Fitch Ratings published a brief entitled, "U.​S. MMF: U.​S. Agencies Benefit from MMF Reform." It tells us, "With money fund reform pushing more than $​1.​1 trillion of assets from prime to government funds, fund managers have been deploying the cash to available sources of supply, particularly U.​S. government agencies. Of the $​1.​1 trillion increase in government money fund assets between October 2015 and July 2017, $​387 billion (​35%) was allocated to U.​S. agencies and $​266 billion (​24%) was allocated to U.​S. Treasurys.... Among government agencies the Federal Home Loan Banks (​FHLBs) have been the biggest beneficiaries of the increase in government money fund assets. These funds' investment in the FHLBs jumped by $​350 billion (​220%), to $​508 billion from $​158 billion, between October 2015 and July 2017. The FHLBs increased short-​term debt outstanding a modest $​20 billion around this period, according to SIFMA data.... Government money funds' need to deploy large inflows over a relatively short period has pushed their allocations to the FHLBs to higher than historical levels.... While the FHLBs' credit and liquidity profile is closely aligned with that of the U.​S. Treasury, historically funds have found diversifying exposures beneficial. Limiting government funds' reliance on the FHLBs could prove important particularly if the FHLBs reduce their short-​term debt issuance, forcing government funds to find other sources of supply.... Aware of their own exposure to funding from money funds and other short-​term investors, the FHLBs have sought to reduce reliance on short-​term funding. Compared with other U.​S. government agencies, the FHLBs have the highest exposure to money funds. As of Q2 2017, money funds held approximately 48% of all FHLBs' debt outstanding, up from 32% as of Q3 2015. Although the FHLBs have benefited from the asset shift in the money fund industry, the trend has begun to reverse modestly, with government money fund assets down $​102 billion since their peak in Nov. 30, 2016.... In addition to higher direct exposure to agency debt, government funds' exposure to repo backed by agency securities has also increased. Government money fund holdings of agency repo have grown by $​152 billion, or 133%, to $​266 billion from $​114 billion, between October 2015 and July 2017. The higher allocations to agency repo support trading in agency debt, including long-​dated securities that money funds could not hold directly."

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