The ICI's latest "Money Market Fund Assets" report says, "Total money market fund assets increased by $26.18 billion to $2.68 trillion for the week ended Wednesday, November 2, the Investment Company Institute reported today. Among taxable money market funds, government funds increased by $32.73 billion and prime funds decreased by $7.66 billion. Tax-exempt money market funds increased by $1.11 billion." We review the latest asset figures below, and we also excerpt from an article from iTreasurer entitled, "Post-Rule Change, Prime Funds in the Balance," which discusses Prime MMFs and alternatives.

Over the past 52 weeks, total money fund assets have declined by $39.7 billion, or 1.5%, while they've declined by $81.7 billion, or 3.0%, YTD in 2016. Prime money fund assets have plunged by $1.074 trillion (down 73.6%) over the past year and by $899.4 billion (down 70.1%) YTD. Government MMFs have increased by $1.150 trillion over 52 weeks (up 113.5%), and they've increased by $943.0 billion (77.2%) YTD. Tax-exempt MMFs have fallen by $115.9 billion (-47.3%) since 10/31/15 and $123.4 billion (-49.3) since 12/31/15. Combined Prime and Tax-exempt MMF assets fell by a massive $1.190 trillion since 10/31/15 and $1.025 trillion since 12/31.

ICI writes, "Assets of retail money market funds increased by $6.36 billion to $953.17 billion. Among retail funds, government money market fund assets increased by $5.10 billion to $566.80 billion, prime money market fund assets decreased by $30 million to $261.60 billion, and tax-exempt fund assets increased by $1.29 billion to $124.78 billion."

Their release continues, "Assets of institutional money market funds increased by $19.81 billion to $1.72 trillion. Among institutional funds, government money market fund assets increased by $27.63 billion to $1.60 trillion, prime money market fund assets decreased by $7.63 billion to $122.77 billion, and tax-exempt fund assets decreased by $190 million to $4.27 billion." Combined retail and institutional Prime assets now total $384.4 billion (14.4% of total assets), while combined retail and institutional Government assets total $2.164 trillion (80.8%). Tax-exempt assets total $129.0 billion, or 4.8%.

The update adds in a note, "ICI reports money market fund assets to the Federal Reserve each week. Data for previous weeks reflect revisions due to data adjustments, reclassifications, and changes in the number of funds reporting. Weekly money market assets for the last 20 weeks are available on the ICI website. For more information about the implementation of new money market fund rules by the Securities and Exchange Commission (SEC), please see our ICI Viewpoints."

The recent iTreasurer article <i:http://www.itreasurer.com/Post-Rule-Change-Prime-Funds-in-the-Balance.aspx>`_ says, "October 14 has come and gone and there are a couple money market fund trends that may bode well for prime money market funds. One is that spreads between institutional prime and government MMFs have widened since the October 14 implementation of new SEC rules. The second is that prime fund portfolios' weighted average maturities (WAM) have lengthened somewhat. These shifts may eventually bring back some lost luster to prime funds for corporate treasurers, but so far inflows have yet to materialize, and views split sharply about whether they ever will."

The piece continues, "Prime institutional funds saw $872 billion flow out of them as of October 28 since the start of the year, bringing down the total invested in those funds to $383 billion as of October 27, according Treasury Strategies and Crane Data. Meanwhile, the volume of Treasury-bond MMFs increased over the same time period by $102 billion, to $603 billion. The biggest jump in volume, however, was with MMFs investing in government securities, which increased by $787 billion, to $1.463 trillion by October 28."

It tells us, "The outflow from prime funds has slowed to a trickle, with a mere $6 billion more bleeding out since mid-October. Anthony Carfang, managing director at Treasury Strategies, a Novantas company, said he does not anticipate anymore material outflow, and money will flow back when investors see "all clear" signals, such as longer weighted average maturities (WAM), asset inflows, and minuscule net asset value (NAV) fluctuation. He added that the money leaving prime funds went mostly to MMFs investing in government securities, including treasury and agency securities."

The iTreasurer article also says, "Corporate cash has several short-term alternatives, including bank deposits, structured deposits, certificates of deposit (CDs), commercial paper (CP), and repurchase agreements (repos). Mr. Carfang said corporates’ eventual return to prime funds depends on two “wildcard” conditions. One is the amount banks choose to pay on deposits, currently close to zero, and the second is whether the yield spread between government and prime MMFs widens."

Finally, it adds, "How the first plays out remains to be seen, but there are indications the yield spread will widen significantly. Mr. Carfang said that by the compliance date the spread had tightened to 8 or 9 basis points and the WAM for prime MMFs had shortened to around 15 days. Since then, the spread has since widened to around 13 bps while the prime WAM crept back up to between 20 and 25 days. The WAM of government and agency securities, however, is now more than 40 days."

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