ICI released its latest monthly summary of "Money Market Fund Holdings, March 2014" yesterday, the latest edition of its new series that tracks the aggregate daily and weekly liquid assets, regional exposure, and maturities (WAM and WAL) for Prime and Government money market funds (as of March 31, 2014). The release was also accompanied by a comment entitled, "Seasonality, U.S. Money Market Funds, and the Borrower of Last Resort from Economist Chris Plantier. Plantier writes in ICI's "Viewpoint", "The March money market fund holdings data indicate a large drop in the share of fund assets allocated to European counterparties and a large increase in the share of fund assets allocated to U.S. counterparties. This shift is likely temporary and reflects reduced willingness of European banks to borrow from money market funds at the end of the quarter, rather than reduced demand from money market funds. Also, the increase in lending to U.S. counterparties is almost entirely due to the large increase in money market fund lending to the Federal Reserve via its overnight reverse-repo (repurchase agreement) facility." (See Crane Data's April 10 News, "March MF Holdings Show Fed Repo Skyrockets, Other Securities Plummet".)
He explains, "The monthly declines partly reflect a reduction in supply from European banks, but they also are related to the introduction and expansion of the Federal Reserve's overnight reverse-repo facility over the past year. In 2013, in an effort to gradually implement and expand its ability to absorb excess liquidity from the financial system, the Federal Reserve began engaging in a new program of fixed-rate, full-allotment, overnight reverse repurchase agreements. Money market funds have been among the counterparties to this new program, and have actively participated in it. In early March, the Federal Reserve increased the effective size of its fixed-rate reverse-repo operations, allowing each counterparty to lend the Fed up to $7 billion overnight. It subsequently increased this maximum amount to $10 billion in early April."
Plantier adds, "Though the overnight reverse-repo operation is technical in nature, its primary purpose is to put a floor under short-term interest rates so that the Fed can better control short-term interest rates. In practical terms, however, the Fed has become the borrower of last resort in short-term liquidity markets, sucking up excess liquidity via its reverse-repo operation, especially near the end of the quarter. On March 31, 2014, the Fed allotted $242.1 billion in reverse repos (the highest amount ever), of which at least $175 billion was allotted to money market funds, according to ICI's analysis of N-MFP data."
ICI's "Prime and Government Money Market Funds' Daily and Weekly Liquid Assets table shows Prime Money Market Funds' Daily liquid assets at 26.0% as of March 31, 2014, up from 23.8% on 2/28/14. "Daily liquid assets" were made up of: "All securities maturing within 1 day," which totaled 19.0% (vs. 17.0% last month) and "Other treasury securities," which added 7.0% (vs. 6.8% last month). Prime funds' Weekly liquid assets totaled 35.9% (vs. 37.3% last month), which was made up of "All securities maturing within 5 days" (27.9% vs. 29.4% in Feb.), Other treasury securities (7.0% vs. 6.8% in Feb.), and Other agency securities (1.1% vs. 1.0% a month ago).
Government Money Market Funds' Daily liquid assets total 62.4% in March vs. 61.9% in February. All securities maturing within 1 day totaled 22.0% vs. 22.9% last month. Other treasury securities added 40.3% (vs. 39.0% in Feb.). Weekly liquid assets totaled 85.6% (vs. 84.5%), which was comprised of All securities maturing within 5 days (33.8% vs. 33.5%), Other treasury securities (37.5% vs. 37.8%), and Other agency securities (14.3% vs. 13.2%).
ICI's "Prime and Government Money Market Funds' Holdings, by Region of Issuer" table shows Prime Money Market Funds with 48.1% in the Americas (vs. 42.4% last month), 18.7% in Asia Pacific (vs. 18.9%), 32.9% in Europe (vs. 38.4%), and 0.3% in Other and Supranational (vs. 0.3%). Government Money Market Funds held 89.3% in the Americas (vs. 84.5% last month), 0.4% in Asia Pacific (vs. 0.6%), 10.2% in Europe (vs. 14.9%), and 0.1% in Supranational (vs. 0.1%).
The table, "Prime and Government Money Market Funds' WAMs and WALs shows Prime MMFs WAMs shortened by one day and WALs remaining unchanged from last month (at 47 and 83 days, respectively) and Government MMFs' WAMs shortened by two days to 45 days and their WALs increased by one day to 69 days. ICI's release explains, "Each month, ICI reports numbers based on the Securities and Exchange Commission's Form N-MFP data, which many fund sponsors provide directly to the Institute. ICI's data report for February covers funds holding 94 percent of taxable money market fund assets." Note: ICI doesn't publish individual fund holdings.
