ICI released its latest monthly "Money Market Fund Holdings" summary, which reviews the aggregate daily and weekly liquid assets, regional exposure, and maturities (WAM and WAL) for Prime and Government money market funds. (For more, see our Oct. 13 News, "Oct. MF Portfolio Holdings: Repos Surpass Treasuries as Largest Slice." Also: Please join us for our European Money Fund Symposium Online this Thursday, Oct. 21 from 9:30am-12:00pm Eastern. Register here for this free, 2 1/2 hour event.)
The MMF Holdings release says, "The Investment Company Institute (ICI) reports that, as of the final Friday in September, prime money market funds held 30.4 percent of their portfolios in daily liquid assets and 47.8% in weekly liquid assets, while government money market funds held 80.8 percent of their portfolios in daily liquid assets and 89.4% in weekly liquid assets." Prime DLA was down from 31.7% in August, and Prime WLA decreased from 48.6%. Govt MMFs' DLA decreased from 81.3% in August and Govt WLA decreased from 89.8% from the previous month.
ICI explains, "At the end of September, prime funds had a weighted average maturity (WAM) of 42 days and a weighted average life (WAL) of 59 days. Average WAMs and WALs are asset-weighted. Government money market funds had a WAM of 33 days and a WAL of 81 days." Prime WAMs were one day lower than August, while WALs were two days lower than the previous month. Govt WAMs and WALs were three days and two days lower than August, respectively.
Regarding Holdings By Region of Issuer, the release tells us, "Prime money market funds' holdings attributable to the Americas rose from $185.34 billion in August to $206.69 billion in September. Government money market funds' holdings attributable to the Americas rose from $3,567.89 billion in August to $3,608.59 billion in September."
The Prime Money Market Funds by Region of Issuer table shows Americas-related holdings at $206.7 billion, or 45.0%; Asia and Pacific at $84.9 billion, or 18.5%; Europe at $162.2 billion, or 35.3%; and, Other (including Supranational) at $5.7 billion, or 1.3%. The Government Money Market Funds by Region of Issuer table shows Americas at $3.609 trillion, or 91.0%; Asia and Pacific at $121.6 billion, or 3.1%; Europe at $228.5 billion, 5.8%, and Other (Including Supranational) at $8.9 billion, or 0.2%.
In related news, in its most recent "Short-Term Market Outlook and Strategy," J.P. Morgan also includes a "September MMF holdings update." The piece tell us, "This September, AUMs of taxable MMFs increased overall by $13bn. As with last month, we continue to see flows into government money funds accompanied by flows out of prime money funds: government MMFs surpassed $4tn in AUMs after a month-over-month increase of just over $20bn, while prime MMF AUMs fell again, falling almost $8bn from August's level to $845bn."
They explain, "With the debt ceiling increased but still looming, MMFs' usage of the Fed's RRP has only expanded, now up 37% to $1.21tn for government MMFs and up 38% to $220bn for prime MMFs since August's end.... This growing exposure continues to overtake other holdings sectors, with government MMFs seeing a continual decline in holdings of T-bills (-$294bn MoM) and Agencies (-$31bn MoM), and prime MMFs less and less exposed to banks (-$30bn MoM) and Treasuries (-$26bn MoM)."
JPM Securities' Teresa Ho, Alex Roever and Holly Cunningham write, "Following the September FOMC announcement that the ON RRP facility's counterparty limit would be doubled from $80bn to $160bn, 2 counterparties have since gone in for above $80bn. The largest counterparty allocated $89bn, versus $66bn in August and $58bn in July. Additionally, there were 6 counterparties that went in for $60-$80bn, 6 counterparties that went in for $40-60bn, 6 counterparties that went in for $20-40bn, and 58 counterparties that went in for less than $20bn (Exhibit 5). In aggregate, the number of Fed RRP MMF counterparties increased by 8 month over month, from 70 to 78."
They continue, "Quarter-end gave way to a large decline in Treasury repo and TD balances among government and prime MMFs, respectively. Prime MMFs saw a decrease of $27bn in TDs month over month, and government MMFs saw a decrease of $60bn or 12% in Treasury repo (excluding RRP), now making up only about 20% of government MMFs' overall repo holdings."
JPM says, "Based on MMF holdings data as of September 30th, MMFs held just under $300bn in T-bills expiring in December, $130bn in January, and $90bn in February, all with a grand majority held by government MMFs. With the debt ceiling officially pushed back to December 3rd, an important question is how MMFs will potentially reposition their portfolios in response -- namely, whether there will be a significant sell-off of Treasuries expiring on-or-after the new drop-dead date. We don't anticipate that MMFs will move to liquidate bills ahead of potential default -- given the amounts they hold in the RRP, they have plenty of liquidity should redemptions increase. Plus, given the limited availability of cash alternatives in the market, we see the risk of shareholder liquidations as minimal."
Finally, they add, "Overall, as anticipated, the Fed's RRP has seen tremendous and increasing use by MMFs as they focus on continuing to build liquidity heading into December. This trend has pushed MMF holdings out of banks and T-bills in comparison, and it could potentially further impact bills expiring soon after the new deadline in anticipation of default-driven shareholder redemptions. On the margin, this could put more pressure on money market yields, but this might open an opportunity for less risk-averse market participants to buy cheap in seeing that a Treasury technical default is, at this point, very likely not to occur."
