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U.S. Domestic 'AAAm' Money Market Fund Trends (Third-Quarter 2022)


U.S. Domestic 'AAAm' Money Market Fund Trends (Second-Quarter 2022)


European 'AAAm' Money Market Fund Trends (Second-Quarter 2022)


Rapidly Rising Rates Are Putting Some Money Market Funds At Risk


European 'AAAm' Money Market Fund Trends (First-Quarter 2022)

U.S. Domestic 'AAAm' Money Market Fund Trends (Third-Quarter 2022)

Index 7-day net yield (%) 30-day net yield (%) WAM (R) (days) Total net assets (Bil. $) Credit quality (%)(A-1+/A-1)
S&P Global Ratings 'AAAm' principal stability funds - prime 2.64 2.25 19 2,853.80 98/2
S&P Global Ratings 'AAAm' principal stability funds – government 2.75 2.37 19 382.70 70/30
WAM R--Weighted average maturity to reset

Market Comment

Growth in rated U.S. government and prime money market funds (MMFs) were mixed during the third quarter of 2022. Assets under management (AUM) in government fund strategies saw a de-minimis decline, resulting in a 0.23% quarter-over-quarter decrease. While prime fund net assets had a modest increase from the previous quarter of 4.46%, this, driven by an increase in prime institutional funds, make money funds more compelling than other asset classes in a rising rate environment.

Federal Reserve policy and key inflation data continue to be a key focus for fund managers. S&P Global economists revised their expectations upward for the Fed funds rate, which is now forecast to reach 4.00%-4.25% by early-2023. (see "Economic Outlook U.S. Q4 2022: Teeter Totter," Sept. 26, 2022). As the U.S. economy transitions through 2022 and into 2023, fund managers will keep close watch on U.S. GDP figures to help monitor the risks of recession and whether or not the Fed can navigate a soft landing.

Over the past six months the Fed raised the federal funds rate target range from 0.25%–0.50% to 3.00%–3.25%, an increase of 275 basis points (bps). September's rate hike of 75 bps was the third straight supersized rate hike by the Fed. This is one of the fastest policy adjustments since the early 1980s. Government and prime funds are benefiting from higher-yielding assets. During the third quarter, the seven-day and 30-day net yields for government funds grew to 2.64% and 2.25%, respectively. The seven-day and 30-day net yield for prime funds jumped to 2.75% and 2.378%, respectively. The spread between government and prime funds continued to be in a range of 10bps–15 bps.

Table 1

'AAAm' Principal Stability Funds Seven-Day Net Yield (%)
Index Sept-21 Dec-21 Mar-22 Jun-22 Sep-22
S&P Global Ratings 'AAAm' prime MMFs 0.01 0.02 0.15 1.10 2.64
S&P Global Ratings 'AAAm' government MMFs 0.04 0.04 0.26 1.27 2.75

Repo exposure in government funds continues to see a greater allocation by fund managers. During the quarter, the Fed's reverse repurchase facility exceeded the prior quarter month end at $2.4 trillion. Government funds also had a modest increase in agency and Treasury floaters, while Treasury bills had lower allocation in the funds, primarily because of lower supply.

Generally, the composition of prime funds was consistent with the previous quarter. There was slightly greater allocation to repo, offset with a lower allocation to certificates of deposits and bank deposits. Managers also added modestly to their corporate bond exposure.

Managers of government and prime strategies continue to remain short. Although predictions on where the terminal rate will end up and the exact level of rate hikes vary, the funds' maturity profiles remain conservative until they are convinced that the Fed is closer to the end of its tightening cycle. Weighted average maturities moved downward by eight days for government funds and five days for prime funds.

Table 2

'AAAm' Principal Stability Funds Weighted Average Maturity (In Days)
Index Sep-21 Dec-21 Mar-22 Jun-22 Sep-22
S&P Global Ratings 'AAAm' prime MMFs 35 36 32 27 19
S&P Global Ratings 'AAAm' government MMFs 43 41 31 24 19

Table 3

'AAAm' Principal Stability Funds 'A-1+' Credit Quality (%)
Index Sep-21 Dec-21 Mar-22 Jun-22 Sep-22
S&P Global Ratings 'AAAm' prime MMFs 97 97 98 98 98
S&P Global Ratings 'AAAm' government MMFs 65 64 64 67 70

Despite the rapid rise in rates by the Fed's tightening by 150 bps during the quarter, the distribution of net asset values (NAV per share) for funds has been narrower, with only one rated fund pricing below 0.9985. As a result, we increased our surveillance to daily for this fund. It has remained within all of our metrics for 'AAAm' principal stability fund ratings (PSFRs) during the observed period. Funds appear to be mitigating the price volatility by remaining shorter in duration and higher in credit quality.

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Top 10 U.S.Domiciled 'AAAm' MMFs--Government And Prime--By Assets--Key Statistics

Table 4

S&P Global Ratings 'AAAm' U.S. Dollar Principal Stability Funds--Government
Portfolio maturity (days)
Rating Fund name Net assets (Mil. $) WAM (R) WAM (F) Portfolio credit quality 'A-1+' (%)
AAAm JPMorgan U.S. Government Money Market Fund 232,058 18 71 97
AAAm Goldman Sachs Money Market Funds - Goldman Sachs Financial Square Government Fund 227,864 10 77 98
AAAm BlackRock Liquidity Funds FedFund 154,606 20 44 90
AAAm Federated Government Obligations Fund 142,722 13 73 98
AAAm Morgan Stanley Institutional Liquidity Funds - Government Portfolio 142,057 11 63 92
AAAm Fidelity Investments Money Market Government Portfolio 118,126 14 53 99
AAAm State Street Institutional U.S. Government Money Market Portfolio 116,651 16 55 99
AAAm Dreyfus Government Cash Management 112,528 8 63 93
AAAm Allspring Government Money Market Fund 108,901 15 64 95
AAAm BlackRock Liquidity Funds Treasury Trust Fund 103,851 43 75 100

Table 5

S&P Global Ratings 'AAAm' U.S. Dollar Prinicpal Stability Fund--Prime
Portfolio maturity (days)
Rating Fund name Net assets (Mil. $) WAM (R) WAM (F) Portfolio credit quality 'A-1+' (%)
AAAm JPMorgan Prime Money Market Fund 55,811 11 53 64
AAAm Federated Prime Cash Obligations Fund 23,950 13 71 70
AAAm State Treasury Asset Reserve of Ohio (STAR OHIO) 18,705 29 55 77
AAAm Florida PRIME 17,584 20 71 61
AAAm Texas Cooperative Liquid Assets Securities System (TX CLASS) 15,827 31 82 61
AAAm Connecticut State Treasurer's Short-Term Investment Fund 15,719 23 56 82
AAAm Morgan Stanley Institutional Liquidity Funds - Prime Portfolio 15,141 11 38 62
AAAm Federated Institutional Prime Obligations 14,328 15 75 70
AAAm Western Asset Insitutional Liquid Reserves 13,622 15 37 87
AAAm Colorado Local Government Liquid Asset Trust (COLOTRUST PLUS+) 13,006 27 84 66

This report does not constitute a rating action.

Primary Credit Analysts:Joseph Zimbalist, New York +1 8045231867;
Marissa Zuccaro, Centennial + 1 (303) 721 4762;
Secondary Contact:Andrew Paranthoiene, London + 44 20 7176 8416;

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