The Federal Reserve's huge Z.1 "Flow of Funds" statistical release for the Fourth Quarter of 2012 was published yesterday, and the four tables it includes on money market mutual funds show that the Household sector remain the largest investor segment and that SecurityRPs (repo) remain the largest investment segment. Table L.206 shows the Household sector with $1.110 trillion, or 41.9% of the $2.650 trillion held in Money Market Mutual Fund Shares as of Q42012. Household shares increased by $66 billion in the 4th quarter, but they fell by $4 billion during 2012. Household sector money fund assets remain well below their record level of $1.582 trillion at yearend 2008.

Funding corporations, which includes securities lenders, remained the second largest investor segment with $589 billion, or 22.2% of money fund shares. They decreased by $18 billion in the latest quarter and fell by $62 billion in 2012. (Funding corporations held over $1.025 trillion in money funds at the end of 2008.) Nonfinancial corporate businesses were the third largest investor segment, according to the Fed's data series, with $445 billion, or 16.8% of the total.

State and local governments ranked a distant fourth in market share among investor segments with 4.5%, or $119 billion, while the Rest of the world category jumped (up $49 billion in Q4) into fifth place with 4.2% of assets ($112 billion). Private pension funds held $96 billion (3.6%), Nonfinancial noncorporate businesses held $79 billion (3.0%), State and local government retirement held $42 billion (1.6%), Life insurance companies held $32 billion (1.2%), and Property-casualty insurance held $26 billion (1.0%), according to the Fed's Z.1 breakout.

The Flow of Funds Table L.119 shows `Money Market Mutual Fund Assets largely invested in Security RPs ($545 billion, or 20.6%), Treasury securities ($458 billion, or 17.3%), and Time and savings deposits ($435 billion, or 16.4%). Money funds also hold large positions in Agency and GSE backed securities ($344 billion, or 13.0%), Open market paper (we assume this is CP, $341 billion, or 12.9%), and Municipal securities ($337 billion, or 12.7%). The remainder is invested in Corporate and foreign bonds ($102 billion, or 3.9%), `Foreign deposits ($43, or 1.6%), Miscellaneous assets ($29 billion, or 1.1%), and Checkable deposits and currency ($17 billion, or 0.6%).

During 2012, Security RPs (up $61 billion), Time and savings deposits (up $55 billion) and Municipal securities (up $40 billion) showed large increases, while Agencies (down $60 billion), "Miscellaneous" (down $44 billion) and Corporate and foreign bonds (down $28 billion) showed large declines. (We're not aware of a detailed definition of the Fed's various categories, so aren't sure in some cases how to map some of these figures against other data sets.)

In other news, Wells Fargo Advantage Funds published its latest "Overview, strategy, and outlook." It discusses the expiration of unlimited deposit insurance, saying, "The Federal Deposit Insurance Corporation's (FDIC's) unlimited insurance coverage for balances in noninterest-bearing transaction accounts (NIBTA) expired at the end of 2012 and insurance coverage reverted to the $250,000 limit adopted in October 2008. After watching NIBTA balances increase steadily since the cap was removed and unlimited insurance was in effect, we, along with most market observers, believed we would see a decrease in NIBTA balances if the unlimited insurance was allowed to lapse."

Wells explains, "In fact, NIBTA balances exceeding the $250,000 limit increased by $49.6 billion during the fourth quarter of 2012. This increase, coupled with an $80 billion increase in total institutional money market fund assets over the same period, goes a long way toward explaining compressed credit spreads and declining yields on term money market securities. The FDIC doesn't give us the data to understand the trend in the NIBTA balances during the quarter. The decision to not extend the insurance coverage wasn't made until the last days of the year, when there was a seasonal lack of paper available, and because many logistical steps would need to be taken in order to move these balances, it may be that balances didn't move until after the year-end. According to Federal Reserve (Fed) data, total U.S. bank deposits fell about $100 billion in January, but this seemed to be a partial reversal of the $350 billion buildup that occurred in the fourth quarter."

They add, "We wouldn't be surprised if NIBTA balances greater than $250,000 fell in the first quarter of 2013, but our guess is that most of the decline will have simply shifted to other interest-bearing deposits. Still, the expiration of the unlimited insurance likely played a role in the plunge in repurchase agreement (repo) rates at year-end. Fed data showed approximately $150 billion in deposits from public entities. Many state laws require that these deposits be collateralized by U.S. government securities, a requirement which was fulfilled by the unlimited FDIC insurance. When the unlimited insurance expired, banks had to pledge collateral against these deposits, effectively removing $150 billion in collateral from the repo markets."

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