The Investment Company Institute released its latest "Money Market Fund Holdings" report (with data as of March 31, 2015), which tracks the aggregate daily and weekly liquid assets, regional exposure, and maturities (WAM and WAL) for Prime and Government money market funds. ICI's "Prime and Government Money Market Funds' Daily and Weekly Liquid Assets" table shows Prime Money Market Funds' Daily liquid assets at 24.9% as of March 31, 2015, down from 25.6% on Feb. 28. Daily liquid assets were made up of: "All securities maturing within 1 day," which totaled 19.2% (vs. 21.1% last month) and "Other treasury securities," which added 5.8% (up from 4.5% last month). Prime funds' Weekly liquid assets totaled 37.9% (vs. 37.9% last month), which was made up of "All securities maturing within 5 days" (30.8% vs. 32.3% in February), Other treasury securities (5.8% vs. 4.9% in February), and Other agency securities (1.3% vs. 1.1% a month ago). ICI Economist Chris Plantier also commented on the latest data in a blog post, "Federal Reserve Reverse Repo Facility Helps Stabilize Short-Term Money Markets." (See also our previous Money Fund Portfolio Holdings story, Crane Data's April 13 News, "April MF Portfolio Holdings Show Spike in Fed Repo,Treasury Jump.")
Government Money Market Funds' Daily liquid assets totaled 56.0% as of March 31 vs. 56.4% in February. All securities maturing within 1 day totaled 18.4% vs. 24.6% last month. Other treasury securities added 37.6% (vs. 31.8% in February). Weekly liquid assets totaled 82.6% (vs. 80.9%), which was comprised of All securities maturing within 5 days (38.2% vs. 40.3%), Other treasury securities (35.6% vs. 29.4%), and Other agency securities (8.8% vs. 11.2%).
ICI's "Prime and Government Money Market Funds' Holdings, by Region of Issuer" table shows Prime Money Market Funds with 50.4% in the Americas (vs. 40.5% last month), 19.9% in Asia Pacific (vs. 20.2%), 29.4% in Europe (vs. 39.0%), and 0.3% in Other and Supranational (same as last month). Government Money Market Funds held 91.9% in the Americas (vs. 85.7% last month), 0.2% in Asia Pacific (vs. 0.4%), 7.9% in Europe (vs. 13.9%), and 0.1% in Supranational (vs. 0.1%).
The table, "Prime and Government Money Market Funds' WAMs and WALs" shows Prime MMFs WAMs at 42 days as of March 31, down from 44 days last month. WALs were at 79 days, same as last month. Government MMFs' WAMs was at 44 days, up from 42 days last month, while WALs was at 81 days, up from 80 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.
ICI's Plantier writes, "Following a pattern observed at the end of recent quarters, money market fund holdings of European issuers dropped at the end of March, although the decline was not as large as the previous quarter, ending December 2014. As we have noted before, for regulatory reasons European banks have been paring their balance sheets at the end of each quarter, resulting in a temporary decline in their desire to borrow from money market funds. Consequently, money market funds have temporarily parked some assets with the Federal Reserve through the Fed's reverse repurchase (RRP) facility. This increase in "lending" to the Federal Reserve helps prevent a buildup of excess liquidity in the financial system at the end of each quarter that would otherwise cause short-term interest rates to fall temporarily."
He adds, "According to ICI's analysis of data collected by the U.S. Securities and Exchange Commission on SEC Form N-MFP, prime and government money market funds held at least $307 billion combined in overnight and term RRP agreements on March 31, 2015. For government money market funds, 50.5 percent of repo agreements were attributable to the Federal Reserve as a counterparty in March. For prime money market funds, 51.8 percent of repo agreements were executed with the Fed in March. March 2015 marked the second time the Federal Reserve was a repo counterparty for more than half of the repurchase agreements entered into by taxable money market funds, the first being December 2014. If not for the Federal Reserve's RRP facility, short-term money market interest rates likely would have fallen significantly at the end of March."
In their latest "Prime Money Market Fund Holdings Update," JP Morgan Securities', Alex Roever, Teresa Ho, and John Iborg report that, "Prime money market funds experienced $20bn in outflows during March. Assets invested in prime institutional funds decreased by $18bn, while prime retail balances fell by $2bn. Separately, government fund assets decreased by $17bn during the month. Taxable MMF assets decreased by $64bn during the first quarter of 2015. The decline was split almost evenly between prime and government MMFs: government fund AuM decreased by $37bn, while prime fund AuM decreased by $28bn. First quarter net outflows from taxable funds are typical as cash built up around year-end begins to dissipate, and this year's decline showed to be in line with recent history."
They continue, "Prime funds shortened their maturity profiles over the course of March, likely as a means to meet anticipated investor redemptions at the end of the month. Composite weighted average maturities of prime MMFs dropped by 3 days mostly during the last days of March. At 39 days, prime fund WAMs currently stand near their multi-year low. Additionally, holdings of US Treasury securities increased by $17bn or 25% month-over-month, which could be another sign of fund managers attempting to bolster liquidity. Looking forward, we expect prime funds to become increasingly conscientious of building liquidity as SEC money market fund reform continues to reshape the industry. The combination of investors shifting their cash out of prime funds and large fund families modifying their product offerings is likely to put emphasis on ensuring that ample liquidity is maintained for prime MMFs. Indeed, to date, six major complexes representing almost half of the MMF business in terms of AuM have made some form of formal announcement to address their respective strategy for dealing with money fund reform rules. Whether it be converting prime funds into government fund status, or instituting short maturity funds, higher liquidity levels will be needed."
They add, "Prime money market funds decreased exposures to banks by $141bn month-over-month. The sharp pullback in bank outstandings was driven primarily by time deposits balances, which fell $117bn.... In addition to time deposit shedding, many banks also reduced outstandings in the repo market at the end of March. Although almost all of this activity was with government MMF counterparties, it further illustrates the temporary shedding of short-term wholesale funding that occurs around quarter-ends.... Away from time deposits, bank balances of CP and CD fell by $19bn and $22bn respectively, concentrated in the United Kingdom and France. Allocations to ABCP/CCP, repo, and other bank paper went practically unchanged across most regions."
Further, "Money market funds represented $310bn, or 82% of aggregate Fed RRP usage at quarter-end. MMFs took down $144bn of the $176bn in total usage for the two term operations conducted prior to the end of the March. During the overnight operation conducted on March 31st, money funds took down $167bn of the $202bn in total overnight RRP usage. Similar to what transpired at the end of the year, prime funds used the RRP increasingly towards the end of the quarter, whereas government fund demand was more consistent. While government MMFs were the largest users of the first term operation conducted on March 19th, prime funds came in more for the last term offering on March 30th, and overnight offering on the 31st. Higher yielding market rates likely lured prime funds away from the RRP and into alternative product until the end of the month when a source of temporary backstop supply was needed."
