Amid an asset shortage, yields on money market funds are rapidly declining, with sub-1% returns becoming increasingly common.
Latest data shows over 100 money market funds have seen their 7-day annualized yields fall below 1%, including top performers like Tianhong Yu’e Bao, now hovering near the threshold. Consequently, more than 30 funds have been forced to cut management fees due to contractual triggers, while many others have imposed purchase restrictions to safeguard returns.
**Over 100 Funds Yield Below 1%** Wind data reveals that as of December 19, 123 money market funds reported 7-day annualized yields under 1%. Products like Tianfeng Jinguanjia, Shan Zheng Zichan Riritianli C, GF Xianjinbao A, and Jinying Xianjin Zengyi E even dipped below 0.5%.
Tianhong Yu’e Bao, the largest money market fund by size, saw its yield drop to 1.02%, briefly touching 1.001% on December 4. Other major funds, including Jianxin Jiaxinbao A, Huaxia Caifubao A, and Yifangda Yilicai A, posted yields of 1.15%, 1.06%, and 1.09%, respectively.
In its Q3 report, Tianhong Yu’e Bao’s manager noted that deposit shifts have strained banks’ liquidity management, increasing reserve demands and reducing base money supply in interbank markets. This has amplified rate volatility, while bond and stock markets exhibited a seesaw effect. Though banks face limited liability-side pressure, interbank certificate of deposit (NCD) adjustments lagged bond markets, with overall yields continuing to decline as assets mature.
Ge Shang Fund analyst Bi Mengran attributed the yield slump to falling risk-free rates, dragging down returns on bank deposits and bond repurchases, alongside abundant liquidity exacerbating the asset shortage. Funds have responded by cutting leverage and shortening durations, further pressuring yields.
However, a few funds, such as Bank of China Ruyibao A (1.99%), Jiahe Huobi A (1.99%), and Pengyang Xianjintongli B (1.96%), maintained yields near 2% through aggressive duration and leverage strategies.
**Forced Fee Cuts** As yields decline, multiple funds have slashed fees to comply with contracts. For instance, Everbright Sunlight Cash Treasure reduced its management fee from 0.90% to 0.25% on December 19 after its estimated yield fell below twice the demand deposit rate, reverting to 0.90% a day later. Similarly, China Merchants Securities Zhiyuan Tian Tianli cut fees to 0.30% under similar triggers.
Over 30 funds adjusted fee structures in December alone as yields breached contractual thresholds.
**Purchase Restrictions to Shield Returns** Funds are increasingly limiting subscriptions, with some halting purchases entirely. For example, Bank of Shanghai Huiyingli E and Huizengli E will cap daily purchases at CNY 100,000 and CNY 50,000 starting December 22. Others, like Fuan Da Xianjintong, suspended subscriptions via third-party platforms to ensure stable operations, though direct sales channels remain open.
Industry sources link these moves to regulatory guidelines tightening settlement timelines and banning terms like "real-time redemption" to curb arbitrage. Some investors previously exploited delays in fund transfers to earn returns on both fund units and idle cash, diluting existing holders’ gains and complicating liquidity management.
"Hence, restrictions target specific third-party distributors," an insider explained, noting firms aim to protect investor interests.