The Federal Reserve's latest Z.1 "Financial Accounts of the United States" statistical release (formerly the "Flow of Funds") for the Third Quarter of 2014 was published last week. The four tables it includes on money market mutual funds show that the Household sector remains the largest investor segment, and Credit Market Instruments is the largest investment segment. Table L.206 shows the Household sector with $1.113 trillion -- or 43.4% of the $2.565 trillion held in Money Market Mutual Fund Shares as of Q3 2014. Household shares increased by $27 billion in the 3rd quarter, but are are down $22 billion year-to-date (after rising $21 billion in 2013). Household sector money fund assets remain well below their record level of $1.581 trillion at year-end 2008.
Nonfinancial corporate businesses were the second largest investor segment, according to the Fed's data series, with $512.9 billion, or 20% of the total. Nonfinancial corporate business assets in money funds increased $19.5 billion in the quarter and are down $8.2 billion YTD. In 2013, they increased by $40.5 billion. Funding corporations, which includes securities lenders, remained the third largest investor segment with $367.7 billion, or 14.3% of money fund shares. They increased by $3.0 billion in the latest quarter and have fallen by $66.1 billion YTD. They dropped $58.8 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 ($161.1 billion). Private pension funds, which held $137.2 billion (5.3%), remained in 5th place. The Rest of the world category was the sixth largest segment in market share among investor segments with 4.5%, or $114.8 billion, while Nonfinancial noncorporate businesses held $82.4 billion (3.2%), State and local government retirement held $36.2 billion (1.4%), Property-casualty insurance held $21.1 billion (0.8%), and Life insurance companies held $19.2 billion (0.7%), according to the Fed's Z.1 breakout.
The Fed's "Flow of Funds" Table L.120 shows "Money Market Mutual Fund Assets" largely invested in Credit market instruments ($1.419 trillion, or 55.3%), which includes: Open market paper ($332 billion, or 12.9%; we assume this is CP), Treasury securities ($392 billion, or 15.2%), Agency and GSE backed securities ($347 billion, or 13.5%), Municipal securities ($279 billion, or 10.9%), and Corporate and foreign bonds ($71 billion, or 2.7%).
Other large holdings positions in the Fed's series include Security repurchase agreements <b:>`_ ($576 billion, or 22.4%) and Time and savings deposits ($531 billion, or 20.7%) <b:>`_. Money funds also hold minor positions in Foreign deposits ($23 billion, or 0.9%) and Miscellaneous assets ($19 billion, or 0.7%). Checkable deposits and currency went into negative territory with -$3.1 billion.
During Q3, Credit Market Securities (up $32 billion), Time and Savings Deposits (up $21 billion), Treasury securities (up $21 billion), Agency and GSE Backed Securities (up $19 billion), Security Repos (up $12 billion), Corporate and foreign bonds (up $5 billion), and Misc. Assets (up $3 billion), showed increases. Checkable Deposits and Currency (down $22 billion), Open Market Paper (down $9 billion), Foreign Deposits (down $4 billion), and Municipal Securities (down $2 billion), 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.)
Wells Fargo Securities money market strategist Garret Sloan had some observations about the Fed's Z.1 report in his Dec. 15 commentary. He writes, "Parsing the data by investor type, retail investors reduced holdings of credit market instruments, which includes U.S. Treasuries, by $131 billion. The largest reductions came in two sectors: municipals and corporate bonds. Retail investors reduced holdings by 2.9 percent and 6.1 percent respectively. This investor type reduced GSE holdings by a much larger percentage of holdings, but the outright holdings of GSE debt amongst this investor class is so small relative to the others it would likely distort the true flow numbers. These are direct investments, and not investments through mutual funds.... Over this same period retail deposit and money market fund activity has risen, with retail money fund assets rising by 2.5 percent and deposits climbing by 1.2 percent."
Sloan adds, "In the corporate investor section of the report, activity in credit market instruments was largely unchanged, with holdings relatively flat at just over a quarter of a trillion dollars. Treasury, commercial paper, agency, municipal, mortgage, and ABS holdings remained steady. Money market fund shares rose over the period by 3.5 percent, while deposits were largely flat. However, there appears to be a striking omission from the Flow of Funds Report with respect to holdings of corporate bonds. Based on discussions with many large U.S. nonfinancial corporations, we can confirm that many of them hold corporate bonds in their portfolios. Yet, in the most recent AFP Liquidity Survey as well as the Flow of Funds report, corporate bond holdings are not broken out."
Finally, he says, "In the public entity investor space, credit market instruments fell by 2.4 percent. Reductions were relatively even across asset classes, with Treasuries, Agencies, corporate and mortgage-backed bonds each falling by similar percentages, though on a dollar basis the Treasury and Agency markets felt the lion's share of the reductions. Money market funds fell by 1.6 percent and repo agreements fell by 1.5 percent. Meanwhile, time and savings deposits rose on a QoQ basis by 3.1 percent. As a percentage of total public entity non-retirement investment assets, Treasury securities remain the largest single allocation, with 23.3 percent of holdings, followed by Agency securities, which represented 18.5 percent. Deposit products are the next largest allocation, with 18 percent, followed by mortgages, and corporate equities representing 8.3 percent and 6.9 percent respectively. Corporate bonds represent 6.7 percent of total public entity assets, followed by money market funds at 6.5 percent, and repo agreements at 5.2 percent."
