The Investment Company Institute's latest weekly "Money Market Fund Assets" report shows assets rising for the fourth week in a row and the fifth week out of the past six. Over the past 4 weeks, money fund assets have increased by $66.8 billion, and over the past 6 weeks assets are up $103.4 billion. Money fund assets are up by $324 billion, or 7.5%, YTD in 2021. (This follows a gain of $665.0 billion, or 18.3%, in 2020.) Inst MMFs are up $418 billion (15.1%), while Retail MMFs are down $94 billion (-6.1%). Over the past 52 weeks, money fund assets have increased by $301 billion, or 7.0%, with Retail MMFs falling by $98 billion (-6.4%) and Inst MMFs rising by $399 billion (14.3%).
ICI's release says, "Total money market fund assets increased by $21.61 billion to $4.62 trillion for the eight-day period ended Wednesday, December 1, the Investment Company Institute reported today. Among taxable money market funds, government funds increased by $25.92 billion and prime funds decreased by $3.72 billion. Tax-exempt money market funds decreased by $599 million." ICI's stats show Institutional MMFs increasing $21.6 billion and Retail MMFs decreasing $3.7 billion in the latest week. Total Government MMF assets, including Treasury funds, were $4.089 trillion (88.5% of all money funds), while Total Prime MMFs were $444.9 billion (9.6%). Tax Exempt MMFs totaled $87.2 billion (1.9%).
ICI explains, "Assets of retail money market funds decreased by $3.72 billion to $1.43 trillion. Among retail funds, government money market fund assets decreased by $2.34 billion to $1.15 trillion, prime money market fund assets decreased by $1.11 billion to $205.74 billion, and tax-exempt fund assets decreased by $271 million to $76.86 billion." Retail assets account for just under a third of total assets, or 31.0%, and Government Retail assets make up 80.3% of all Retail MMFs.
They add, "Assets of institutional money market funds increased by $25.33 billion to $3.19 trillion. Among institutional funds, government money market fund assets increased by $28.26 billion to $2.94 trillion, prime money market fund assets decreased by $2.60 billion to $239.19 billion, and tax-exempt fund assets decreased by $328 million to $10.30 billion." Institutional assets accounted for 69.0% of all MMF assets, with Government Institutional assets making up 92.2% of all Institutional MMF totals.
Crane Data's MFI Daily shows money fund assets rising by $65.9 billion to $5.041 trillion in November. Our monthly MFI XLS. Over the past 5 and 10 years, November and December have been the two strongest months for money market fund asset growth. (Last year was a notable exception -- in 2020 assets were roughly flat following the monstrous buildup during March and April.) Over 10 years through 2020, assets have averaged gains of $37 billion in November and $41 billion in December. Thus, we expect the recent strong inflows to continue as we approach year end. (Note that ICI's asset totals don't include a number of funds tracked by the SEC and Crane Data, so they're almost $400 billion lower than Crane's asset series.)
In other news, The Wall Street Journal writes, "Covid-19 Made Americans Into Super Savers. Now They're Hoarding Cash." The article tells us, "Americans are hoarding cash because of fatigue and uncertainty, with little chance the trend will reverse soon. Over the past two years, households have socked away close to $1.6 trillion in 'excess savings,' or resources they otherwise wouldn't have been able to save before the Covid-19 crisis, according to the Federal Reserve Bank of New York."
It explains, "While the savings rate has dropped back to 2019 levels after four consecutive quarters of record high savings, financial advisers, money managers and economists say Americans are too nervous about potential worst-case scenarios to dip into their funds. And now, with the Omicron variant of the coronavirus threatening to disrupt stability once again, many of them expect the cash hoarding to continue."
The Journal piece says, "Hoarding savings can hurt individuals' long-term finances should inflation rise further, and the piling of savings can create bigger problems for an economy in which consumer spending makes up more than two-thirds of its gross domestic product. At the start of the coronavirus pandemic, people began hoarding money for emergencies. The government also issued three rounds of stimulus payments to Americans who qualified. With no end in sight, many Americans kept saving both as a safety measure and as a result of being stuck at home, leading to the highest personal savings rate since World War II."
It adds, "Researchers at the New York Fed say the move happened more mechanically than intentionally. People saved more because they weren't spending as much, not necessarily because they were actively stockpiling money in their reserves."
Finally, Federated Hermes' Deborah Cunningham writes "Continuity is critical" in her latest monthly commentary, discussing the reappointment of the Federal Reserve's Jerome Powell. She says, "President Biden's public opinion rating has taken a hit recently, but the markets approved of his nomination of Federal Reserve Chair Jerome Powell to a second term. While the decision was a vote of confidence in his ability to navigate monetary policy in uncertain times, it had everything to do with continuity. Other than criticizing lawmakers for dragging their feet on new fiscal stimulus last fall, Powell has worked well with Congress. And despite defending various Fed stances, he has acknowledged worrisome developments such as rising inflation, giving him credibility with investors. Although Lael Brainard certainly is qualified, Powell was the right choice."
The update continues, "The persistence of the pandemic is one reason we need the status quo. The emergence of the omicron variant has highlighted that. But the most pressing motivation for continuity is the tapering of the Fed's monthly asset purchases, which began in mid-November with a reduction of $10 billion of Treasuries and $5 billion of mortgaged-backed securities. It's crucial this succeeds without spooking the markets, and the selection of a new Fed chair might have done that."
It adds, "The front end of the Treasury yield curve has reflected the debt limit drama, with 1-month bills offering about double the yield of 6-month bills and essentially equal to that of 12-month Treasuries. Expecting the curve to steepen and attractive investment opportunities to arise after the situation is resolved, in the middle of November we lowered the weighted average maturity (WAM) target range of our government money market funds to 30-40 days from 35-45 days. We kept WAMs of our prime and municipal funds in target ranges of 40-50 days."
