Money fund assets jumped in the latest week after declining in 6 of the past 8 weeks; it was their biggest gain since late April. The Investment Company Institute's latest weekly "Money Market Fund Assets" report shows assets down by $121 billion, or -2.6%, year-to-date, with Institutional MMFs down $172 billion, or -5.3% and Retail MMFs up $50 billion, or 3.4%. Over the past 52 weeks, money fund assets are up by $69 billion, or 1.5%, with Retail MMFs rising by $88 billion (6.2%) and Inst MMFs falling by $19 billion (-0.6%). (For the month of Sept. through 9/22, MMF assets increased by $25.4 billion to $5.053 trillion according to Crane's MFI XLS, which tracks a broader universe of funds than ICI. Crane Data's Prime asset total is currently $963.6 billion.)

ICI's weekly release says, "Total money market fund assets increased by $31.76 billion to $4.58 trillion for the week ended Wednesday, September 21, the Investment Company Institute reported.... Among taxable money market funds, government funds increased by $21.56 billion and prime funds increased by $10.58 billion. Tax-exempt money market funds decreased by $369 million." ICI's stats show Institutional MMFs increasing $22.7 billion and Retail MMFs increasing $9.1 billion in the latest week. Total Government MMF assets, including Treasury funds, were $3.955 trillion (86.3% of all money funds), while Total Prime MMFs were $527.8 billion (11.5%). Tax Exempt MMFs totaled $101.1 billion (2.2%).

ICI explains, "Assets of retail money market funds increased by $9.08 billion to $1.52 trillion. Among retail funds, government money market fund assets increased by $1.94 billion to $1.13 trillion, prime money market fund assets increased by $7.82 billion to $297.99 billion, and tax-exempt fund assets decreased by $680 million to $90.15 billion." Retail assets account for just under a third of total assets, or 33.1%, and Government Retail assets make up 74.4% of all Retail MMFs.

They add, "Assets of institutional money market funds increased by $22.68 billion to $3.06 trillion. Among institutional funds, government money market fund assets increased by $19.62 billion to $2.82 trillion, prime money market fund assets increased by $2.76 billion to $229.83 billion, and tax-exempt fund assets increased by $311 million to $10.59 billion." Institutional assets accounted for 66.7% of all MMF assets, with Government Institutional assets making up 92.2% 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 over $400 billion lower than Crane's asset series.)

In other news, J.P. Morgan's "`Mid-Week US Short Duration Update," gives, "An update on CP buyers in light of prospective final MMF reforms." They write, "It's been a while since we've last checked in on the composition of CP buyers, but given the forthcoming SEC ruling on MMF reform (reported to be released in October), we thought it would be worthwhile to look at how the CP buyer base has evolved YTD. Based on the Fed's most recent Z.1 report on the Financial Accounts of the United States, MMFs continued to comprise a smaller segment of the CP market, representing 20% as of 2Q22, down from 21% at YE21 and 25% at YE20."

The brief continues, "This should not be a surprise, as prime MMFs have concentrated more holdings into the Fed's RRP since 1Q21, and currently hold about $265bn of RRP exposures as of August 2022. Meanwhile, corporates' share of the CP market held steady at 23% YTD, though this is a decline from 27% at YE20. Even so, from a notional perspective, they continue to have a significant amount of CP exposure, totaling about $250bn, a notable increase from where they were pre-pandemic. This makes sense, as the liquidity portfolios of large corporations substantially increased since early 2020."

JPM tells us, "Indeed, at their peak, S&P non-financial firms held $2.22tn across cash, cash equivalents, and marketable securities as of 3Q20, an uptick from $1.70tn as of 4Q19." Their balances stayed above $2tn for most of 2020 and 2021, but have since come down some, declining by about $250bn to $1.85tn as of 2Q22."

The article says, "Beyond MMFs and corporates, mutual funds, such as ultra-short and short-term bond funds, are holding a slightly smaller share of the CP market, at 3% as of 2Q22 versus 5% as of 4Q20, perhaps driven by fund outflows over the past year. State and local governments continue to see a gradual increase in their participation. 'Other financial businesses,' which we believe include securities lenders and hedge funds, have seen a slight decline in participation YTD -- though like corporates, they continue to have a substantial amount of CP exposure, totaling about $200bn."

It states, "In the event the SEC finalizes MMF reform as proposed (e.g., swing pricing for institutional prime and tax-exempt funds), the concern is what happens to short-term funding. Overall, we believe short-term funding will remain available for banks and corporates. Even if prime funds shrink, this should leave the door open for other credit liquidity investors to step in and absorb some of that lost capacity, particularly if some of the money that exits prime gets redirected into ultra-short/short-term bond funds/SMA instead of government MMFs. However, while credit will continue to be extended in the money markets, the composition will change."

Finally, JPM adds, "Ultimately, prime funds are not government funds, nor are they ultra-short/short-term bond funds or SMAs. Money is moving to an investor base that either cannot buy CP/CD or can buy a host of other products that compete with CP/CD. Funding costs will have to adjust to incentivize some of the longer-duration liquidity investors to take part. As a result, the CP/CD curve will likely have to steepen, and spreads widen."

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