ICI's latest "Money Market Fund Assets" report shows overall money fund assets rising for the 7th week in a row, increasing by $101 billion since 10/19 and hitting their highest level since the first week in August. Total assets appear intent on erasing their modest year-to-date deficit; they're now down just $23 billion, or 0.8%. MMF assets have seen year-end growth spurts in each of the past 5 years, so it appears likely we'll end the year with assets up slightly for the 5th year in a row. Prime money market fund assets inched higher again in the latest week, their 4th increase in the past five weeks. Prime MMFs began November with their first increase since July 13 and have risen $3.8 billion since 11/2. Tax Exempt MMFs also rose again for the 7th week out of the past eight. We review the latest statistics, and also cover testimony from Treasury Strategies' Tony Carfang to a House Subcommittee below. (Note: Crane Data also posted the latest versions of our "Funds" and "Portfolio Holdings" data files from the SEC's Form N-MFP data series here. Our regular December Money Fund Portfolio Holdings will also be released later today.)
The release says, "Total money market fund assets increased by $16.87 billion to $2.74 trillion for the week ended Wednesday, December 7, the Investment Company Institute reported today. Among taxable money market funds, government funds increased by $15.21 billion and prime funds increased by $910 million. Tax-exempt money market funds increased by $760 million." Total Government MMF assets, which represent 81.5% of all money funds, stand at $2.229 trillion, while Total Prime MMFs, which total 13.8%, stand at $376.5 billion. Tax Exempt MMFs total $130.8 billion, or 4.8%.
ICI explains, "Assets of retail money market funds increased by $3.77 billion to $975.87 billion. Among retail funds, government money market fund assets increased by $3.15 billion to $597.81 billion, prime money market fund assets decreased by $180 million to $251.88 billion, and tax-exempt fund assets increased by $810 million to $126.18 billion.... Assets of institutional money market funds increased by $13.09 billion to $1.76 trillion. Among institutional funds, government money market fund assets increased by $12.06 billion to $1.63 trillion, prime money market fund assets increased by $1.09 billion to $124.67 billion, and tax-exempt fund assets decreased by $50 million to $4.58 billion."
The update notes, "ICI reports money market fund assets to the Federal Reserve each week. Data for previous weeks reflect revisions due to data adjustments, reclassifications, and changes in the number of funds reporting. Weekly money market assets for the last 20 weeks are available on the ICI website. For more information about the implementation of new money market fund rules by the Securities and Exchange Commission (SEC), please see our ICI Viewpoints."
Prior to this week's Prime inflows, the past 4 weeks had seen (admittedly modest) inflows of $3.8 billion in total. Prime MMFs had declined by 16 weeks in a row prior to 11/9, dropping by $663.1 billion. YTD, Prime MMF assets have declined by $907.3 billion, or 70.7%, and they've declined by $1.082 trillion, or 74.2%, since 10/31/15 (just prior to the start of the massive Prime to Government migration).
Government money funds have gained $104.6 billion over the past 7 weeks, and they increased by $686.0 billion over the past 19 weeks. Govt MMFs are up by $1.008 trillion YTD (82.6%) and they're up by $1.215 trillion (119.9%) since 10/31/15. Tax Exempt MMFs have risen for 7 out of the past 8 weeks, gaining $3.2 billion. They'd fallen by $68.5 billion the previous 14 weeks. Tax Exempt MMFs are down by $123.6 billion YTD (-48.6%) and they're down by $114.2 billion (-46.6%) since 10/31/15.
Also, a press release entitled, "Treasury Strategies Testifies on 'The Impact of Regulations on Short-Term Financing' to the U.S. Congress," explains, "Anthony Carfang, Managing Director of Treasury Strategies, a division of Novantas, Inc., testified today at the U.S. House of Representatives on "The Impact of Regulations on Short-Term Financing." Treasury Strategies supports well-thought-out efforts to improve economic efficiency and to reduce the likelihood of another systemic failure."
It explains, "Citing experiences of Treasury Strategies' corporate clients, Carfang raised serious concerns about unintended consequences of the simultaneous implementation of Dodd-Frank, Basel III, Money Market Fund regulations." He cites "Impaired market liquidity; Higher costs and less certainty for borrowers; Reduced access to credit for businesses; Reduced access to capital for state and local governments; and Reduced capacity for economic growth" as concerns.
Treasury Strategies statement explains, "Money Market Mutual Funds, a primary cash management tool for corporate treasurers is a case in point. Prime funds, a key funding source for corporations and banks, have declined 74% or $1.04 trillion since the new rules were announced. Tax exempt funds, a key funding source for municipalities, school districts and hospitals, have declined 51% or $132 billion. Almost all of the assets have moved into Government or Treasury Funds. This $1.1 trillion movement of capital out of the private sector raises the cost of capital and limits credit available for America's businesses and communities."
"Well-thought-out efforts to mitigate the adverse consequences of these regulations and restore the smooth flow of capital in the U.S. economy are essential," noted Cathy Gregg, also a Treasury Strategies Managing Director.
Carfang comments, "Recent financial regulations such as Dodd-Frank, Basel III, Money Market Fund regulations and many more, separately and in concert with each other, have triggered regulatory and compliance cost burdens that radiate through the economy. Ultimately, this is choking the U.S. economy and paralyzing American businesses and financial firms that had nothing to do with the financial crisis.... One place to start is to dial back the most recent MMF regulations, which have caused $1.1 trillion in assets to flee the private sector."
