ICI released its latest "Money Market Fund Assets" report Thursday, which shows that assets surged in the latest week after being flat the previous week and falling sharply the two weeks before that. Year-to-date, MMFs are down by $115 billion, or -2.4%, with Institutional MMFs down $83 billion, or -2.6% and Retail MMFs down $32 billion, or -2.2%. Over the past 52 weeks, money fund assets have increased by $93 billion, or 2.1%, with Retail MMFs falling by $55 billion (-3.7%) and Inst MMFs rising by $149 billion (4.9%). (Note: Thanks again to those who attended our Bond Fund Symposium earlier this week in Newport Beach, Calif.! Visit our "Bond Fund Symposium 2022 Download Center" for materials and recordings.)
ICI's weekly release says, "Total money market fund assets increased by $29.73 billion to $4.59 trillion for the week ended Wednesday, March 30, the Investment Company Institute reported today. Among taxable money market funds, government funds increased by $27.25 billion and prime funds increased by $1.23 billion. Tax-exempt money market funds increased by $1.25 billion." ICI's stats show Institutional MMFs increasing $28.5 billion and Retail MMFs increasing $1.2 billion in the latest week. Total Government MMF assets, including Treasury funds, were $4.078 trillion (88.8% of all money funds), while Total Prime MMFs were $425.3 billion (9.3%). Tax Exempt MMFs totaled $87.4 billion (1.9%).
ICI explains, "Assets of retail money market funds increased by $1.23 billion to $1.44 trillion. Among retail funds, government money market fund assets decreased by $143 million to $1.16 trillion, prime money market fund assets decreased by $223 million to $196.66 billion, and tax-exempt fund assets increased by $1.59 billion to $78.24 billion." Retail assets account for just under a third of total assets, or 31.3%, and Government Retail assets make up 80.9% of all Retail MMFs.
They add, "Assets of institutional money market funds increased by $28.50 billion to $3.15 trillion. Among institutional funds, government money market fund assets increased by $27.39 billion to $2.92 trillion, prime money market fund assets increased by $1.46 billion to $228.66 billion, and tax-exempt fund assets decreased by $343 million to $9.17 billion." Institutional assets accounted for 68.7% of all MMF assets, with Government Institutional assets making up 92.4% of all Institutional MMF totals. (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 Carfang Group posted a brief entitled, "U.S. Bank Deposit Growth Slows in 2021," which tells us, "Domestic deposits at U.S. banks grew by 11.7% at a record $18.2 trillion during 2021. Deposit growth mirrored the nominal GDP growth and M2 money supply over that same period. This is a sharp slowdown following the 23% growth of 2020 when the Fed flooded the banking system with deposits in response to the pandemic. Banks were awash in liquidity as deposits grew much faster than GDP."
It continues, "Current growth rates for nominal GDP, M2 and domestic deposits remain well above recent pre-pandemic averages. Recent changes in Fed policy are likely to cause deposits and money supply to further decelerate while inflation will cause nominal GDP to grow. Deposits now stand at 76% of GDP. Should they revert to their historical level of 60% of GDP as the Fed ends its QE, deposit levels would fall by $2.8 trillion."
Carfang adds, "It's too early to declare that the deposit market is tightening but contingency planning is in order. Interviews with senior bankers reflect concern with Fed taper, interest rates and inflation. That, combined with new FDIC guidance favoring technology sourced deposits, alters the playing field for 2022 considerably."
The report explains, "Domestic deposits at U.S. banks grew 11.7% to a record $18.2 trillion in 2021. [The] 11.7% growth is a marked slowdown from the 23% growth in 2020 but well above the long term trendline. Banks in the U.S. have added an historic $4.97 trillion in deposits since the onset of the pandemic. After years of holding steady at 60% of U.S GDP, deposits grew rapidly during the pandemic and now stand at 75.8% of GDP, also well above trendline. Deposit growth closely tracked growth of M2 money supply which was 11.9%."
It states, "Noninterest-bearing deposit growth continues to outstrip interest bearing deposits by a wide margin. Non-interest-bearing deposits (NIB) grew by 18.2% in 2021, whereas Interest bearing (IB) deposits grew by only 9.1%. However, IB growth outpaced NIB growth in the fourth quarter 3.6% to 2.0%. With rates so low, many depositors appeared content leaving their cash in noninterestbearing accounts. That could change markedly as the Fed begins an extended rate increase cycle. These gains follow 46% and 16% increases respectively in 2020. Across all U.S. banks, IB deposits accounted for 70% of total domestic deposits in Q4. The pre-pandemic share was 76% so this is a significant shift."
The brief also tells us that, "Uninsured deposit growth (17.8%) YTD exceeded insured deposit growth (6.8%). This is a sharp slowdown from 2020 during which uninsured deposits grew by 33% while insured deposits were up at 17%, roughly half that rate. Separation continued in the fourth quarter as uninsured deposits grew by 4.9% vs. 1.6% for insured deposits."
Carfang writes, "Brokered deposits are in a state of flux, down 47.8% in 2021 following new classification guidance from the FDIC.... [T]he major reclassifications took place in the second quarter, but the trend continued through year-end. Brokered deposits fell from $1.14 trillion at year-end to $0.59 trillion at year end. They represent a 3.3% of total domestic deposits."
Finally, they conclude, "The torrid 23% deposit growth of 2020 has slowed markedly in 2021. At 11.7%, growth was almost identical to gains in nominal U.S. GDP and in M2 money supply. While that is not yet enough to declare that the market for deposits is tightening, it does indicate alignment with other macro indicators. However, it remains well above historical norms.... Will liquidity still be king, or will depositors begin to seek more yield? ... Will the FDIC brokered deposit guidance continue to lead to major reclassifications and will technology sourced deposits continue to grow in importance?"
