Money market mutual fund assets broke the $​5.​0 trillion level for the first time ever on Tuesday, April 27

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Paul Romano
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Money market mutual fund assets broke the $​5.​0 trillion level for the first time ever on Tuesday, April 27

Post by Paul Romano »

From the article:


“Finally, Crane says, "About 10 percent of money funds are yielding 0.​00 or 0.​01 percent”


Just checked the Vanguard website and Prime is yielding 0.66%. In 2013 it returned 0.01%. Do you think we will soon be seeing those levels again within the next few months. Will Vanguard need to waive fees to keep rates positive?


“ Money Fund Assets Break $​5.​0 Trillion; Crane Featured in Ignites Piece

Apr 30, 2020

Money market mutual fund assets broke the $​5.​0 trillion level for the first time ever on Tuesday, April 27, according to Crane Data'​s Money Fund Intelligence Daily publication. Money fund assets continued to rise sharply in April, up an enormous $​432.​9 billion month-​to-​date through April 28 to $​5.​023 trillion, after a breathtaking increase of $​624.​9 billion in March. In March and April combined, money fund assets have risen by an eye-​popping $​1.​058 trillion! Government funds jumped $​349.​4 billion MTD in April to $​3.​870 trillion (​after a surge of $​790.​4 billion in March), Prime funds saw 6assets rise $​76.​4 billion, retaking the $​1.​0 trillion level early this week, to $​1.​012 trillion in April through 4/​28 (​after falling $​159.​6 billion in March). Tax-​Exempt assets increased $​7.​1 billion to $​141.​0 billion MTD (​after falling $​5.​8 billion in March).

Finally, Crane says, "About 10 percent of money funds are yielding 0.​00 or 0.​01 percent. That'​s the floor that funds put in there. They tend to waive any fees above the level that would put them at zero or below. In 2009 through 2015, nobody went negative. We don'​t expect anyone to go negative this time. But if you get another shock, if you get another push lower, we'​ve learned in the last decade that the Fed is very powerful ... but if the market says we'​re going negative, at some point we'​re going negative. We don'​t think that'​s going to happen, funds don'​t think it'​s going to happen.... More and more funds are still digesting that big hundred basis point Fed cut that happened during the emergency week in March. Zero yields are a big deal, fee waivers and then theoretically negative yield."
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Kenkat
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Re: Money market mutual fund assets broke the $​5.​0 trillion level for the first time ever on Tuesday, April 27,

Post by Kenkat »

Interesting, I pulled most of my money out of Vanguard Prime MM and moved it to an online savings account due to the rate drop. I think you are correct in thinking that money market funds yields are going to continue to drop until they are near zero.
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JoMoney
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Re: Money market mutual fund assets broke the $​5.​0 trillion level for the first time ever on Tuesday, April 27,

Post by JoMoney »

I wonder how much of that money is people who bailed out of other stock/bond investments, and believe they're going to get back in at a better price before all the other money does.
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Re: Money market mutual fund assets broke the $​5.​0 trillion level for the first time ever on Tuesday, April 27,

Post by cdu7 »

Kenkat wrote: Thu Apr 30, 2020 8:41 am Interesting, I pulled most of my money out of Vanguard Prime MM and moved it to an online savings account due to the rate drop. I think you are correct in thinking that money market funds yields are going to continue to drop until they are near zero.
I did the same, moving everything to FDIC insured accounts. I don’t know how much longer the online savings accounts can keep paying significant interest either at this point......
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Re: Money market mutual fund assets broke the $​5.​0 trillion level for the first time ever on Tuesday, April 27,

Post by Broken Man 1999 »

The only MM funds we have are Vanguard Federal MM funds, as those are our sweep accounts. The Federal MM fund is yielding .45%. But, I am not seeking yield from our MM funds, so the yield isn't all that important to me.

Our only use of the MM funds are as a portal between our portfolio MFs and ETFs and our bank accounts, just a place $$$ pass thru. The MM funds typically have very few $$$ in them. Some have zero $$$.

We do live in interesting times. How MM funds shake out in this era of massive Treasury support of almost every thing financial remains to be seen. In fact ALL the results of the Treasury's actions remain to be seen.

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Re: Money market mutual fund assets broke the $​5.​0 trillion level for the first time ever on Tuesday, April 27,

Post by firebirdparts »

JoMoney wrote: Thu Apr 30, 2020 8:45 am I wonder how much of that money is people who bailed out of other stock/bond investments, and believe they're going to get back in at a better price before all the other money does.
Whaetver money the Fed created during "operations" has to be somewhere. There's no avoiding it. People are selling bonds and of course the fed is buying them with cash. That cash can only be destroyed by the Fed. Even if it wasn't in a MM fund it all has to be in banks/brokerage accounts somewhere.
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Re: Money market mutual fund assets broke the $​5.​0 trillion level for the first time ever on Tuesday, April 27,

Post by LadyGeek »

The article is here: Money Fund Assets Break $5.0 Trillion; Crane Featured in Ignites Piece, by Crane Data LLC.

(Only the first and last paragraphs of this long article have been posted, which is copyright fair-use.)
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Re: Money market mutual fund assets broke the $​5.​0 trillion level for the first time ever on Tuesday, April 27

Post by Independent George »

What do the low interest rates do to Schwab's business model of paying out less than they earn on money market funds?
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Re: Money market mutual fund assets broke the $​5.​0 trillion level for the first time ever on Tuesday, April 27,

Post by dmcmahon »

firebirdparts wrote: Thu Apr 30, 2020 9:21 am
JoMoney wrote: Thu Apr 30, 2020 8:45 am I wonder how much of that money is people who bailed out of other stock/bond investments, and believe they're going to get back in at a better price before all the other money does.
Whaetver money the Fed created during "operations" has to be somewhere. There's no avoiding it. People are selling bonds and of course the fed is buying them with cash. That cash can only be destroyed by the Fed. Even if it wasn't in a MM fund it all has to be in banks/brokerage accounts somewhere.
That's exactly right. The money created has to end up on someone's balance sheet. Just like stock price movements where for every buyer there's a seller, and therefore there's no such thing as "money on the sidelines". Unless the Fed creates some.
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Re: Money market mutual fund assets broke the $​5.​0 trillion level for the first time ever on Tuesday, April 27

Post by HawkeyePierce »

If I was parking cash in an MM fund I'd strongly look at moving it to a no-penalty CD at Ally while they're still paying 1.5%.
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Re: Money market mutual fund assets broke the $​5.​0 trillion level for the first time ever on Tuesday, April 27

Post by Paul K »

Independent George wrote: Thu Apr 30, 2020 10:26 am What do the low interest rates do to Schwab's business model of paying out less than they earn on money market funds?
It hurts it, for sure. If real MM yield is 1%, Schwab clients are cool with getting 0.7%. If MM yield is 0.2%, they're not going to be cool with getting minus 0.1%. Numbers made up, just for illustration.

I wouldn't be surprised if Schwab started pushing their other products like Pledged Asset Line.
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Re: Money market mutual fund assets broke the $​5.​0 trillion level for the first time ever on Tuesday, April 27,

Post by birdog »

Kenkat wrote: Thu Apr 30, 2020 8:41 am Interesting, I pulled most of my money out of Vanguard Prime MM and moved it to an online savings account due to the rate drop. I think you are correct in thinking that money market funds yields are going to continue to drop until they are near zero.
I don’t have any money in these extremely low yielding holdings but if I did I would do the same thing. Ally is currently paying 1.5%, Marcus is paying 1.55% and CIT Bank is paying 1.7%.
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Re: Money market mutual fund assets broke the $​5.​0 trillion level for the first time ever on Tuesday, April 27,

Post by Munir »

birdog wrote: Fri May 01, 2020 6:36 am
Kenkat wrote: Thu Apr 30, 2020 8:41 am Interesting, I pulled most of my money out of Vanguard Prime MM and moved it to an online savings account due to the rate drop. I think you are correct in thinking that money market funds yields are going to continue to drop until they are near zero.
I don’t have any money in these extremely low yielding holdings but if I did I would do the same thing. Ally is currently paying 1.5%, Marcus is paying 1.55% and CIT Bank is paying 1.7%.
How about cash in an IRA? It cannot use internet savings accounts. Is the only option CDs?
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Re: Money market mutual fund assets broke the $​5.​0 trillion level for the first time ever on Tuesday, April 27,

Post by vectorizer »

Munir wrote: Fri May 01, 2020 1:26 pm How about cash in an IRA? It cannot use internet savings accounts. Is the only option CDs?
You can open IRA savings accounts as well as CDs at Ally. My spouse and I recently did just that because of rapidly dropping MM rates. Marcus does not offer IRAs (I checked there first).
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Re: Money market mutual fund assets broke the $​5.​0 trillion level for the first time ever on Tuesday, April 27,

Post by birdog »

Munir wrote: Fri May 01, 2020 1:26 pm
birdog wrote: Fri May 01, 2020 6:36 am
Kenkat wrote: Thu Apr 30, 2020 8:41 am Interesting, I pulled most of my money out of Vanguard Prime MM and moved it to an online savings account due to the rate drop. I think you are correct in thinking that money market funds yields are going to continue to drop until they are near zero.
I don’t have any money in these extremely low yielding holdings but if I did I would do the same thing. Ally is currently paying 1.5%, Marcus is paying 1.55% and CIT Bank is paying 1.7%.
How about cash in an IRA? It cannot use internet savings accounts. Is the only option CDs?
Personally, I would just not hold cash in an IRA.
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Re: Money market mutual fund assets broke the $​5.​0 trillion level for the first time ever on Tuesday, April 27,

Post by vectorizer »

birdog wrote: Fri May 01, 2020 2:52 pm Personally, I would just not hold cash in an IRA.
You'd be much more likely to hold cash in an IRA if you were in the distribution phase, like me.
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Re: Money market mutual fund assets broke the $​5.​0 trillion level for the first time ever on Tuesday, April 27,

Post by Dottie57 »

Kenkat wrote: Thu Apr 30, 2020 8:41 am Interesting, I pulled most of my money out of Vanguard Prime MM and moved it to an online savings account due to the rate drop. I think you are correct in thinking that money market funds yields are going to continue to drop until they are near zero.
I’ve moved a lot of money to CDs too! I am worried about what they invest in - especially MBS (agency related) or government securities which are not treasuries.
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Re: Money market mutual fund assets broke the $​5.​0 trillion level for the first time ever on Tuesday, April 27,

Post by birdog »

vectorizer wrote: Fri May 01, 2020 3:57 pm
birdog wrote: Fri May 01, 2020 2:52 pm Personally, I would just not hold cash in an IRA.
You'd be much more likely to hold cash in an IRA if you were in the distribution phase, like me.
I’m not sure I follow. Can’t you put your cash in a regular high yield online account and then fill your tax-advantaged space with a bond fund to get to your desired asset allocation and then if there’s space left in the IRA fill it with an equity fund? That’s what I do. What does accumulation vs distribution have to do with it?
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Re: Money market mutual fund assets broke the $​5.​0 trillion level for the first time ever on Tuesday, April 27,

Post by Katietsu »

birdog wrote: Fri May 01, 2020 9:21 pm
vectorizer wrote: Fri May 01, 2020 3:57 pm
birdog wrote: Fri May 01, 2020 2:52 pm Personally, I would just not hold cash in an IRA.
You'd be much more likely to hold cash in an IRA if you were in the distribution phase, like me.
I’m not sure I follow. Can’t you put your cash in a regular high yield online account and then fill your tax-advantaged space with a bond fund to get to your desired asset allocation and then if there’s space left in the IRA fill it with an equity fund? That’s what I do. What does accumulation vs distribution have to do with it?
The point is that you can put your cash in a high yield online account while IN an IRA. And someone whose is in the distribution phase using IRA withdrawals to pay their electric bill is much more likely to want part of their IRA in a savings account compared to someone in accumulation phase who is not using IRA withdrawals for routine expenses.
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Paul Romano
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Re: Money market mutual fund assets broke the $​5.​0 trillion level for the first time ever on Tuesday, April 27

Post by Paul Romano »

The following is from A Bloomberg article on May 8, 2020

Vanguard Prime Money Market is down to 0.52%.


https://www.bloomberg.com/news/articl ... f=yO6sPLqg


“Cash Havens With $4.8 Trillion Fret Unthinkable Negative Returns“



“When rates were near zero during the recovery from the global financial crisis, some fund companies waived management fees in order to preserve returns for clients. That could happen again, according to Will Goldthwait, global cash and fixed-income strategist at State Street Global Advisors

Giants of the industry like Vanguard Group and Fidelity Investments already have done what’s known as “soft closes,” or shutting down some funds to new investors. Speculation is swirling that management fees may be waived eventually by some companies in the industry. And managers are getting creative with their investments. It’s all an effort to preserve some sort of positive return for clients, a task that may get more difficult as traders start to bet on a negative Federal Reserve benchmark rate.“
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