Money fund assets rose for the sixth week in a row, the 9th week out of 10, and the 23rd week out of the past 25. ICI's latest "Money Market Fund Assets" report shows that MMF totals have increased by $422 billion, or 13.9%, year-to-date. Over the past 52 weeks, ICI's money fund asset series has increased by $582 billion, or 20.1%, with Retail MMFs rising by $247 billion (22.9%) and Inst MMFs rising by $335 billion (18.5%). We review ICI's assets, discuss our own Money Fund Intelligence Daily series, just broke over $3.8 trillion for the first time, and review a recent Wells Fargo MMFs commentary below.
ICI writes, "Total money market fund assets increased by $6.77 billion to $3.47 trillion for the week ended Wednesday, October 9, the Investment Company Institute reported.... Among taxable money market funds, government funds increased by $1.08 billion and prime funds increased by $4.17 billion. Tax-exempt money market funds increased by $1.51 billion." ICI's weekly series shows Institutional MMFs rising $0.9 billion and Retail MMFs increasing $5.9 billion. Total Government MMF assets, including Treasury funds, were $2.597 trillion (74.8% of all money funds), while Total Prime MMFs were $735.7 billion (21.2%). Tax Exempt MMFs totaled $136.8 billion, 3.9%.
They explain, "Assets of retail money market funds increased by $5.88 billion to $1.32 trillion. Among retail funds, government money market fund assets increased by $1.68 billion to $758.16 billion, prime money market fund assets increased by $2.80 billion to $439.93 billion, and tax-exempt fund assets increased by $1.41 million to $125.13 billion." Retail assets account for over a third of total assets, or 38.1%, and Government Retail assets make up 57.3% of all Retail MMFs.
The release adds, "Assets of institutional money market funds increased by $887 million to $2.15 trillion. Among institutional funds, government money market fund assets decreased by $593 million to $1.84 trillion, prime money market fund assets increased by $1.37 billion to $295.76 billion, and tax-exempt fund assets increased by $110 million to $11.71 billion." Institutional assets accounted for 61.8% of all MMF assets, with Government Institutional assets making up 85.7% of all Institutional MMF totals.
Crane Data's monthly Money Fund Intelligence, which is a separate and broader series than ICI's, shows that money fund assets overall rose by $76.3 billion in September to $3.786 trillion, after rising by $84.2 billion in August. Institutional MMFs increased by $51.5 billion, while Retail MMFs rose by $30.3 billion. Government & Treasury money funds are now also growing faster than Prime MMFs; they were up $36.4 billion and $28.9 billion, respectively, vs. Prime's $16.4 billion increase last month. (Note: Crane Data's asset totals include a number of internal and other money funds that aren't included in ICI's series, so our totals are substantially higher.)
Earlier this week, assets tracked by Crane Data's Money Fund Intelligence Daily broke the $3.8 trillion level for the first time ever. Month-to-date through October 9, assets tracked by our MFID have increased by $41.9 billion to a record $3.801 trillion. In October so far, the Crane Institutional MF Index has increased by $26.3 billion to $2.527 trillion, while the Crane Retail MF Index rose $14.2 billion to $1.135 trillion. Prime MMFs have increased by $17.6 billion to $1.049 trillion while Govt (including Treasury) MMFs have grown by $22.9 billion to $2.613 trillion.
In other news, Wells Fargo Money Market Funds published its latest "Portfolio Manager Commentary," which tells us, "Generally, what happens in the money markets stays in the money markets. They can seem a bit arcane, they're viewed by the business world as benign but necessary plumbing, and their various markets and mechanisms would be incomprehensible to the general public. So if something happens there that not only makes the business press but moves beyond it into the general media, it must have been noteworthy. Such was the case with the repurchase agreement (repo) market volatility in mid-September."
Senior Fund Manager Michael Bird explains, "The executive summary of events is that repo rates spiked higher, catching the attention not only of the Federal Reserve (Fed) but also of the media. While the Fed moved promptly to inject liquidity into the system by offering its own repo deal to primary dealers, it took a few days to get the details properly calibrated. Eventually the Fed drove repo rates down to relative levels not seen in over a year."
The commentary continues, "The Fed may have been left a bit red-faced by the spike in repo rates, partly because it calls into question its ability to control short-term rates, which is central to the transmission of monetary policy, and partly because regulators have been touting SOFR as an acceptable reference rate to replace LIBOR (the London Interbank Offered Rate). It took a few days to get the response right, but after adding the term operations, the Fed demonstrated the control it desired. Its next step will be to take more permanent measures to avoid the need for the temporary OMOs it used this time around. Among the leading contenders are a standing repo facility, which we discussed earlier this year here, or a resumption of asset purchases."
It also says, "For the second consecutive meeting, the Federal Open Market Committee (FOMC) reduced the federal funds target range by a quarter-percentage point to 1.75% to 2.00%, a move that was both expected and fully priced into the market. In addition to the 25-basis-point (bp) cut to the target range, the FOMC reduced both the reverse repo rate (RRP) and the interest on excess reserves (IOER) by 30 bps to 1.70% and 1.80%, respectively, in an effort to keep the effective funds rate within its target range.... There was even greater dissension within the ranks at this meeting compared to the last—three dissenters compared to two in July."
The Wells "Overview, strategy and outlook" also comments, "The mid-month repo kerfuffle ... had little impact on commercial paper rates. Overnight and very short paper felt some pressure at the time as each product is competing in the prime space for the same investment dollars. However, term commercial paper rates rose and fell incrementally in line with changes in LIBOR as the repo phenomenon was largely viewed as a short-term, supply-driven situation. Issuers in general were pretty well funded before quarter-end and therefore didn't need to pay a hefty premium to attract investment. Going forward, what should start to affect commercial paper levels is the looming year-end. Issuers typically prefer to be assured of being properly funded over year-end well beforehand and will pay a premium to attract investments to avoid year-end funding pressures. These funding pressures, coupled with uncertainty over the path of policy rates, might cause term levels to rise and widen further relative to LIBOR."
Finally, it adds, "Money market funds have exhibited exceptional growth since the beginning of the year. Crane Data indicates $604 billion has flowed into the funds since December 31, bringing overall balances to $3.758 trillion! This is not quite a record for balances though: Money market fund assets peaked on January 14, 2009, at $3.922 trillion. The growth this year has been split between government funds and prime funds. Remarkably, prime fund asset growth has exceeded government fund growth by 50%, with government funds adding $221 billion and prime funds drawing $303 billion.... If investors decide to de-risk going into year-end, the fourth quarter, which has historically been a period of growth for money market funds in general, may see larger flows than in years past. Who knows -- maybe we'll hit another high in money market fund assets this year. Stay tuned!"
