The Investment Company Institute released its "Money Market Fund Holdings" summary report for December, 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 Dec. 31, 2014). ICI's "Prime and Government Money Market Funds' Daily and Weekly Liquid Assets" table shows Prime Money Market Funds' Daily liquid assets at 21.9% as of December 31, 2014, down from 25.8% on Nov. 30. "Daily liquid assets" were made up of: "All securities maturing within 1 day," which totaled 17.0% (vs. 22.2% last month), and "Other treasury securities," which added 4.9% (down from 3.6% last month). Prime funds' "Weekly liquid assets" totaled 39.9% (vs. 37.8% last month), which was made up of "All securities maturing within 5 days" (32.3% vs. 32.9% in November), Other treasury securities (4.9% vs. 3.4% in November), and Other agency securities (2.8% vs. 1.5% a month ago). (See also our previous Money Fund Portfolio Holdings story, Crane Data's Jan. 13 News, "January MMF Portfolio Holdings Show Spike in Fed Repo, Treasuries.")
ICI's Chris Plantier also posted a "Viewpoints" commentary this month on the holdings entitled, "European Banks Borrow Less from MMFs; the Federal Reserve Borrows More." He comments, "As we discussed in April and July of last year, due to regulatory pressures European banks generally have become less willing to borrow from U.S. money market funds (MMFs), especially at the end of the quarter. This quarter-end effect was particularly large at the end of December 2014.... [D]eclines in the share allocated to European counterparties are larger than the decline seen in December 2013. In addition, the share settled at much lower levels at the end of 2014, suggesting that regulatory pressures continue to rise on European banks."
ICI's holdings report also shows that Government Money Market Funds' Daily liquid assets totaled 51.6% as of Dec. 31 vs. 60.7% in November. All securities maturing within 1 day totaled 19.3% vs. 27.8% last month. Other treasury securities added 32.2% (vs. 32.9% in November). Weekly liquid assets totaled 80.7% (vs. 78.2%), which was comprised of All securities maturing within 5 days (40.2% vs. 37.8%), Other treasury securities (29.7% vs. 31.2%), and Other agency securities (10.8% vs. 9.2%).
ICI's "Prime and Government Money Market Funds' Holdings, by Region of Issuer" table shows Prime Money Market Funds with 51.1% in the Americas (vs. 41.8% last month), 20.0% in Asia Pacific (vs. 20.5%), 28.6% in Europe (vs. 37.5%), and 0.3% in Other and Supranational (same as last month. Government Money Market Funds held 92.6% in the Americas (vs. 86.3% last month), 0.2% in Asia Pacific (vs. 0.6%), 7.1% in Europe (vs. 13.0%), and 0.1% in Supranational (vs. 0.0%).
The table, "Prime and Government Money Market Funds' WAMs and WALs" shows Prime MMFs WAMs at 43 days as of Dec. 31 vs. 46 days in November. WALs were at 78 days, down from 80 last month. Government MMFs' WAMs was at 43 days, down from 46 days last month, while WALs was at 74 days from 76 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 December covers funds holding 94 percent of taxable money market fund assets." Note: ICI publishes aggregates but doesn't publish individual fund holdings.
In its latest "Prime Money Market Fund Holdings Update," JP Morgan Securities', Alex Roever, Teresa Ho, and John Iborg report, among other things, a $119 billion decline in exposures to banks due to large pullbacks in time deposits and CP/CD balances.. They comment, "Total time deposit balances contracted by $95bn, while CP and CD balances dropped by a combined $26bn. By jurisdiction, the reduction in time deposits was driven by French banks (-$21bn), Norwegian banks (-$15bn) and Swedish banks (-$37bn). Furthermore, reductions in CP and CD balances were mostly scattered across several European banks. A prominent trend during 2014, many international banks and their securities dealing affiliates have tended to temporarily shed short-term wholesale funding sources such as repo and time deposits from their balances sheets at quarter-ends as they prepare to comply with and disclose their Basel III leverage ratio and LCR this year. This phenomenon certainly continued to play out during 4Q14."
Roever, et. al., explain, "As we have highlighted in previous holdings notes, the bank balance-sheet management mentioned above has caused temporary crunches in money market liquidity, which in turn has prompted large surges in Fed RRP usage on quarter-end dates. In fact, looking at money funds that voluntarily report their holdings on a daily basis illustrates how strong this relationship has been throughout the duration of 2014." They add, "[T]here has been a very strong negative correlation between MMF usage of the RRP and the amount of dealer repo and time deposits outstanding on quarter-end dates."
On the reverse repo program, they continue, "Money market funds accounted for $201bn or 89% of the $226bn in usage at the term RRP facility, and took down $159bn or 93% of the $171bn in overnight RRP used on December 31st. Government MMFs were the largest users of the first two term RRP operations, representing 52% of awarded bids during the December 8th operation and 67% of awarded bids during the December 15th operation. Prime fund participation picked up over the last two term RRP offerings, amounting to 51% of usage. Furthermore, usage of the ON RRP on 12/31 was mostly split evenly between prime and government funds."
Finally, on Treasurys, they tell us, "As of the end of the year, MMFs held $35.4bn in Treasury floaters, an increase of $9.8bn since November, and the largest monthly increase in holdings since the FRN was first auctioned last January. With the on-the-run issue averaging an attractive discount margin of 8.5bp through December and the continuing lack of investible assets in the front end, this uptick in holdings is not much of a surprise. On balance, treasury funds continue to be the largest holders of floaters at $21.8bn, followed by prime MMFs with $11.8bn and government MMFs at $1.8bn. Money market funds now hold 22% of all Treasury FRNs outstanding."
