The Federal Reserve's latest Z.1 "Financial Accounts of the United States" statistical release (formerly the "Flow of Funds") for the First Quarter of 2014 was published late last week, and the four tables it includes on money market mutual funds show that the Household sector remains the largest investor segment, and "Security repurchase agreements" passed "Time and savings deposits" as the largest investment segment. Table L.206 shows the Household sector with $1.091 trillion, or 42.1% of the $2.591 trillion held in Money Market Mutual Fund Shares as of Q1 2014. Household shares decreased by $39 billion in the 1st quarter. They fell by $23 billion during 2013. Household sector money fund assets remain well below their record level of $1.581 trillion at yearend 2008.
Nonfinancial corporate businesses were the second largest investor segment, according to the Fed's data series, with $497 billion, or 19.1% of the total. Nonfinancial corporate business assets in money funds decreased $24 billion in the quarter and increased by $40 billion in 2013. Funding corporations, which includes securities lenders, remained the third largest investor segment with $358 billion, or 13.8% of money fund shares. They decreased by $24 billion in the latest quarter and fell by $104 billion in 2013. (Funding corporations held over $906 billion in money funds at the end of 2008.)
State and local governments held 6.3% of money fund assets ($165 billion). The Rest of the world category moved down to the fifth largest segment (flat in Q1) in market share among investor segments with 6.3%, or $164 billion, while Private pension funds, which held $147 billion (5.6%), moved down to 6th place. Nonfinancial noncorporate businesses held $81 billion (3.1%), State and local government retirement held $50 billion (1.9%), Life insurance companies held $20 billion (0.8%), and Property-casualty insurance held $18 billion (0.7%), according to the Fed's Z.1 breakout.
The Flow of Funds Table L.120 shows Money Market Mutual Fund Assets largely invested in Credit market instruments ($1.520 trillion, or 58.7%), a category which is made up of Open market paper (we assume this is CP, $354 billion, or 13.6%), Treasury securities ($454.4 billion, or 17.5%), Agency and GSE backed securities ($326.1 billion, or 12.5%), Municipal securities ($296.4 billion, or 11.4%), and Corporate and foreign bonds ($88.7 billion, or 3.4%).
At the end of Q1 2014, money funds also held large positions in Security repurchase agreements ($506.2 billion, or 19.5%) and Time and savings deposits ($493.4 billion, or 19.0%). The remainder is invested in Foreign deposits ($19.4 billion, or 0.7%), Miscellaneous assets ($37.2 billion, or 1.4%), and Checkable deposits and currency ($15.5 billion, or 0.5%).
During Q1, Security repos (up $13 billion) and Open market paper (CP, up $2 billion) showed increases, while Time and savings deposits (down $1 billion), Treasury securities (down $34 billion), Agency securities (down $35 billion), Credit market securities (down $92 billion), Municipal securities (down $12 billion), and Foreign deposits (down $14 billion), all showed 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, the Federal Reserve Bank of New York's Liberty Street Economics blog published "What's Your WAM? Taking Stock of Dealers' Funding Durability". It says, "One of the lessons from the recent financial crisis is the need for securities dealers to have durable sources of funding. As evidenced by the demise of Bear Stearns and Lehman Brothers, during times of stress, cash lenders may pull away from firms or funding markets more broadly. Lengthening the tenor of secured funding is one way for a dealer to mitigate the risk of losing funding when market conditions are strained. In this post, we use clearing bank tri-party repo data to examine the degree to which dealers are lengthening the maturities of their sources of funding. (Aggregate statistics using these data are available here.) We focus on less liquid securities because it is for these assets that the durability of funding matters the most. We find substantial progress overall, with the weighted-average maturity (WAM) of funding of the less liquid securities more than doubling from January 2011 to May 2014. Nevertheless, there is currently a wide dispersion in dealer-level WAM, raising questions as to whether all dealers have enough durability in their funding of risk assets."
The post, written by Adam Copeland, Isaac Davis, and Ira Selig, says, "Although dealers can obtain funding in the money markets through a range of mechanisms, the repurchase agreement (repo) is a particularly popular tool. Repos are essentially collateralized loans, although they are treated differently in bankruptcy cases. Furthermore, many dealers use a particular type of repo, called tri-party repo, to raise secured funds (see this staff report for a description of tri-party repo), so studying the maturity of tri-party repo trades should provide us with a representative view into the durability of dealers' funding."
Finally, it adds, "The WAM statistic is the average remaining maturity of all open tri-party repo trades, weighted by the value of securities posted as collateral. Remaining maturity is the number of days left until a particular repo trade matures. For example, after five days, the remaining maturity on a seven-day repo is two days. We focus on repo trades collateralized by risk assets as opposed to trades collateralized by government and agency securities. In tri-party repo, the four main types of risk assets financed are asset-backed securities, private-label collateralized mortgage obligations, corporate bonds, and equities (see this table for a snapshot of the types of securities posted as collateral in tri-party repo)."
