Money market mutual fund assets rebounded on Tuesday following some of the worst daily asset declines in recent history. Crane Data's Money Fund Intelligence Daily shows money fund assets rose by $6 billion yesterday, after falling by $37.3 billion on Monday and $41.9 billion on Friday, the last day of July. (Note that some of Crane's daily asset totals use the prior day's data due to our early morning publication time.) Assets fell by almost 5.0% in the week through Monday, a drop of $121.7 billion, though the weekly drop has now been cut to $106.6 billion. Money funds declined by approximately $107.9 billion in July, the largest drop since April 2010.

Treasury money funds, led by Institutional funds, showed the largest percentage declines in the week through August 1, falling 8.2%, or $28.6 billion (to $321.5 billion), but they bounced the most yesterday (up $2.2 billion). Government money funds also dropped sharply in the 7 days through 8/1, down 6.6%, or $27.8 billion (to $392.5 billion), while Prime funds too saw declines (down 4.3%, or $63.5 billion to $1.399 trillion). Tax-Exempt money fund assets inched down by 0.7% ($1.9 billion), and Retail Taxable assets overall also showed minimal declines (-0.7%, or $5.2 billion).

Treasury Bill rates have moved inversely to Treasury money fund assets over the past week-and-a-half. According to the Treasury, the rate on a 4-week T-bill rose from 0.01% on July 20 to a recent high of 0.17% on Friday. Rates declined to 0.14% on Monday and plunged back to 0.05% yesterday. The brief spike in yields is already gone, though money fund yields may inch higher in coming days as the jump works its way through some funds. (Our Crane 100 Money Fund Index, an average of the 100 largest taxable money funds, recently inched up to 0.04% from 0.03%.) Finally, Fed funds rates remained elevated yesterday, however, closing at 0.16% after peaking at 0.17% Monday.

Following the debt ceiling limit increase, Reuters wrote "Money fund managers breathe easier on debt deal", which says, "Pressures on money-market mutual funds have ebbed now that a deal to raise the federal debt ceiling has been reached in Washington, fund industry executives said on Tuesday."

The article quotes John Donohue, CIO for money market funds at JPMorgan Chase & Co's asset-management arm, "A lot of the uncertainty was just cleared up, so that's a positive." Reuters adds, "He and others expressed confidence money that left the funds because of the recent uncertainty would return."

Reuters' also quotes Sue Hill, senior portfolio manager for Federated Investors, "Investor concerns have certainly lessened considerably," said Hill said flows within the company's money funds had returned to "typical" levels since Monday after the outlines of a deal were announced." "We're glad to have this deal signed," she said.

Note: For more detailed information on money fund asset flows and for more coverage on recent events, see the pending August issue of Money Fund Intelligence and our latest MFI Daily publication. (Subscriptions are required.)

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