Treasury: sweep assets fell as rates declined.

• Author: Marshall, Jeffrey
• Position: BusinessBriefs - Brief Article

Sweep assets generated by company funds in sweep accounts declined in 2003 by 3 percent, or $7 billion, according to Treasury Strategies 2004 Commercial Bank Sweep Survey. The decline reverses 11 years of consecutive growth that saw sweep assets rocket from $20 billion to $320 billion.

In a sweep program, banks automatically invest customer deposit balances. In return, banks charge a fixed monthly fee and earn a spread on invested balances. As interest rates have dropped, however, the yield on sweeps has dropped below the product's monthly fee for many businesses, prompting them to drop the product.

"Sweep assets grew rapidly because of the product's tremendous convenience," notes Chrystal Pozin, manager of Treasury Strategies Sweep Survey. "But the recent decline in interest rates has caused smaller firms to exit the product, leading to the decline in assets."

A decline in the number of sweep accounts began in 2002 and continued through 2003. Pozin says that companies shifted sweep assets into deposit accounts and direct purchases of overnight investments...