The ICI's latest weekly "Money Market Mutual Fund Assets" says, "Total money market mutual fund assets decreased by $52.30 billion to $2.613 trillion for the week ended Wednesday, October 16, the Investment Company Institute reported today. Taxable government funds decreased by $36.40 billion, taxable non-government funds decreased by $15.85 billion, and tax-exempt funds decreased by $60 million." After rising almost $100 billion in the 3rd quarter, money fund assets declined by $80 billion over the past three weeks. Year-to-date, money fund assets have declined by $51 billion, or 1.9%.
ICI Chief Economist Brian Reid comments, "Though money market fund outflows picked up as the debt ceiling deadline approached, the flows were modest and well within the range that funds can easily accommodate, given their high liquidity requirements. Specifically, taxable government fund outflows totaled 4 percent of these fund assets, while prime funds had only modest outflows, totaling 1 percent of assets."
The release continues, "Assets of retail money market funds increased by $890 million to $936.66 billion. Taxable government money market fund assets in the retail category decreased by $710 million to $200.19 billion, taxable non-government money market fund assets increased by $1.26 billion to $541.81 billion, and tax-exempt fund assets increased by $340 million to $194.67 billion.... Assets of institutional money market funds decreased by $53.19 billion to $1.677 trillion. Among institutional funds, taxable government money market fund assets decreased by $35.69 billion to $695.89 billion, taxable non-government money market fund assets decreased by $17.11 billion to $909.81 billion, and tax-exempt fund assets decreased by $400 million to $71.03 billion."
In other news, we missed commenting on a Viewpoint by ICI's Brian Reid entitled, "Money Market Funds and the Debt Ceiling: What Do We Know?. Earlier this week, Reid wrote [prior to the extension of the ceiling], "As the U.S. Treasury reaches the limits of its borrowing authority this week, markets and the media are focusing on the risk that the United States will default on its debt and fail to pay interest or principal on maturing Treasury securities, perhaps before the end of October. Some of that attention has fallen on money market funds and how they would be affected by a default."
He continued, "I will explain in detail below, but here are three points worth remembering: 1. Money fund managers already are positioning their portfolios to minimize any impact of a default on the funds and their investors. 2. Outflows from money market funds have been minimal to date, and funds are easily accommodating these outflows. They hold large amounts of liquidity to meet redemptions. 3. No one knows exactly what will happen in the event of a default -- which would be an unfortunate historical first in this country -- but money market funds won't be uniquely affected."
Reid explained, "In general, we know that money market fund managers are taking steps to ensure that their funds maintain continued high levels of liquidity as we approach the second half of October. Some funds are holding more cash; others are selling Treasury securities that mature in late October or early November. Some are investing in later-maturing Treasuries that are less likely to be affected in the immediate aftermath of a default."
He added, "We saw managers take similar action in the summer of 2011, when the United States faced another debt ceiling deadline in addition to market pressures from eurozone debt problems. At that time, money market funds experienced modest outflows -- 4 percent of total assets came out of prime funds, while 8 percent of total assets came out of government funds. But thanks in part to the minimum-liquidity requirements imposed on money market funds by the Securities and Exchange Commission in 2010, the funds met those redemptions and came through the summer of 2011 without experiencing any problems."
