The Investment Company Institute released its latest monthly "Money Market Fund Holdings" summary (with data as of August 31, 2017) yesterday. This release reviews the aggregate daily and weekly liquid assets, regional exposure, and maturities (WAM and WAL) for Prime and Government money market funds. The MMF Holdings release says, "The Investment Company Institute (ICI) reports that, as of the final Friday in August, prime money market funds held 27.3 percent of their portfolios in daily liquid assets and 43.1 percent in weekly liquid assets, while government money market funds held 57.1 percent of their portfolios in daily liquid assets and 75.7 percent in weekly liquid assets." Prime DLA decreased from 29.2% last month and Prime WLA increased from 42.7% last month. We review the ICI's latest Holdings update, as well as recent Portfolio Holdings commentary from J.P. Morgan Securities, below.

ICI explains, "At the end of August, prime funds had a weighted average maturity (WAM) of 33 days and a weighted average life (WAL) of 73 days. Average WAMs and WALs are asset-weighted. Government money market funds had a WAM of 31 days and a WAL of 87 days." Prime WAMs were down one day from the prior month, and WALs were down one day. Govt WAMs and WALs both decreased by 1 day from last month.

Regarding Holdings By Region of Issuer, ICI's release tells us, "Prime money market funds' holdings attributable to the Americas declined from $174.32 billion in July to $170.19 billion in August. Government money market funds' holdings attributable to the Americas rose from $1,686.38 billion in July to $1,687.96 billion in August." (See too Crane Data's Sept. 13 News, "Sept. Money Fund Portfolio Holdings: Repo Rebounds, Treasuries Drop.")

The Prime Money Market Funds by Region of Issuer table shows Americas-related holdings at $170.2 billion, or 39.1%; Asia and Pacific at $85.7 billion, or 19.7%; Europe at $177.0 billion, or 40.6%; and, Other (including Supranational) at $2.5 billion, or 0.7%. The Government Money Market Funds by Region of Issuer table shows Americas at $1.688 trillion, or 78.4%; Asia and Pacific at $108.2 billion, or 5.0%; and Europe at $353.5 billion, or 16.4%.

In related news, J.P. Morgan Securities' U.S. Fixed Income Markets' latest "Short Duration Strategy Weekly," also comments on the latest set of money fund portfolio holdings. They write, "Total taxable money fund AUM increased by $73bn or 3% in August, driven predominately by inflows into government MMFs. Month-over-month, government MMF assets rose by $56bn, while prime fund assets rose by $17bn. Given the time of year, it's common for MMFs to experience inflows. That being said, we note that the recent surge has been notable relative to this time in prior years and could be driven in part by some very large corporate bond deals that took place this summer."

Their update on "Taxable MMF holdings for August" continues, "As expected, government MMFs actively avoided Treasury bills that matured in October.... Over the course of August, exposure to October bills decreased by $16.5bn, as debt ceiling concerns led funds to reduce their exposures to bills that are most at risk of a technical default. Instead, they piled into surrounding maturities, with exposure to September and November bills increasing by $38bn and $58bn respectively."

J.P. Morgan tells us, "As of August month-end, government MMFs held $219bn of Treasury bills. Of this amount, approximately 80% mature inside of 3 months (i.e., November and in) and 20% beyond 3 months (i.e, December and out).... With the Fed potentially in play in December, we suspect MMFs may choose to stay short duration ahead of the Fed meeting, which should keep a lid on yields on short-dated bills, such as cash management and 1-month bills, even as we are anticipating $170bn of net new bill supply in 4Q17."

They explain, "Within government MMFs, repo ex-Fed RRP continues to comprise a significant portion of holdings. This asset class has seen the greatest growth in government MMFs, increasing by $338bn year-to-date.... In contrast, there have been reductions in Treasury bill (-$38bn) and Treasury coupons/FRN holdings (-$134bn). Meanwhile, Agency holdings have been fairly stable this year."

J.P. Morgan adds, "Foreign banks seem to be driving the growth in repo this year, particularly the French banks.... This growth now places the French banks as among the biggest repo counterparties in the money markets. Indeed, of the top 6 repo counterparties with MMFs, three of them are French banks."

Finally, they write, "As for prime MMFs, portfolio allocations were largely unchanged month-over-month.... Balances to foreign banks increased slightly, offset by small declines in Fed RRP. Again, the increase in foreign bank exposure was predominately driven by banks domiciled in France, in the form of CP/CDs, followed by banks domiciled in Netherlands and Belgium."

Email This Article

Use a comma or a semicolon to separate

captcha image