Reuters Says Slew of T-bills Coming
Reuters writes, "A slew of T-bills coming? Money market funds say 'bring 'em on'." The article explains, "More than $1 trillion in U.S. short-term bills are expected to flood the market over the next 1-1/2 years following the increase in the debt ceiling, as the Treasury replenishes its diminished cash balance while funding the country's huge fiscal deficit. There is, however, no shortage of buyers, with money market funds leading the way. Armed with a record $7.4 trillion in assets as of July 1, money funds, which invest in short-term, low-risk securities such as Treasury bills and repurchase agreements, or repos, are ready to take on more supply." Reuters tells us, "J.P. Morgan, Barclays, and TD Securities have estimated new issuance of Treasury bills alone over the next 18 months of between $900 billion and $1.6 trillion, higher than their initial projections before the debt ceiling resolution. 'It sounds like a large amount of issuance coming from the Treasury, but we welcome it and feel that we will have no trouble accommodating it,' said Susan Hill, senior portfolio manager and head of the government liquidity group at Federated Hermes, with assets under management of $631.1 billion." The piece adds, "Analysts ... said money market funds will likely reallocate out of regular repos into T-bills. Repos have grown to 37% of money funds' assets, J.P. Morgan said in a research note. 'The overall portion of money fund investments in the repo market is still quite large, so it becomes more of a decision of going out of that normal repo transaction into Treasury bills if the value is there,' said Hill of Federated Hermes.... Analysts also pointed to money market funds' continued appeal to investors that should further propel the growth in their assets, which means more cash for T-bills. Money market yields are 170 basis points higher than bank deposits, a historically wide spread, wrote Samuel Earl, U.S. rates strategist at Barclays. Households, which have $10 trillion in time deposits and savings accounts, are likely to continue to move deposits at banks into money funds, he added."
