ICI released its weekly "Money Market Fund Assets" late Thursday. It says, "Total money market fund assets increased by $6.70 billion to $2.58 trillion for the week ended Wednesday, August 20, the Investment Company Institute reported today. Among taxable money market funds, Treasury funds (including agency and repo) increased by $7.95 billion and prime funds decreased by $2.08 billion. Tax-exempt money market funds increased by $830 million. Assets of retail money market funds decreased by $950 million to $905.65 billion. Among retail funds, Treasury money market fund assets decreased by $120 million to $202.76 billion, prime money market fund assets decreased by $1.46 billion to $515.57 billion, and tax-exempt fund assets increased by $620 million to $187.31 billion. Assets of institutional money market funds increased by $7.65 billion to $1.68 trillion. Among institutional funds, Treasury money market fund assets increased by $8.07 billion to $722.64 billion, prime money market fund assets decreased by $620 million to $883.98 billion, and tax-exempt fund assets increased by $210 million to $72.01 billion." In other news, Fitch Ratings issued a release, "Fitch: Rate Moves To Trigger Flows From Deposits Into US MMFs." States Fitch, "Wider differences between the yields on US banks' interest-bearing deposits and money market funds (MMF) could drive deposit outflows after the Fed begins hiking rates, according to Fitch Ratings. Recent MMF reforms may also affect deposit flow changes as rates rise. The tiny rate differences across short-dated rate products are currently not significant enough to offer a yield advantage of one product over another. However, as rates eventually rise, Fitch expects money market funds to be more reactive to increases in the Fed's short-term policy rates than deposits. Many observers expect money market funds will attract deposit cash away from banks into higher yielding assets after a meaningful (yet difficult to gauge) rate differential is reached. The magnitude of deposit outflows is mostly expected to be driven by institutional money managers that control billions of dollars of institutional liquidity.... Slow rate increases by the Fed, which Fitch believes is a base case scenario, would allow for excess deposits to leak out of the banking system without any concern. However, rapid rate increases could draw deposits from banks at a faster rate, which Fitch believes would be a less favorable scenario for banks. Recent MMF reforms will likely influence this balancing act with some degree of outflows from MMFs into banks. New requirements for prime money funds -- including floating NAV, liquidity fees, and potential redemption gates, may make money funds a less attractive cash management product for investors. Consequently, Fitch expects that some investors will gradually take some assets out of money funds over the two-year implementation period for the reforms. Fitch believes that banks could capture at least some of the money currently invested in prime MMFs if institutional investors do not feel adequately compensated for the added risks."
