ICI's latest "Money Market Fund Assets" report shows an increase in Prime money fund assets for the second week in a row (last week saw the first increase since July 13) and an increase in Tax Exempt MMFs for the 5th week in a row. The release says, "Total money market fund assets increased by $3.32 billion to $2.69 trillion for the week ended Wednesday, November 16, the Investment Company Institute reported today. Among taxable money market funds, government funds increased by $1.06 billion and prime funds increased by $1.46 billion. Tax-exempt money market funds increased by $810 million."
It explains, "Assets of retail money market funds increased by $7.54 billion to $972.08 billion. Among retail funds, government money market fund assets increased by $6.58 billion to $593.87 billion, prime money market fund assets increased by $420 million to $252.70 billion, and tax-exempt fund assets increased by $540 million to $125.51 billion."
ICI's weekly continues, "Assets of institutional money market funds decreased by $4.22 billion to $1.71 trillion. Among institutional funds, government money market fund assets decreased by $5.53 billion to $1.59 trillion, prime money market fund assets increased by $1.03 billion to $124.19 billion, and tax-exempt fund assets increased by $270 million to $4.48 billion."
Prior to the past 2 weeks' worth of inflows ($4.1 billion in total), prime MMFs had declined by 16 weeks in a row, dropping by $663.1 billion. YTD, Prime MMF assets have declined by $906.9 billion, or 70.6%, and they've declined by $1.082 trillion, or 74.2%, since 10/31/15. Government money funds have also gained $4.1 billion over the past 2 weeks, and they increased by $679.6 billion over the 16 weeks prior.
Govt MMFs are up by $958.8 billion YTD (78.5%) and they're up by $1.116 trillion (115.0%) since 10/31/15. Tax Exempt MMFs have risen for 5 weeks in a row, up $2.4 billion. after falling by $68.5 billion the previous 14 weeks. Tax Exempt MMFs are down by $124.4 billion YTD (-48.9%) and they're down by $115.0 billion (-46.9%) since 10/31/15.
In other news, the Treasury's Office of Financial Research updated its U.S. Money Market Fund (MMF) Monitor yesterday with data as of Oct. 31, 2016. Spokesperson John Poirier comments, "In October, outflows from prime money market funds continued, but at a slower pace. Assets of prime funds declined an additional $167 billion. Assets of government funds increased $176 billion. The total assets invested in money market funds were still about $2.9 trillion."
He explains, "Since the beginning of the year, prime funds have declined $991 billion and government funds have grown $965 billion, largely in anticipation of reforms that took effect on Oct. 14. Government funds now account for 76 percent of total assets in money market funds, compared with 41 percent at the beginning of the year. Although a shift has occurred from prime to government funds, total assets in money market funds have been little changed as a result of the reform."
The OFR update notes, "The reforms require prime and tax-exempt money market funds to split their investor base into retail and institutional investors. Funds for institutional investors must let their net asset value float with the value of the underlying portfolio's assets. Both retail and institutional funds also must adopt liquidity fees and restrictions on redemptions called "gates." Fees and gates are tools for limiting cash outflows during market stress. Government funds are not required to adopt liquidity fees and gates. They can continue to sell and redeem their shares at a stable net asset value."
It adds, "Large inflows into government money market funds support demand for short-term Treasuries, government agency securities, and repurchase agreements (repos) collateralized by these securities. The OFR's MMF Monitor shows that money market funds' investments in the Federal Reserve's reverse repo (RRP) facility were $198 billion. This is about $71 billion higher than the average for months other than quarter ends. Usually, investments in the RRP facility increase at quarter end, when banks reduce their borrowing in the money market to improve balance sheet ratios."
Finally, the OFR writes, "Investments in bank debt continued to decline in October. An OFR blog on Sept. 22 explained that the sharp decline in the assets of prime money market funds had ripple effects. For example, demand has declined for commercial paper and banks' certificates of deposit. As a result, short-term rates have risen, such as the benchmark three-month London Interbank Offered Rate (LIBOR). In October, the three-month LIBOR stabilized at about 0.88 percent, although it later increased due to developments unrelated to money fund reform."
