The Investment Company Institute released its latest "Money Market Fund Holdings" summary (with data as of Nov. 30, 2016), which reviews the aggregate daily and weekly liquid assets, regional exposure, and maturities (WAM and WAL) for Prime and Government money market funds. J.P. Morgan Securities also released its new "Prime money market fund holdings update" late last week. Both updates, which review below, confirm our earlier reports of a stabilization in Prime assets and a jump in Treasury holdings in November. (See our Dec. 12 News, "December Portfolio Holdings: Treasuries Surpass Repo as Largest Piece.")

ICI's release explains, "The Investment Company Institute (ICI) reports that, as of the final Friday in November, prime money market funds held 29.1 percent of their portfolios in daily liquid assets and 46.3 percent in weekly liquid assets, while government money market funds held 59.3 percent of their portfolios in daily liquid assets and 75.3 percent in weekly liquid assets."

It says, "At the end of November, prime funds had a weighted average maturity (WAM) of 37 days and a weighted average life (WAL) of 68 days. Average WAMs and WALs are asset-weighted. Government money market funds had a WAM of 43 days and a WAL of 95 days." Prime WAMs were down from 38 days in October and Prime WALs were up from 61 days the prior month.

On Holdings By Region of Issuer, it adds, "Prime money market funds' holdings attributable to the Americas rose from $167.43 billion in October to $170.07 billion in November. Government money market funds' holdings attributable to the Americas rose from $1,790.59 billion in October to $1,896.11 billion in November."

The Prime Money Market Funds by Region of Issuer table shows Americas at $170.1 billion, or 44.9%; Asia and Pacific at $68.5 billion, or 18.1%; Europe at $136.5 billion, or 36.0%; and Other (including Supranational) at $3.5 billion, or 0.9%. The Government Money Market Funds by Region of Issuer table shows Americas at $1.896 trillion, or 84.6%; Asia and Pacific at $75.2 billion, or 3.4%; and Europe at $266.8 billion, or 11.9%.

The release explains, "Each month, ICI reports numbers based on the Securities and Exchange Commission's Form N-MFP data. The report includes all money market funds registered under the Securities Act of 1933 and the Investment Company Act of 1940, that are publicly offered. All master funds are excluded, but feeders are apportioned from the corresponding master and included in the report."

J.P. Morgan's latest update comments, "After several months of turbulence, volatility in the prime money market fund space waned during November. Prime AuM went virtually unchanged during the month at $375bn. This was the story for both institutional and retail funds. Institutional and retail fund assets both finished flat at $125bn and $350bn respectively. Prime allocations to banks remained stable throughout the month. Net exposure to short-term bank debt was up $1bn."

It continues, "Government fund AuM increased by $61bn during November. Inflows primarily occurred post-election, which could have been due to some investors reacting to heightened uncertainty by moving into cash. Government money market funds increased their allocations to Treasury bills by nearly $100bn during the month, the most of any asset class. This increase was coincident with a $100bn increase in net bill supply. During 2016 bills have helped to bolster supply, alleviating pressure felt by government MMFs."

JPM's piece tells us, "Our longer term outlook for bill supply is positive (we look for $456bn of net bill supply next year). However, a downside risk to this view is the debt ceiling. Treasury would need to cut bill supply as the end of the debt ceiling suspension approaches.... Such a downturn in bill outstandings would pressure the yields of bills and their close substitutes (coupons, discos, repo) lower. We project bill supply to slightly fall by $30bn going into year-end.... Year-end should make things tight for government funds."

Finally, it adds, "As certain dealers temporarily withdraw from the repo market, funds will inevitably park their cash into the RRP facility. Using last quarter-end for reference, it is interesting to note that many funds invested one-third or more of their portfolio into the facility.... Allocations will probably go even higher on December 31 as year-ends typically are more severe than other quarterends. Taking this into consideration, we wouldn't be surprised if more than a few funds go in for the maximum counterparty limit of $30bn and total usage exceeds $500bn."

Email This Article

Use a comma or a semicolon to separate

captcha image