Money market mutual fund assets showed huge gains for the eighth week in a row, breaking the $4.65 trillion level and hitting yet another record. ICI's latest weekly "Money Market Fund Assets" report says, "Total money market fund assets increased by $127.54 billion to $4.65 trillion for the week ended Wednesday, April 22, the Investment Company Institute reported.... Among taxable money market funds, government funds increased by $108.70 billion and prime funds increased by $19.05 billion. Tax-exempt money market funds decreased by $206 million." ICI's stats show Institutional MMFs rising $123.0 billion and Retail MMFs increasing $4.6 billion. Total Government MMF assets, including Treasury funds, were $3.825 trillion (82.2% of all money funds), while Total Prime MMFs were $687.4 billion (14.8%). Tax Exempt MMFs totaled $139.15 billion, 3.0%. Money fund assets are up an eye-popping $1.020 trillion, or 28.1%, year-to-date in 2020, with Inst MMFs up $717 billion (31.7%) and Retail MMFs up $173 (12.6%). Over the past 52 weeks, ICI's money fund asset series has increased by $1.602 trillion, or 52.5%, with Retail MMFs rising by $341 billion (28.3%) and Inst MMFs rising by $1.139 trillion (61.9%).

They explain, "Assets of retail money market funds increased by $4.58 billion to $1.55 trillion. Among retail funds, government money market fund assets increased by $441 million to $986.37 billion, prime money market fund assets increased by $4.45 billion to $436.96 billion, and tax-exempt fund assets decreased by $311 million to $124.46 billion." Retail assets account for over a third of total assets, or 33.3%, and Government Retail assets make up 63.7% of all Retail MMFs.

ICI adds, "Assets of institutional money market funds increased by $122.96 billion to $3.10 trillion. Among institutional funds, government money market fund assets increased by $108.26 billion to $2.84 trillion, prime money market fund assets increased by $14.60 billion to $250.43 billion, and tax-exempt fund assets increased by $105 million to $14.68 billion." Institutional assets accounted for 66.7% of all MMF assets, with Government Institutional assets making up 91.5% of all Institutional MMF totals. (Note: Crane Data has its own separate, and larger, daily and monthly asset series.)

In related news, The Wall Street Journal tells us that, "Coronavirus Made America's Biggest Banks Even Bigger." The article states, "Companies and consumers flooded U.S. banks with a record $1 trillion of deposits in the first quarter, when markets went haywire and America went dark to stop the spread of the new coronavirus. More than half of it went to the four largest banks in America -- JPMorgan Chase & Co., Bank of America Corp., Wells Fargo & Co. and Citigroup Inc. The $590 billion in deposits they gained in the first quarter is nearly double the previous quarterly record of $313 billion for the entire U.S. banking industry, according to Federal Deposit Insurance Corp. data."

They comment, "Much of the $1 trillion flowed into the banks in a two-week span in March, according to a Wall Street Journal analysis of Federal Reserve data. During that time, companies were frantically drawing down on their credit lines and stockpiling cash in preparation for a severe recession. The growth in deposits shows how different this crisis is from the last one. In 2008, America's biggest banks were the bad guys that nearly destroyed the economy. Now, they are a refuge for jittery consumers and businesses waiting out the shutdown."

The WSJ piece continues, "Banks' loan books grew sharply in March, largely a result of companies draining their credit lines.... Much of the borrowed funds ended up in deposit accounts at the same banks, executives said last week when the banks reported first-quarter earnings. Citigroup borrowers drew down $32 billion on credit lines in the first quarter. The corresponding rise in deposits accounted for roughly a third of the $92 billion in corporate deposits the bank added in March, said Chief Financial Officer Mark Mason."

It adds, "Figuring out what to do with all the new deposits is the problem. Because companies have never stockpiled cash quite like this before, banks aren't sure how long the money will stick around. Banks make money on the spread between what they can pay depositors and what they can charge lenders. If the deposits aren't stable, they can't lend them out for fear of getting squeezed. The loan-to-deposit ratio for the industry has fallen to an all-time low, Barclays's Mr. Goldberg said, a sign the banks were holding back."

Finally, ultra-short bond funds saw substantial asset declines in March, J.P. Morgan tells us in a new "Short Duration Update." The brief on "Low duration bond funds" states, "The sharp outflows last month were not limited to prime MMFs: after years of steady growth, low duration bond funds also lost cash. We estimate total AUM across short-term and ultrashort mutual funds and ETFs registered $720bn as of 3/31/20, down $71bn over the month (though still up $31bn relative over a year ago). Both ultrashort funds (those with a portfolio duration between 0.5 and 1.5 years), and short-term funds (with a longer duration of 1.5 to 3.5 years) shrank, dropping $43bn and $28bn, respectively in March. On a percentage basis, this drop was especially severe for the ultrashort funds, which lost 18% of their AUM."

The update says, "Within both the short-term and ultrashort categories, we classify funds into four general styles: government, credit, conservative credit, and multi-sector. Looking at flows by style, outflows were unsurprisingly concentrated in the riskier multi-sector and credit funds (as well as ultrashort conservative credit funds). Short-term government funds gained assets in March, while ultrashort government funds were flat.... On average, all of the credit styles saw negative total returns in March as credit spreads widened sharply, with the riskier styles underperforming. Short-term government funds saw positive returns as rates fell."

JPM adds, "Despite the recent losses, most fund styles have seen positive total returns over the past year, though some individual funds have seen sharply negative returns; short-term funds continue to show more variation in returns between different funds.... It's also worth noting that given the widening of credit spreads, the yields on short-term and ultrashort credit funds actually increased.... Considering the sharp decline in MMF yields, this could make these funds an attractive option going forward for those willing to take on some credit risks, but given considerable uncertainty and volatility, we wouldn't necessarily expect inflows to pick back up any time soon."

Crane Data's Bond Fund Intelligence shows overall bond fund assets falling by $280.2 billion (-9.3%) to $2.721 trillion, with Conservative Ultra-Short BFs falling $21.4 billion (-22.6%) to $73.2 billion, Ultra-Short BFs falling $12.8 billion (-14.4%) to $75.8 billion and Short-Term BFs falling $23.9 billion (-7.6%) to $289.3 billion. (Let us know if you'd like to see our latest BFI, BFI XLS or Bond Fund Portfolio Holdings, which just shipped yesterday.) ICI's latest weekly "Combined Estimated Long-Term Fund Flows and ETF Net Issuance" shows overall bond funds with their first inflow in two weeks in the week ended April 15.

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