The latest weekly "Money Market Mutual Fund Assets" report shows a surprisingly strong jump in money fund assets, likely due to start-of-quarter dividends, bond coupon payments and funding allotments. While probably temporary, it does appear that money fund assets are struggling to form a bottom at the $2.8 trillion level -- the same level assets stood at in September 2007, at the start of the Subprime Liquidity Panic.
ICI's release says, "Total money market mutual fund assets increased by $17.83 billion to $2.830 trillion for the week ended Wednesday, July 7, the Investment Company Institute reported today. Taxable government funds decreased by $10.57 billion, taxable non-government funds increased by $22.43 billion, and tax-exempt funds increased by $5.97 billion. Assets of retail money market funds increased by $6.53 billion to $988.20 billion. Taxable government money market fund assets in the retail category increased by $1.42 billion to $172.53 billion, taxable non-government money market fund assets increased by $2.00 billion to $602.50 billion, and tax-exempt fund assets increased by $3.11 billion to $213.17 billion."
It adds, "Assets of institutional money market funds increased by $11.30 billion to $1.841 trillion. Among institutional funds, taxable government money market fund assets decreased by $12.00 billion to $688.41 billion, taxable non-government money market fund assets increased by $20.44 billion to $1.014 trillion, and tax-exempt fund assets increased by $2.86 billion to $138.71 billion."
After averaging $17 billion a week in outflows throughout 2010, money fund asset declines have slowed to an average of just 2.6 billion over the past 8 weeks. But year-to-date, money fund assets remain down by $463 billion, or 14.1%, and over 52 weeks money fund assets remain down by an eye-popping $838 billion, or 22.0%. Nonetheless, the outflows are certainly slowing, and the inflows into competing products -- banks, bonds, etc. -- appear to be experiencing fatigue too.
The most recent (July) issue of Money Fund Intelligence, our monthly newsletter ($500/yr) commented, "In the 12 months through May, the Federal Reserve's data shows money fund assets falling by $896 billion, or 25.5%, while bank savings rose by $613 billion, or 13.8%. But there is recent evidence that the shift from money funds into banks has slowed dramatically." Bank savings inflows slowed dramatically in May, and the FDIC's recent capping of rates at 0.25% instead of 0.5% in TAG "noninterest bearing account rates" is bound to push money out of banks. (See our March 25 News "FDIC's TLGP TAG Backing 834 Billion in Non-Interest-Bearing Accounts" and our Nov. 24, 2009, News "Unlimited FDIC Transaction Account Guarantee Insurance Fading Away".)
