The Investment Company Institute released its latest "Money Market Fund Holdings" report, which tracks the aggregate daily and weekly liquid assets, regional exposure, and maturities (WAM and WAL) for Prime and Government money market funds (as of Sept. 30, 2014). ICI's "Prime and Government Money Market Funds' Daily and Weekly Liquid Assets" table shows Prime Money Market Funds' Daily liquid assets at 25.4% as of September 30, 2014, down from 26.1% on August 31. Daily liquid assets were made up of: "All securities maturing within 1 day," which totaled 21.4% (vs. 21.9% last month) and "Other treasury securities," which added 4.0% (down from 4.2% last month). Prime funds' Weekly liquid assets totaled 37.3% (vs. 39.2% last month), which was made up of "All securities maturing within 5 days" (31.5% vs. 32.4% in August), Other treasury securities (4.0% vs. 4.1% in August), and Other agency securities (1.9% vs. 2.7% a month ago). (See our previous Oct. 10 News, "October Money Fund Portfolio Holdings Show Spike in Fed Repo, T-Bills".)

Government Money Market Funds' Daily liquid assets total 63.7% as of September 30 vs 60.6% in August. All securities maturing within 1 day totaled 27.4% vs. 29.0% last month. Other treasury securities added 36.3% (vs. 31.6% in August). Weekly liquid assets totaled 81.3% (vs. 80.6%), which was comprised of All securities maturing within 5 days (37.1% vs. 41.2%), Other treasury securities (33.7% vs. 29.5%), and Other agency securities (10.5% vs. 9.9%).

ICI's "Prime and Government Money Market Funds' Holdings, by Region of Issuer" table shows Prime Money Market Funds with 48.5% in the Americas (vs. 42.0% last month), 20.4% in Asia Pacific (vs. 19.6%), 30.7% in Europe (vs. 38.2%), and 0.3% in Other and Supranational (down from 0.2% last month). Government Money Market Funds held 91.1% in the Americas (vs. 83.9% last month), 0.4% in Asia Pacific (vs. 0.7%), 8.4% in Europe (vs. 15.4%), and 0.1% in Supranational (vs. 0.1%).

The table, "Prime and Government Money Market Funds' WAMs and WALs," shows Prime MMF WAMs at 46 days as of Sept. 30 vs. 45 days in August. WALs were at 78 days, up from 77 last month. Government MMF WAMs were at 44 days, same as last month, while WALs dropped to 72 days from 73 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 September covers funds holding 94 percent of taxable money market fund assets." Note: ICI doesn't publish individual fund holdings.

In related news, JP Morgan Securities' released its September "Prime Money Market Fund Holdings Update." Strategists Alex Roever, Teresa Ho, and John Iborg write, "MMFs used 95.6% of Fed ON RRP at quarter-end. Over the course of 2014, scarcity of assets has led MMFs to be active participants in the Fed’s ON RRP program. This asset scarcity is particularly acute at quarter-ends. On 9/30, FRBNY reported that aggregate demand for the ON RRP reached $407bn, well in excess of the $300bn program cap. The excess demand pushed the overnight RRP rate down to 0bp. While we do not know how much of the $407bn bid is attributable to MMFs, month-end holdings reports indicate MMFs held about $287bn of the $300bn awarded. Of this $287bn, about $131bn was held by 45 prime funds and $156bn was held by 30 government funds."

They add, "Time deposits and repo holdings plummeted at quarter-end. The strong quarter-end demand for the Fed's ON RRP is a reflection of the decline in availability of other overnight assets at quarter-end. This is a trend that has grown more prominent over the past few quarters as many international banks, and their securities dealing affiliates, are preparing to comply with and disclose their Basel III leverage ratio and LCR in 2015. Our analysis of MMF month-end holdings demonstrate a growing tendency for quarter-end repo and time deposit balances to be substantially less than holdings at end of the prior two-months."

Roever, Ho and Iborg continued, "For MMFs, the supply trend is not their friend. Aside from this quarter-end effect, bank regulations are generally having an impact on the availability of assets for MMFs, although the effects are less visible. Our analysis of prime MMF holdings indicate the outstanding amount of Eurozone bank debt has declined about 20% YTD, as have ABCP outstandings. Changing regulations have had a significant impact on both of these, as well as on the amount of financial corporate CP and municipal money market debt outstanding. Aside from the regulatory environment, the declining availability of short-maturity treasury and agency debt is starting to have an impact on fund liquidity. In the months ahead, prime money funds may find it more challenging to source sufficient short-term assets to meet SEC mandated liquidity requirements."

They concluded, "Looking ahead, though quarter-end has passed, the demand for longer-term assets is unlikely to subside. While overnight supply has rebounded some, investors are also aware that year-end is right around the corner. This is a time when liquidity is usually at its lowest across the curve. Tack on the newly imposed cap on the Fed ON RRP facility which limits investors' use of it as a source of backstop supply, prime MMFs are likely positioning ahead of this event earlier than usual by terming out their maturities into 2015."

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