldwide. The Day One Agenda for Crane'​s European Money Fund Symposium includes: "Welcome to European Money Fund Symposium" with Peter Crane of Crane Data; followed by a "French Money Market Fund Update" with Vanessa Robert of Moody'​s Investors Service and French MMF Portfolio Manager (​pending); an "IMMFA Update: The State of MMFs in Europe" with Kim Hochfeld of SSGA and Veronica Iommi of IMMFA; and, "Senior Portfolio Manager Perspectives," featuring Neil Hutchison of J.​P. Morgan AM, Peter Yi of Northern Trust AM, and an Additional Speaker TBD.

The afternoon will consist of: "Euro Money Funds & European Issues," moderated by Dan Singer of J.​P. Morgan Securities and featuring David Callahan of Lombard Odier and Joe McConnell, from J.​P. Morgan Asset Management; "U.​S. Money Fund & European USD Update" with Peter Crane, Deborah Cunningham of Federated Hermes and Rob Sabatino of UBS Asset Management; "U.​K. & Sterling MMF Issues with Dennis Gepp of Federated Hermes and Michelle Randall of Invesco; and lastly, "Ultra‐​Short Bond Funds in Europea" with Abis Soetan of Fitch Ratings and Mhammed Belfaida of Aviva Investors."

The Day Two Agenda includes: "European MM Reforms: Here We Go Again" with John Aherne of William Fry and John Hunt of Sullivan & Worcester LLP; "Money Market Funds in Ireland" with Patrick Rooney of Irish Funds; and, "Strategists Speak: Euro, ECB & Neu CP Update" with Giuseppe Maraffino of Barclays and Shane O'​Neill of BRED Banque Populair.

The second day'​s afternoon will include: "Dealer Update & Issuance Outlook" with Stewart Cutler of Barclays; Kieran Davis of TD Securities and Marianne Medora of Groupe BPCE/​Natixis; "Chinese Money Funds & Asian Markets" with Andrew Paranthoiene of S&​P Global and Minyue Wang of Fitch Ratings; and, last on the day 2 agenda, "Portals & Off​shore Information & Data" with Peter Crane and Joe Knight of FIS Global.

Also, with just two weeks to go, Crane Data is making final preparations for our big show, Money Fund Symposium, which is June 20-​22, 2022 at The Hyatt Regency Minneapolis, in Minneapolis, Minn. (​Note that we'​re starting on the Juneteenth Holiday. Our apologies but we'​re unable to move the dates.) The agenda is all set and registrations are still being taken.

Money Fund Symposium attracts money fund managers, marketers and servicers, cash investors, money market securities dealers, issuers, and regulators for 2 1/​2 days of sessions, socializing and networking. Visit the MF Symposium website at www.​moneyfundsymposium.​com for more details. Registration is $​750, and discounted hotel reservations may still be available. We hope you'​ll join us in Minneapolis! (​E-​mail us at info@​cranedata.​com to request the full brochure.)

Also, mark your calendars for our next Crane'​s Money Fund University, which will be held in Boston, Mass., Dec. 15-​16, 2022. 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.

Finally, our next Bond Fund Symposium will also be held in Boston, Mass., on March 23-​24, 2023. (​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. Let us know if you'​d like more details on any of our events, and we hope to see you in in Minneapolis soon, in Paris in September, or in Boston in December or in March 2023. Thanks to all of our speakers and sponsors and for your patience and support over the past two rough years!

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While its "Money Market Fund Reform" proposal (​see the Comments on MMF Reform here) is getting all the attention in the cash space, two new proposals from the Securities & Exchange Commission published last week could impact the sector as well. The SEC'​s proposed rule changes on both "Environmental, Social, and Governance Disclosures for Investment Advisers and Investment Companies" and "Investment Company Names" could force major changes to, or even eliminate, the nascent and fast-​growing ESG & Social money market fund space. (Note: For those planning on attending our upcoming Money Fund Symposium, which is June 20-​22, in Minneapolis, Minn, please make your hotel reservations ASAP! We fear the hotel may sell out very soon.)

The press release for the latter, entitled, "SEC Proposes Rule Changes to Prevent Misleading or Deceptive Fund Names," says, "The Securities and Exchange Commission today proposed amendments to enhance and modernize the Investment Company Act '​Names Rule' to address changes in the fund industry and compliance practices that have developed in the approximately 20 years since the rule was adopted. A fund'​s name is an important marketing tool and can have a significant impact on investors' decisions when selecting investments, and the Names Rule addresses fund names that are likely to mislead investors about a fund'​s investments and risks. The proposal follows a request for comment the SEC issued to gather public feedback on potential reforms to the rule in March 2020."

SEC Chair Gary Gensler comments, "​A lot has happened in our capital markets in the past two decades. As the fund industry has developed, gaps in the current Names Rule may undermine investor protection. In particular, some funds have claimed that the rule does not apply to them -- even though their name suggests that investments are selected based on specific criteria or characteristics. Today'​s proposal would modernize the Names Rule for today'​s markets."

The release continues, "The Names Rule currently requires registered investment companies whose names suggest a focus in a particular type of investment (​among other areas) to adopt a policy to invest at least 80 percent of the value of their assets in those investments.... The proposed amendments would enhance the rule'​s protections by requiring more funds to adopt an 80 percent investment policy. Specifically, the proposed amendments would extend the requirement to any fund name with terms suggesting that the fund focuses in investments that have (​or whose issuers have) particular characteristics. This would include fund names with terms such as '​growth' or '​value' or terms indicating that the fund'​s investment decisions incorporate one or more environmental, social, or governance factors. The amendments also would limit temporary departures from the 80 percent investment requirement and clarify the rule'​s treatment of derivative investments."

The release on the ESG rule, "SEC Proposes to Enhance Disclosures by Certain Investment Advisers and Investment Companies About ESG Investment Practices," tells us, "The Securities and Exchange Commission today proposed amendments to rules and reporting forms to promote consistent, comparable, and reliable information for investors concerning funds' and advisers' incorporation of environmental, social, and governance (​ESG) factors. The proposed changes would apply to certain registered investment advisers, advisers exempt from registration, registered investment companies, and business development companies."

Gensler says, "I am pleased to support this proposal because, if adopted, it would establish disclosure requirements for funds and advisers that market themselves as having an ESG focus. ESG encompasses a wide variety of investments and strategies. I think investors should be able to drill down to see what'​s under the hood of these strategies. This gets to the heart of the SEC'​s mission to protect investors, allowing them to allocate their capital efficiently and meet their needs."

The release also states, "The proposed amendments seek to categorize certain types of ESG strategies broadly and require funds and advisers to provide more specific disclosures in fund prospectuses, annual reports, and adviser brochures based on the ESG strategies they pursue. Funds focused on the consideration of environmental factors generally would be required to disclose the greenhouse gas emissions associated with their portfolio investments. Funds claiming to achieve a specific ESG impact would be required to describe the specific impact(​s) they seek to achieve and summarize their progress on achieving those impacts. Funds that use proxy voting or other engagement with issuers as a significant means of implementing their ESG strategy would be required to disclose information regarding their voting of proxies on particular ESG-​related voting matters and information concerning their ESG engagement meetings."

It adds, "Finally, to complement the proposed ESG disclosures in fund prospectuses, annual reports, and adviser brochures, the proposal would require certain ESG reporting on Forms N-​CEN and ADV Part 1A, which are forms on which funds and advisers, respectively, report census-​type data that inform the Commission'​s regulatory, enforcement, examination, disclosure review, and policymaking roles. The proposing release will be published in the Federal Register. The comment period will remain open for 60 days after publication in the Federal Register."

On Thursday, law firm K&​L Gates published the update, "A Fund by Any Other Name: SEC Proposes Names Rule Amendments." The "U.​S. Asset Management and Investment Funds Alert," explains, "On 25 May 2022, the U.​S. Securities and Exchange Commission (​the SEC) proposed amendments (​the Proposed Amendments) to Rule 35d-​1 (​the Names Rule) under the Investment Company Act of 1940, as amended in its release entitled '​Investment Company Names' (​the Proposing Release). The Proposed Amendments would significantly expand the scope of terms that the SEC considers materially deceptive and misleading in a registered investment company'​s (​a fund) name without a corresponding policy to invest at least 80% of the value of the fund'​s net assets, plus the amount of any borrowings for investment purposes, in the manner suggested by the fund'​s name (​an 80% Policy). Triggered in part by the rise of environmental, social, and governance (​ESG) investing and concerns that investors may rely inordinately on a fund'​s name to understand its investments and risks, the Proposed Amendments are aimed at addressing perceived gaps in the Names Rule."

They write, "While the SEC is clearly motivated by concerns over '​greenwashing,' where disclosure of ESG considerations in fund offering materials does not align with actual investment practices, the Proposed Amendments would also capture other terms that historically have been considered investment strategy terminology outside the scope of the rule. This approach represents a significant departure from the SEC'​s long-​standing position on the use of fund names by expanding the scope of the Names Rule to apply to fund names that include terms suggesting that the fund focuses in '​investments that have, or whose issuers have, particular characteristics.'"

K&​L Gates' summary adds, "The Proposed Amendments include enhanced disclosure requirements for how a fund defines the terms in its name and selects investments for its 80% basket. The Proposed Amendments also go beyond enhancing disclosure requirements by limiting when funds may deviate from an 80% Policy, mandating how the Names Rule will be applied to derivatives exposure calculations, imposing specific requirements on unlisted closed-​end funds and business development companies (​BDCs), and requiring new or expanded notice, recordkeeping, and reporting requirements. The comment period for the Proposed Amendments is 60 days after publication in the Federal Register. If adopted, compliance with all elements of the Proposed Amendments will be required following a one-​year transition period."

We asked K&​L Gates Partner (​and author of the above piece) Clair Pagnano whether this proposal would impact ESG & Social Money Market Funds. She tells us, "The short answer is '​yes.' The new '​Names' rule proposal, if adopted as proposed, would apply to MMFs. However, the SEC in its request for comments did ask: 'Consistent with the current names rule, the proposed amendments would generally apply to money market funds. 17 CFR 270.​2a-​7 ('​rule 2a-​7') also requires funds that use the term '​money market' in their names to comply with the requirements of that rule. Are the requirements of rule 2a-​7 sufficient to prevent materially misleading or deceptive money market funds names, or should we continue to apply the names rule to those funds?' So there is ample opportunity for MMFs to push back on [​the proposal'​s] application to MMFs, although I think likely some version of the Names rule will apply to them. I note that a number of the ancillary reporting requirements will not apply to MMFs (​i.​e. Form N-​PORT disclosures, etc., as that is not something MMFs file)."

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We wrote last month (​in our May 10 Link of the Day), that "Stablecoin TerraUSD '​Breaks the Buck'," which described the meltdown in one of the major "​stablecoins" used to transact crypto assets. Since then, the focus and concerns have moved towards the largest stablecoin, Tether. Several new articles shed a little light on Tether'​s reserves and backing, and it doesn'​t appear that investors will have their concerns assuaged. The Financial Times writes in, "Tether has held some reserves at Bahamas bank Capital Union," "Tether has held some of its reserves at a small Bahamas bank called Capital Union, people familiar with the matter said, shedding further light on how the group manages the $​73bn stablecoin that underpins the crypto market. The stablecoin issuer has generally declined to reveal where exactly it holds the assets that back its eponymous token, known as USDT."

The FT explains, "Tether has come under renewed scrutiny in recent weeks after USDT briefly traded as low as 95 cents, significantly below the $​1 peg it seeks to maintain. Investors have since redeemed more than $​10bn from Tether, which has argued that the outflows have proven it has ample liquidity on hand. Launched in 2014, Tether'​s USDT token is widely used in cryptocurrency markets for trading bitcoin and other major digital assets. USDT is the largest stablecoin in circulation by market value. Tether is registered in the British Virgin Islands and promises to redeem on demand USDT on a one-​to-​one basis with dollars."

It continues, "The company'​s ability to keep that promise ultimately depends on the liquidity and safety of its reserves, which it says include bank deposits, US government bonds, commercial paper, precious metals and cryptocurrencies. Capital Union said '​the only information we make publicly available about our company is contained in the annual report' on its website, while Tether did not comment on its relationship with the bank. Tether previously disclosed that it has had a banking relationship since 2018 with another Bahamas bank, Deltec Bank & Trust.... In the past, Tether struggled to access the traditional financial system. Last year, US regulators said Tether had previously misled users about its reserves, in part because it had used bank accounts in the names of its general counsel and sister exchange Bitfinex. Tether and Bitfinex agreed to pay $​60mn across two settlements in which they neither admitted nor denied wrongdoing."

The FT adds, "In an interview with the Financial Times this month, Tether'​s chief technology officer Paolo Ardoino said its most liquid reserves, cash deposits, were held at two Bahamas banks. He added that Tether had '​strong banking relationships' with '​more than seven, eight banks across the world'. People familiar with the matter said Capital Union was another Bahamas bank that Tether had used. The boutique bank was founded in 2013 and had assets of $​1bn as of the end of 2020, the most recent year for which there are public accounts.... `​It is unclear exactly how much of Tether'​s reserves have been held through Capital Union, or when the relationship began. Chalopin in a 2021 interview with Bloomberg said Deltec held only about a quarter of Tether'​s reserves, then about $​15bn, in the form of cash and low-​risk bonds."

Another article on CNBC.​com, entitled, "Some investors got rich before a popular stablecoin imploded, erasing $​60 billion in value," comments, "In May, the collapse of one of the most popular U.​S. dollar-​pegged stablecoin projects cost investors tens of billions of dollars as they pulled out in a panic that some have compared to a bank run. But before that, the stablecoin known as terraUSD (​or UST, for short) and its sister token luna, had experienced a pretty spectacular run-​up -- and some investors made a killing before it all collapsed. Venture capital firm Pantera Capital tells CNBC it earned a 100-​fold return on its $​1.​7 million investment in luna. Hack VC and the Winklevoss-​backed CMCC Global didn'​t share their exact gains, but CMCC told CNBC that it closed its luna position in March, while Hack reportedly got out in December."

For more Crane Data News mentioning stablecoins, see these articles: "TerraUSD Crash, Vanished Savings" (​5/​31/​22); "MFI Awards Given to Top Funds of 2021; Capital Advisors on Stablecoins" (​1/​13/​22); "Weekly MF Portfolio Holdings; Western'​s Straker Reviews Stablecoins" (​12/​1/​21); "Tether Hits Keep Coming: WSJ, PWG, CNBC; Taming Wildcat Stablecoins" (​7/​21/​21).

In related news, Bloomberg writes that "JPMorgan Finds New Use for Blockchain in Trading and Lending." They say, "JPMorgan Chase & Co is using blockchain for collateral settlements, the latest Wall Street experimentation with the technology in the trading of traditional financial assets. The bank'​s first such transaction came on May 20, when two of its entities transferred the token representation of BlackRock Inc. money market fund shares as collateral on its private blockchain. The effort will allow investors to pledge a wider range of assets as collateral and use them outside of market operating hours, according to New York-​based JPMorgan." (​See also our News, "Franklin Blockchain MF Picks Curv" (​11/​22/​19); "Franklin Files for Blockchain Enabled U.​S. Govt Money Market Fund" (​9/​4/​19); and, "Blockchain Euro CP Test Completed" (​2/​25/​19).

In other news, Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics Wednesday, which track a shifting subset of our monthly Portfolio Holdings collection. The most recent cut (​with data as of May 27) includes Holdings information from 64 money funds (​up 1 from a week ago), which represent $​2.​148 trillion (​up from $​1.​912 trillion) of the $​4.​952 trillion (​43.​4%) in total money fund assets tracked by Crane Data. (​Our Weekly MFPH are e-​mail only and aren'​t available on the website. See our May 11 News, "May MF Portfolio Holdings: Treasuries Plummet, Time Deposits Higher," for more.)

Our latest Weekly MFPH Composition summary again shows Government assets dominating the holdings list with Repurchase Agreements (​Repo) totaling $​1.​073 trillion (​up from $​973.​4 billion a week ago), or 49.​9%; Treasuries totaling $​788.​1 billion (​up from $​725.​7 billion a week ago), or 36.​7%, and Government Agency securities totaling $​136.​2 billion (​up from $​111.​1 billion), or 6.​3%. Commercial Paper (​CP) totaled $​47.​4 billion (​up from a week ago at $​36.​3 billion), or 2.​2%. Certificates of Deposit (​CDs) totaled $​39.​9 billion (​up from $​18.​4 billion a week ago), or 1.​9%. The Other category accounted for $​39.​8 billion or 1.​9%, while VRDNs accounted for $​24.​2 billion, or 1.​1%.

The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $​788.​1 billion (​36.​7% of total holdings), the Federal Reserve Bank of New York with $​778.​7B (​36.​2%), Federal Home Loan Bank with $​79.​6B (​3.​7%), BNP Paribas with $​48.​6B (​2.​3%), Federal Farm Credit Bank with $​45.​1B (​2.​1%), RBC with $​31.​9B (​1.​5%), Fixed Income Clearing Corp with $​24.​5B (​1.​1%), Societe Generale with $​19.​0B (​0.​9%), Mitsubishi UFJ Financial Group Inc with $​18.​1B (​0.​8%) and Sumitomo Mitsui Banking Corp with $​16.​5B (​0.​8%).

The Ten Largest Funds tracked in our latest Weekly include: JPMorgan US Govt MM ($​281.​6B), Goldman Sachs FS Govt ($​208.​0B), Morgan Stanley Inst Liq Govt ($​161.​9), Dreyfus Govt Cash Mgmt ($​118.​9B), Fidelity Inv MM: Govt Port ($​117.​8B), Allspring Govt MM ($​116.​1B), Goldman Sachs FS Treas Instruments ($​113.​1B), State Street Inst US Govt ($​90.​0B), JPMorgan 100% US Treas MMkt ($​90.​0B) and First American Govt Oblg ($​86.​6B). (​Let us know if you'​d like to see our latest domestic U.​S. and/​or "​offshore" Weekly Portfolio Holdings collection and summary, or our Bond Fund Portfolio Holdings data series.)

​

Today, we quote from another of last month'​s "Comments on Money Market Fund Reform" published on the SEC'​s website. The letter submitted by SIFMA'​s Asset Management Group tells us, "The Asset Management Group of the Securities Industry and Financial Markets Association ('​SIFMA AMG'), together with the Securities Industry and Financial Markets Association (​collectively, '​SIFMA'), respectfully submits this comment letter to the U.​S. Securities and Exchange Commission (​the '​Commission') with respect to the Commission'​s request for comment on proposed amendments to Rule 2a-​7 that govern money market funds under the Investment Company Act of 1940 ('​1940 Act'), and related proposed amendments to Form N-​MFP, Form N-​CR and Form N-​1A. We appreciate the opportunity to provide our views to the Commission." (Note: Register ASAP for our upcoming Money Fund Symposium, which takes place June 20-​22, in Minneapolis, Minn.)

It explains, "We believe SIFMA offers a valuable and unique perspective on the Proposed Rule because, among other things, our members represent individuals and businesses that depend on money market funds as an essential cash management tool as well as issuers who depend on money market funds to create and maintain an active and robust market for the securities they issue. As fiduciaries to millions of investors and clients and as investment managers to money market funds used as investment vehicles by retail and institutional investors, SIFMA'​s members are committed to enhancing investor protections through reasonable regulation. Therefore, SIFMA supports the Commission'​s overall objective of improving the resilience and transparency of money market funds. At the same time, however, SIFMA believes that it is essential for regulation to preserve the core, valuable cash management functions that money market funds provide to various types of investors and the financial and economic functions that money market funds provide to capital markets more broadly."

The letter says, "SIFMA appreciates that the Commission has refrained from proposing certain reforms that SIFMA believes would destroy the utility and benefit of money market funds without addressing the unique stresses experienced by money market funds in March 2020. Yet, SIFMA remains troubled that aspects of the Proposed Rule would go too far in endangering the vitality of money market funds as a product. SIFMA is very concerned that certain of the proposed reforms would either obstruct the operation of money market funds or alter their indispensable characteristics, harming shareholders who rely on them as a cash management tool and issuers who depend on money market funds as an important source of financing. Below, we discuss the important role of money market funds in the short-​term funding markets, provide our positions on the provisions of the Proposed Rule, identify potentially harmful aspects of the reforms, and recommend several modifications to the Proposed Rule with the goal of better focusing the regulations on improving the resilience of money market funds."

It continues, "SIFMA members support a rulemaking package that removes redemption gate provisions from Rule 2a-​7 and increases daily and weekly liquid asset requirements. SIFMA members believe such measures, taken together, most effectively address the stresses faced by money market funds in March 2020 and improve the resilience of money market funds because (​i) removing redemption gates from Rule 2a-​7 will eliminate a driver of increased redemption behavior experienced in March 2020 and (​ii) establishing incremental increased liquidity minimums to 20% daily liquid assets and 40% weekly liquid assets will provide adequate protection from dilution (​if any). SIFMA members do not believe additional anti-​dilution measures, such as swing pricing, are necessary or appropriate for money market funds, and strongly oppose the Commission'​s swing pricing proposal."

The comment summarizes, "SIFMA members take the following general views on the following key provisions of the Proposed Rule: SIFMA supports the removal of redemption gates from Rule 2a-​7 ...; SIFMA supports incremental increased liquidity minimums and believes that incremental increased liquidity minimums, together with the removal of liquidity fees and redemption gates, sufficiently address the issues faced by money market funds in March 2020 ...; SIFMA strongly opposes swing pricing requirements for any type of money market fund and believes that implementing swing pricing requirements for money market funds would unnecessarily restrict investors' ability to use money market funds for their intended cash management purposes and would be ineffective in achieving the Commission'​s goals for reform ...; SIFMA does not support requiring government and retail money market funds to determine that financial intermediaries that submit orders to a money market fund have the capacity to redeem and sell the fund'​s shares at prices that do not correspond to a stable price per share ...; and, SIFMA does not support prohibiting a money market fund from using RDM or similar mechanisms in a negative interest rate environment to maintain a stable price per share."

In other news, money market fund yields continue to inch higher following a surge early in May in reaction to the Fed'​s 50-​basis-​point move. The 7-​Day Yield Average for our flagship Crane 100 Money Fund Index rose to 0.​57% in the week ended Friday, May 27. The average had been 0.​55% the prior week, 0.​21% on April 29, 0.​15% on March 31 and 0.​02% on February 28 (​where it had been for almost 2 years prior). Brokerage sweep rates also continued to inch higher over the past week. Our latest Brokerage Sweep Intelligence shows the average rate inched up to 0.​05% (​on FDIC insured deposits), up from 0.​04% last week and up from 0.​01% a month ago. We review the latest money fund and brokerage sweep yields below.

The Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (​currently 674), shows a 7-​day yield of 0.​46%, up 2 basis points in the week through Friday. The Crane Money Fund Average is up 31 bps from 0.​15% at the beginning of May. Prime Inst MFs were up 1 bps to 0.​63% in the latest week, and up 39 bps over the course of May. Government Inst MFs rose by 2 bps to 0.​53%, they are up 36 bps MTD. Treasury Inst MFs rose by 3 bps to 0.​49%, up 30 bps in May. Treasury Retail MFs currently yield 0.​29%, (​up 4 bps for the week, and up 23 bps in May), Government Retail MFs yield 0.​25% (​up 2 bps for the week, and up 21 bps in May), and Prime Retail MFs yield 0.​46% (​up 1 bp for the week, and up 32 bps for May), Tax-​exempt MF 7-​day yields rose by 1 bp to 0.​42%, they were up 28 bps in May.

Our Crane Brokerage Sweep Index, the average rate for brokerage sweep clients (​all of which are swept into FDIC insured accounts), inched up to 0.​05%. This follows increases over the past 2 weeks and follows 2 straight years of yields at 0.​01%. Sweep yields were 0.​12% on average at the end of 2019 and 0.​28% on average at the end of 2018. The latest Brokerage Sweep Intelligence, with data as of May 27, shows just one change over the previous week -- Ameriprise increased its rates to 0.​02% for balances over $​100K (​and to 0.​03% for balances over $​5M). A number of brokerages increased rates over the two weeks prior.

Two weeks ago, Brokerage Sweep Intelligence reported that Fidelity hiked its FCash brokerage account rate to 0.​25% across all tiers. (​Rates on its default sweep Cash Management Account also rose to 0.​25%.) We also showed that Raymond James increased rates from 0.​01% to 0.​02% for balances under $​25K, to 0.​03% for balances under $​100K, to 0.​05% for balances under $​500K and to 0.​08% for balances $​500K to $​2.​5 million. Also, RW Baird increased its sweep rates from 0.​03% to 0.​10% for the week ended May 13. Six of 11 major brokerages still offer rates of 0.​01% for balances of $​100K (​and most other tiers). These include: E*​Trade, Merrill Lynch, Morgan Stanley, Schwab, TD Ameritrade, and UBS. (​Wells moved its rates to 0.​02% two weeks ago.)

According to Tuesday'​s Money Fund Intelligence Daily, with data as of Friday (​5/​27), just 79 funds (​out of 821 total) still yield 0.​00% or 0.​01% with assets of $​63.​6 billion, or 1.​3% of total assets. (​This compares to 593 funds with $​2.​623 trillion yielding 0.​00% or 0.​01% at the beginning of the year.) There were 34 funds yielding between 0.​02% and 0.​09%, totaling $​56.​4B, or 1.​1% of assets; 38 funds yielded between 0.​10% and 0.​19% with $​12.​0 billion, or 0.​2% of assets; 261 funds yielded between 0.​20% and 0.​49% with $​1.​254 trillion in assets, or 25.​3%; 364 funds yielded between 0.​50% and 0.​79% with $​2.​989 trillion in assets, or 60.​4%; and just 45 funds yielded 0.​80% or higher with $​577.​7 billion in assets or 11.​7%; three funds yielded over 0.​90%.

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