The Federal Reserve released its latest quarterly "Z.1 Financial Accounts of the United States for the Fourth Quarter, 2015" statistical survey (formerly the "Flow of Funds") late last week. Among the tables it includes on money market mutual funds, the Fed shows that the Household Sector remains the largest investor segment; assets here moved back over $1.0 trillion after dipping below this level in mid-2015. Households, Nonfinancial Corporate Businesses, and State & Local Governments showed the biggest gains in the latest quarter, while Nonfinancial Corporate Businesses, State & Local Governments, and Fund Corporations showed the largest increases over the past 12 months. We review the latest Fed Z.1 numbers below, and we also preview the March issue of our Bond Fund Intelligence newsletter, which was sent to subscribers this weekend.
The Fed's "Table L.206," "Money Market Mutual Fund Shares," shows total assets increasing by $89 billion, or 3.4%, in the fourth quarter to $2.716 trillion. Over the year through Dec. 31, 2015, assets are up $28 billion, or 1.0%. The Household sector totals $1.056 trillion -- or 38.9% of assets. The Household Sector increased by $65 billion, or 6.6%, in the quarter, after increasing $5 billion in the 3rd quarter, and decreasing $45 billion in Q2. Over the past 12 months through Dec. 31, 2015, Household assets are down $64 billion, or 5.7%. Household assets fell below $1 trillion in Q2, a level they hadn't been below for a decade, and these assets remain well below their record level of $1.581 trillion (from year-end 2008).
Nonfinancial Corporate Businesses were the second largest investor segment, according to the Fed's data series, with $586 billion, or 21.6% of the total. Business assets in money funds increased $15 billion in the quarter, or 2.7%, and have risen by $31 billion over the past year, or 5.6%. Funding Corporations, which includes Securities Lending cash, remained the third largest investor segment with $444 billion, or 16.3% of money fund shares. They dropped by $12 billion in the latest quarter, but remain up $18 billion over the previous 12 months. Funding Corporations held over $906 billion in money funds at the end of 2008.
The fourth largest segment, State and Local Governments held 6.7% of money fund assets ($182 billion) -- up $11 billion, or 6.6%, for the quarter, and up $16 billion, 9.8%, for the year. Private Pension Funds, which held $143 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 4.2%, or $115 billion, while Nonfinancial Non-Corporate Businesses held $92 billion (3.4%), State and Local Government Retirement Funds held $52 billion (1.9%), Life Insurance Companies held $29 billion (1.1%), and Property-Casualty Insurance held $18 billion (0.7%), according to the Fed's Z.1 breakout.
The Fed's "Flow of Funds" Table L.121 shows "Money Market Mutual Funds" largely invested in Credit Market Instruments ($1.561 trillion, or 57.5%), which includes: Open market paper ($294 billion, or 10.8%; we assume this is CP), Treasury securities ($475 billion, or 17.5%), Agency and GSE backed securities ($460 billion, or 16.9%), Municipal securities ($268 billion, or 9.9%), and Corporate and foreign bonds ($63 billion, or 2.3%). Overall, Credit Market Instruments are up $119 billion, or 8.2%.
Other large holdings positions in the Fed's series include Security repurchase agreements ($668 billion, or 25.3%) and Time and savings deposits ($438 billion, or 16.1%). Money funds also hold minor positions in Foreign deposits ($11 billion, or 0.4%), Miscellaneous assets ($10 billion, or 0.4%), and Checkable deposits and currency ($7 billion, 0.3%).
During Q4, `Treasury Securities (up $92 billion), Agency and GSE-Backed Securities (up $68 billion), Municipal Securities (up $12 billion), Security Repurchase Agreements (up $8 billion), and Checkable Deposits and Currency (up $6 billion), showed increases. Open Market Paper (down $38 billion), Time and Savings Deposits (down $39 billion), Corporate and foreign bonds (down $13 billion), Misc. Assets (down $4 billion), and Foreign Deposits (down $2 billion) all showed declines.
In other news, the March issue of our Bond Fund Intelligence was sent out to subscribers this weekend. Our lead story, "Bond Fund Inflows Return; High Yield Gets Lion's Share," looks at the rebound in bond assets and record inflows to high yield bonds. Also, we profile Michael Reinartz, co-Portfolio Manager of the $5.4 billion T. Rowe Price Short-Term Bond Fund. In addition, we recap the latest Bond Fund News, including commentary on bond funds from ICI, new fund launches, and the performance of our Crane BFI Indexes. Subscribers can now access the latest and back issues of BFI on our "`Content" page (scroll down to see Bond Fund Intelligence).
The lead BFI story on "Inflows," says, "Bond fund assets rebounded in February after suffering outflows in 6 of the last 7 months. The February gains were led by a big gain in high yield fund assets. Bond funds have seen $5.6 billion in inflows in February through March 2, according to ICI's weekly "Estimated Long-Term Fund Flows," with most of it coming in the week ended March 2, when there was $4.1 billion in inflows."
It adds, "Bond fund assets tracked by Crane Data increased by $8.0 billion in February, led by Long-Term and Intm-Term Bond Funds. Ultra-Short Bond Fund assets fell by $1.9 billion and Global BFs fell by $1.8 billion, but all other categories experienced increases. Returns were relatively flat overall; our BFI Total Index rose by 0.18% in Feb., but it's still down by 0.53% over 1-year. Though High Yield assets rebounded, these funds continue to show deep losses over 1-year (-7.9%) and one fund is showing a loss of over 21.0%." (Contact us if you'd like to see a copy of our latest Bond Fund Intelligence.)
