The Federal Reserve's latest quarterly "Flow of Funds Accounts of the United States - Z.1" shows money fund assets flat in the third quarter of 2010, and shows a continued shift away from Treasuries and Agencies and towards repo and time deposits. The Flow of Funds contains two main tables related to money market funds, including L. 206 "Money Market Mutual Fund Shares," which shows investor types in money funds, and L.121 "Money Market Mutual Funds," which shows investments held by money funds. The most recent Z.1 report continues to show that households, funding corporations and nonfinancial corporate businesses remain the dominant categories of money fund shareholders, and flows from all of these major sectors were flat in Q3.
The household sector remains by far the largest holder of money fund shares with $1.13 trillion, or 41.0% of the $2.746 trillion tracked by the Fed in Q3. Households reduced their money fund holdings by a mere $14 billion in the second quarter, though they've reduced holdings by $232 billion, or 17.1%, over the 1-year through Sept. 30, 2010. Overall money fund assets declined by $617 billion, or 18.3%, over the same 12 months.
Funding corporations, defined by the Fed as "funding subsidiaries, nonbank financial holding companies, [and] custodial accounts for reinvested collateral of securities lending operations," remain the second largest holder of money fund shares with $708 billion, or 25.8% of assets. This is unchanged in the latest quarter but down $236 billion, or 25.0%, in the latest year. Funding corporations have shrunk their money fund balances from a high of $1.071 trillion at year-end 2008, a decline of $363 billion, or 33.9%. (Households have shrunk balances by $446 billion, or 28.4% during this same period.) Nonfinancial corporate businesses, rank third among money fund investors, according to the Fed's quarterly Z.1 series, with $533 billion, or 19.4% of assets. Corporates actually increased their money fund holdings slightly in latest quarter.
The Fed's money fund holdings table shows "Time and savings deposits" and "Security RPs" (repos) increasing by $38 billion and $30 billion, respectively in Q3. These two categories represent the largest holdings of money funds with $470 billion, or 17.1% of assets, and $493 billion, or 17.9% of assets, respectively. Agency and GSE backed securities, the third largest category at 15.1%, and Treasury securities the sixth largest at 11.3%, showed big declines, falling $35 billion and $41 billion, respectively. Open market paper (CP) now ranks fourth among holdings with $386 billion (14.0%), and Municipal securities now ranks fifth $332 billion (12.1%) each.
Consulting firm Treasury Strategies put out a press release late yesterday on the data entitled, "Corporate Cash Increases As Economic Uncertainty Continues According to Treasury Strategies," which says, "The Federal Reserve today reported corporate cash balances spiked to $1.93 trillion - a 38% increase since the first quarter of 2009 – representing $530 billion. This significant increase indicates companies are still accumulating cash rather than redeploying it."
Cathy Gregg, Partner of Treasury Strategies, comments, "From our work with clients, as well as survey data collected this week, we see corporations have experienced very strong growth in cash flow from operations. Since total corporate cash continues to grow, these findings together tell us corporations are still not comfortable with fully redeploying added cash, partly due to an uncertain economic outlook."
Today's Wall Street Journal also writes "Companies Cling to Cash, Coffers Swell to 51-year high as Cautious Firms Put Off Investing in Growth". The article says, "Corporate America's cash pile has hit its highest level in half a century. Rather than pouring their money into building plants or hiring workers, nonfinancial companies in the U.S. were sitting on $1.93 trillion in cash and other liquid assets at the end of September, up from $1.8 trillion at the end of June, the Federal Reserve said Thursday. Cash accounted for 7.4% of the companies' total assets -- the largest share since 1959."
For more on the Fed's Flow of Funds, visit www.federalreserve.gov/releases/z1/Current/ or e-mail info@cranedata.us to request Crane Data's Excel files of the Fed's money fund tables.
