S&P on Record MMF Flows In March
S&P Global Ratings published a release entitled, "U.S. Money Market Funds Saw Record Flows In March, Report Says," which tells us, "During the first quarter of 2020, as the COVID-19 pandemic spread through the U.S. and the country broadly implemented social distancing measures, S&P Global Ratings observed extraordinary investment activity within the money market sector, according to the report "U.S. 'AAAm' Fund Risk Metrics (March 2020)," published today. Both government and prime funds saw record flows. Following sell-offs in U.S. equity markets, a flight to quality saw government and Treasury money market funds (MMFs) receive $620 billion in assets in March, a 32% rise for the month, while prime MMFs lost $83 billion, a 16% decline. U.S. MMFs' total assets ended March slightly above $3 trillion." S&P's Joseph Giarratano comments, "In our view, the outflows from prime MMFs generally did not reflect fundamental credit concerns, but rather stemmed largely from liquidity pressures in March." The ratings agency adds, "Some prime MMFs faced liquidity issues as heavy redemption activity threatened their ability to maintain daily and weekly liquidity levels above regulatory thresholds. To raise additional liquidity and support net asset values (NAVs), some funds utilized external tools, including the Federal Reserve's Money Market Mutual Fund Liquidity Facility and parental capital support. Despite observable deterioration in NAVs, caused by larger-than-normal outflows and liquidity pressures, prime funds maintained principal stability, and all S&P Global Ratings rated MMFs maintained NAVs of at least 0.9975, the lowest deviation point for the 'AAAm' rating."
