Money fund assets rebounded slightly in the latest week, moving back above the $3.6 trillion level. Money fund assets have increased in 8 out of the last 10 weeks and in 15 out of the past 17 weeks. ICI's latest "Money Market Fund Assets" report shows that MMF totals have increased by $557 billion, or 18.3%, year-to-date in 2019. Over the past 52 weeks, ICI's money fund asset series has increased by $566 billion, or 18.6%, with Retail MMFs rising by $192 billion (16.4%) and Inst MMFs rising by $374 billion (20.0%).

Money fund assets should end 2019 with the fastest growth rate since 2008 and the biggest asset increase since 2009. Assets should increase by more than 2 1/2 times 2018's 7.2% gain and more than 2009's 15.4% increase. Our MFI Daily shows money fund assets up by $42.7 billion month-to-date through 12/24 to $3.953 trillion.

ICI writes, "Total money market fund assets increased by $4.87 billion to $3.60 trillion for the week ended Tuesday, December 24, the Investment Company Institute reported.... Among taxable money market funds, government funds increased by $8.00 billion and prime funds decreased by $2.08 billion. Tax-exempt money market funds decreased by $1.05 billion." ICI's weekly series shows Institutional MMFs rising $0.1 billion and Retail MMFs increasing $4.7 billion. Total Government MMF assets, including Treasury funds, were $2.691 trillion (74.7% of all money funds), while Total Prime MMFs were $776.5 billion (21.5%). Tax Exempt MMFs totaled $136.9 billion, 3.8%.

They explain, "Assets of retail money market funds increased by $4.73 billion to $1.36 trillion. Among retail funds, government money market fund assets increased by $4.08 billion to $774.60 billion, prime money market fund assets increased by $739 million to $463.60 billion, and tax-exempt fund assets decreased by $88 million to $125.60 billion." Retail assets account for over a third of total assets, or 37.8%, and Government Retail assets make up 56.8% of all Retail MMFs.

The release adds, "Assets of institutional money market funds increased by $137 million to $2.24 trillion. Among institutional funds, government money market fund assets increased by $3.92 billion to $1.91 trillion, prime money market fund assets decreased by $2.82 billion to $312.94 billion, and tax-exempt fund assets decreased by $962 million to $11.31 billion." Institutional assets accounted for 62.2% of all MMF assets, with Government Institutional assets making up 85.5% of all Institutional MMF totals.

In other news, Federated Investors' Susan Hill writes, "Fed well prepared to corral repo at year-end." She explains, "The end of a year is a time to reflect on events that have transpired and to anticipate things to come. As we move to 2020, this will be particularly true of the repo market, which has dominated our conversations with clients in the fourth quarter. In light of this focus, we wanted to touch on the Federal Reserve's plans for the end of the year and our expectations for the repo market as a result."

Hill continues, "It didn't take long after the mid-September spike in repo rates for the market to fixate on the potential for similar volatility on Dec. 31. These concerns persisted in spite of Fed operations that have added liquidity to the market on both a temporary and permanent basis since then -- actions that have eliminated much of the day-to-day variability in repo rates. The worries may have begun to abate, however, with the Fed recently announcing plans for year-end operations to address any remaining liquidity needs. And they are substantial."

She tells us, "All told, through overnight and term operations, the Fed will make approximately $500 billion available to the market. This number gets even bigger when the permanent operations -- its ongoing purchases of Treasury bills -- are added in. With this enormous potential liquidity provision, the Fed cannot be faulted for failing to use its current tools to their full extent, although it deferred the decision to add new tools or address regulations that might be impacting the transmission of liquidity."

The Federated piece comments, "In fact, some of the onus must go on market participants to prepare, and indications are that they have. We are confident the combination should prevent a repeat of September's volatility. Repo rates could still be higher than normal, as is typically the case on the last day of the year, but we are comfortable that any pressure will subside quickly and would reflect the plumbing of the repo market rather than credit stress. Finally, it is worth noting that the repo rates cited in the media most often reference borrowing costs for counterparties who do not meet our rigorous credit standards."

Finally, it adds, "Many have speculated that the Fed's actions are another wave of quantitative easing in disguise, a characterization that the Fed has vehemently denied. It cannot be denied, however, that the Fed's presence in the repo market at the end of this year will be profound. We expect the Fed to gradually reduce its footprint in early 2020, as permanent bill purchases boost reserves to a level that lessens the need for liquidity injections, at least on a regular basis. In the meantime, however, policymakers' full attention is on mitigating potential dislocations on Dec. 31, and we think they will be successful."

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