J.P. Morgan writes in its most recent "Short-Term Fixed Income" update that, "The latest MMF holdings data reveal yet another rise in T-bills in both government and prime MMFs. As discussed in more detail below, the percentage MMFs are allocating to T-bills has increased to record levels as of the end of May. But in contrast to April where flows into government MMFs prompted the increased exposure, last month's growth in T-bill holdings in MMFs was driven more by relative value considerations. Indeed, month over month, government AUMs fell by $62bn even as they increased their T-bill holdings by $287bn. Meanwhile, repo fell by $223bn. For prime funds, their AUMs increased by $59bn, but their Treasury holdings increased by $75bn while their credit holdings to banks and corporates fell by $26bn."
They explain, "[P]urchases of T-bills by MMFs focused predominately on the shorter end (i.e., less than 90 days) of the curve.... All else equal, we believe this issuance pattern should steepen the T-bills curve, particularly given our expectation that MMF balances should trend higher in 2H. That said, we suspect any sort of steepening will likely be capped/limited given interest among bank portfolios to invest their reserves as a spread over IOER. Anecdotal conversations suggest that engagement would begin if T-bills were trading around IOER + 5-10bp or OIS + 10-15bp. All told, the demand for front-end T-bills will likely remain strong, and in the face of less supply in the short-end relative to the long-end, this should steepen the curve until bank portfolios decide to step in and engage."
On May taxable MMF holdings, JPM comments, "As investors began to put on somewhat more risk last month, taxable MMF inflows were modest, with only $37bn entering the fund complex m/m.... Government funds saw outflows of $10bn while prime funds received a net inflow of $47bn, recouping more of their AUM losses from earlier this year.... Dealer repo ex-FICC decreased $141bn month over month, while exposure to FICC sponsored repo decreased $85bn to $136bn in May…. RRP usage was minimal at just $1bn. Given a 5-12bp disparity between bill yields and repo, most MMFs found relative value by investing in bills rather than repo."
They continue, "In fact, MMFs absorbed a clear majority of the newly issued T-bills last month.... While there was $628bn of net T-bill issuance in May, government funds and prime funds added $287bn and $75bn in bills m/m, respectively. Because of the massive shift in allocations towards T-bills, MMFs now comprise 45% of the T-bill market -- extending last month's rotation into bills.... T-bills now represent a larger fraction of both government and prime funds' portfolios. In both instances, the percentage allocated to T-bills has increased to record levels ... with purchases focused mainly on the shorter end of the bills curve.... The flows into prime funds (+$47bn) in May seem to have entirely found their way into Treasuries instead of credit."
Finally, JPM writes, "On the benchmark reform front, MMFs have continued to hold mostly SOFR Agency FRNs. We estimate that at month-end these funds held $335bn of SOFR FRNs versus $202bn of non-SOFR floaters.... In May, prime funds continued to de-risk, turning away from credit products and pivoting into Treasuries.... Bank CP/CD/TD exposures decreased $2bn.... At the individual issuer level, changes were largely idiosyncratic."
As a reminder, we will be hosting our second online event, "Crane's Money Fund Webinar: Portfolio Holdings Update," next Thursday, June 25 at 2:00pm (Eastern). The webinar will feature Crane Data's Peter Crane and J.P. Morgan Securities' Teresa Ho, who will give a 40 minute update on the latest trends in the money fund space with a focus on the latest Money Fund Portfolio Holdings data. The session will also include a Q&A and brief product training segment on Money Fund Portfolio Holdings data and information. (To register, click here.)
Crane Data's first webinar, "Crane's Money Fund Update & Training," aired May 21st. It featured Pete Crane reviewing recent events and trends involving money market mutual funds for 30 minutes, including discussions of asset flows, negative yield and a number of other topics. The webinar also included a brief, 15 minute tutorial on our Money Fund Intelligence Daily product. (See the bottom of our "Content" page for all of our Webinar and conference materials.)
In related news, Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics Tuesday, which track a shifting subset of our monthly Portfolio Holdings collection. The most recent cut (with data as of June 12) includes Holdings information from 79 money funds (up one from two weeks ago), which represent $2.571 trillion (down from $2.634 trillion) of the $5.122 trillion (50.2%) in total money fund assets tracked by Crane Data. (Note that our Weekly MFPH are e-mail only and aren't available on the website. For our latest monthly Holdings, see our June 10 News, "June Portfolio Holdings: Treasuries Skyrocket; Repo, Agencies Plunge.")
Our latest Weekly MFPH Composition summary again shows Government assets dominating the holdings list with Treasury totaling $1.416 trillion (up from $1.395 trillion two weeks ago), or 55.1%, Repurchase Agreements (Repo) totaling $540.2 billion (down from $592.9 billion two weeks ago), or 21.0% and Government Agency securities totaling $407.4 billion (down from $440.5 billion), or 15.8%. Certificates of Deposit (CDs) totaled $74.2 billion (up from $72.6 billion), or 2.9% and Commercial Paper (CP) totaled $64.0 billion (up from $62.5 billion), or 2.5%. VRDNs accounted for $37.2 billion, or 1.4% and $32.4 billion or 1.3%, was listed in the Other category (primarily Time Deposits).
The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $1.416 trillion (55.1% of total holdings), Federal Home Loan Bank with $239.6B (9.3%), Fixed Income Clearing Co with $85.9B (3.3%), Federal Farm Credit Bank with $65.9B (2.6%), BNP Paribas with $61.2B (2.4%), Federal National Mortgage Association with $54.6B (2.1%), Federal Home Loan Mortgage Corp with $45.2B (1.8%), RBC with $41.8B (1.6%), JP Morgan with $38.4B (1.5%) and Mitsubishi UFJ Financial Group Inc with $26.8B (1.0%).
The Ten Largest Funds tracked in our latest Weekly include: Goldman Sachs FS Govt ($245.5B), JP Morgan US Govt MMkt ($208.3B), Fidelity Inv MM: Govt Port ($179.0B), BlackRock Lq FedFund ($163.7B), Wells Fargo Govt MM ($138.1B), JP Morgan 100% US Treas MMkt ($133.7B), State Street Inst US Govt ($107.6B), Goldman Sachs FS Treas Instruments ($106.9B), Morgan Stanley Inst Liq Govt ($105.4B), BlackRock Lq T-Fund ($85.9B) and Dreyfus Govt Cash Mgmt ($85.6B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary, or our Bond Fund Portfolio Holdings data series.)
