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U.S. Domestic 'AAAm' Money Market Fund Trends (First-Quarter 2025)

(Editor's Note: For insights on rated local government pools, see "'AAAm' Local Government Investment Pool Trends," published April 30, 2025.)

'AAAm' MMF Indicators

S&P Global Ratings' 'AAAm' money market fund (MMF) indicators are metrics of U.S. domestic managed funds that seek to maintain principal value and limit exposure to principal losses due to credit risk, as defined in our principal stability fund ratings (PSFR) criteria. These MMF indicators provide a benchmarking tool of the 'A-1+' credit quality, portfolio composition, maturity distribution, net asset movements, and yields of 'AAAm' principal stability rated funds.

The MMF indicators demonstrate the investment practices of funds conforming to the PSFR criteria. An individual fund's metrics below S&P Global Ratings' 'AAAm' MMF indicators may indicate a more conservative approach to investment, while a fund's risk metrics well above the average may signal a more aggressive approach, albeit undertaken within the 'AAAm' PSFR constraints.

MMF Flows Slow

Rated MMF assets were stable quarter over quarter. Government and prime MMFs experienced modest growth early in the year, which was partially related to institutional investors building up cash amid the uncertainty around the U.S. administration's policies. Near the end of the first quarter, rated MMFs saw outflows in line with seasonal patterns. We expect that MMF assets will experience limited growth until the tax season settles.

Chart 1

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Seven-day net yields for rated government and prime MMFs continued to decline. The Federal Reserve didn't change its policy rate in its January or March meetings; accordingly, seven-day net yields for rated government and prime MMFs fell 15 basis points and 11 basis points, respectively--smaller declines than in the prior quarter. In the past 12 months, seven-day net yields for rated MMFs have fallen roughly 100 basis points overall.

S&P Global Ratings economists last month revised their forecast for the U.S. policy rate due to the fluid nature of tariff implementation, GDP growth, and inflation. They currently expect one Fed rate cut in 2025 instead of two, and they see the federal funds rate ending the year at 4.00%-4.25% (see "Economic Outlook U.S. Q2 2025: Losing Steam Amid Shifting Policies," published March 25, 2025, on RatingsDirect).

Table 1

'AAAm' principal stability funds seven-day net yield (%)
Index June 2024 September 2024 December 2024 March 2025
S&P Global Ratings 'AAAm' government MMFs 5.17 4.84 4.32 4.17
S&P Global Ratings 'AAAm' prime MMFs 5.30 4.96 4.47 4.36
MMF--Money market fund.

Chart 2

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Chart 3

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Credit In Context: Exposures In MMFs

Government portfolio composition

In contrast with prior quarters, repurchase agreement (repo) exposure in rated government MMFs increased in the first quarter, and Treasury bill exposure decreased correspondingly. Average repo allocation moved to 39% from 35% the previous quarter, which included additional usage of the Fed's reverse repo program. The shift into repo was a response to lower Treasury bill supply. The Treasury Department is expected to suppress Treasury bill issuance until there's a resolution with respect to the federal debt ceiling. Allocations to U.S. agency securities in rated government MMFs were relatively unchanged.

Chart 4

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Chart 5

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Prime MMF portfolio composition

Rated prime MMFs relied less on repo in the first quarter, with average repo exposure decreasing to 18% from 24%. Managers reallocated mostly into commercial paper and bank deposits. We observed managers also adding corporate floaters and asset-backed commercial paper (ABCP) as a function of higher supply during the quarter. According to Federal Reserve Economic Data, ABCP outstanding reached $375 billion, the highest level recorded in the past five years. Treasury bill exposure decreased to 2% from 3% over the quarter.

Chart 6

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Chart 7

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Rated government funds in the first quarter experienced a slight decrease in effective 'A-1+' credit quality related to lower Treasury bill exposure. Effective 'A-1+' credit quality in rated prime funds was unchanged.

Table 2

'AAAm' principal stability funds 'A-1+' credit quality (%)
Index June 2024 September 2024 December 2024 March 2025
S&P Global Ratings 'AAAm' government MMFs 96 96 97 96
S&P Global Ratings 'AAAm' prime MMFs 68 67 64 64
MMF--Money market fund.

Chart 8

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MMF Managers Are Waiting For Clarity

While the norm of the last 12 months has been larger movements in average weighted-average maturities (WAMs), both rated government and prime funds moved little in the first quarter. Rated government MMFs reduced WAM by one day on average, and rated prime MMFs held steady. Managers will likely remain hesitant to move WAMs meaningfully until there's more certainty with respect to policy and the markets.

Table 3

'AAAm' principal stability funds weighted average maturity (in days)
Index June 2024 September 2024 December 2024 March 2025
S&P Global Ratings 'AAAm' government MMFs 37 32 39 38
S&P Global Ratings 'AAAm' prime MMFs 24 31 35 35
MMF--Money market fund.

Chart 9

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Stability In MMFs

The distribution of net asset values (NAVs) per share for rated MMFs was stable in the first quarter. At the end of March, the range for rated fund NAVs was 0.9995-1.0009.

Chart 10

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

Table 4

S&P Global Ratings 'AAAm' U.S. dollar principal stability funds (government)
--Portfolio maturity (days)--
S&P Global Ratings' PSFR Fund name Net assets (mil. $) WAM (R) WAM (F) Portfolio credit quality, A-1+ (%)
AAAm JPMorgan U.S. Government Money Market Fund 265,877 31 95 91
AAAm Goldman Sachs Money Market Funds - Goldman Sachs Financial Square Government Fund 242,012 38 105 82
AAAm Fidelity Investments Money Market Government Portfolio 233,523 21 77 95
AAAm JPMorgan 100% U.S. Treasury Securities Money Market Fund 206,818 42 81 100
AAAm State Street Institutional U.S. Government Money Market Portfolio 180,528 34 77 94
AAAm Federated Hermes Government Obligations Fund 172,165 28 92 92
AAAm BlackRock Liquidity Funds FedFund 171,530 30 81 98
AAAm Morgan Stanley Institutional Liquidity Funds - Government Portfolio 144,302 41 101 98
AAAm BlackRock Liquidity Funds Treasury Trust Fund 132,194 38 79 100
AAAm Dreyfus Government Cash Management 132,145 22 78 92
PSFR--Principal stability fund rating. WAM (R)--Weighted average maturity to reset. WAM (F)--Weighted average maturity to final.

Table 5

S&P Global Ratings 'AAAm' U.S. dollar principal stability funds (prime)
--Portfolio maturity (days)--
S&P Global Ratings' PSFR Fund name Net assets (mil. $) WAM (R) WAM (F) Portfolio credit quality (%)
AAAm JPMorgan Prime Money Market Fund 86,725 32 45 66
AAAm Federated Hermes Prime Cash Obligations Fund 82,335 29 61 67
AAAm BlackRock Liquidity Funds TempCash 20,680 35 50 60
AAAm Federated Hermes Institutional Prime Obligations 16,874 28 56 68
AAAm Morgan Stanley Institutional Liquidity Funds - Prime Portfolio 14,622 36 43 76
AAAm State Street Money Market Portfolio 12,102 19 33 80
AAAm Invesco Premier Portfolio 7,895 21 67 73
AAAm Western Asset Institutional Liquid Reserves 7,842 22 64 61
AAAm Western Asset Institutional Cash Reserves Ltd. 5,597 37 68 63
AAAm Morgan Stanley Institutional Liquidity Funds - Money Market Portfolio 2,418 43 55 75
PSFR--Principal stability fund rating. WAM (R)--Weighted average maturity to reset. WAM (F)--Weighted average maturity to final.

This report does not constitute a rating action.

Primary Credit Analyst:Marissa Zuccaro, Englewood + 1 (303) 721 4762;
marissa.zuccaro@spglobal.com
Secondary Contact:Michael Masih, New York + 1 (212) 438 1642;
michael.masih@spglobal.com

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