After dipping slightly on Friday, money fund assets resumed their asset surge on Monday, rising $27.0 billion to a record $5.447 trillion. According to our MFI Daily, total MMF assets have increased by $118.6 billion over the past week and by $194.3 billion month-to-date in March (through 3/20/23). The near-record inflows continue to attract lots of media attention, the latest entrant being MarketWatch's "Money-market funds swell to record $5.4 trillion as assets pour in at fastest pace since pandemic after SVB collapse." Their article tells us, "Assets held by money-market mutual funds swelled to a record high $5.4 trillion last week as inflows hit the fastest pace since the start of the COVID-19 pandemic following the collapse of Silicon Valley Bank. This latest milestone marks the culmination of what has been a banner year for money funds. What started as a trickle of inflows last March after the Federal Reserve delivered its first interest-rate hike since 2018 has surged into a flood, with more than $460 billion flowing into money funds since mid-March 2022 as the Fed has hiked its policy rate by nearly 5 percentage points, according to Crane." (Reminder: Last chance to register for our `Bond Fund Symposium, which is March 23-24 in Boston! Attendees and subscribers may access the materials in our "Bond Fund Symposium 2023 Download Center.")
It continues, "Nearly half of that sum -- $228 billion -- has arrived since the start of 2023, and the rapid inflows seen during the two weeks through Friday has coincided with a flight of deposits from regional lenders, exacerbating a trend of shrinking bank deposits that started in 2022.... When rates were at rock-bottom levels, keeping money in cash was seen as a drag on portfolio returns. But now, even Wall Street luminaries like Bridgewater Associates founder Ray Dalio -- who once encouraged investors to keep their money in stocks and bonds by declaring that 'cash is trash' -- have changed their tune."
MarketWatch's Joseph Adinolfi writes, "All of the inflows accrued to funds that invest exclusively in Treasurys or [Government securities], Crane data showed. So-called 'prime' funds, which buy short-term corporate and bank debt, actually saw money leave in favor of government funds, which are believed to be safer, according to Peter Crane, president of Crane Data. Crane, who has monitored money-market mutual funds for more than half of their five-decade existence, said he believes the pickup in the pace of inflows has been driven by concerns about the stability of regional U.S. lenders triggered by the collapse of Silicon Valley Bank."
He explains, "Money-market funds are now, on average, offering annualized returns north of 4%, Crane said as portfolio managers aim to keep their funds' duration as extremely short-term levels. Typically, money-fund rates are far more attractive than interest rates that investors receive in their checking and savings accounts. Data from Bankrate.com showed the average interest rate on bank savings accounts is a paltry 0.2%. But Crane said investors are also responding to the perceived safety of money-market funds, which invest in short-dated bonds that are easier to hold to maturity."
They quote Peter Crane, "The higher rate is one thing, but safety is also a factor.... Banks are buying three-year Treasurys. Money funds are buying three-week Treasurys.... Maturities are about as short as they have ever been."
MarketWatch also quotes Federated Hermes' Deborah Cunningham, "Part of the reason why the deposits have been leaving is simply an awakening that happened in the market with the news of SVB.... Pretty much everybody in the money market space is rolling overnight repos at this point that's just been the strategy."
In other 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 March 17) includes Holdings information from 79 money funds (up 34 from a week ago), which totals $2.541 trillion (up from $1.355 trillion) of the $5.420 trillion in total money fund assets (or 46.9%) tracked by Crane Data. (Our Weekly MFPH are e-mail only and aren't available on the website. See our latest Monthly Money Fund Portfolio Holdings here.)
Our latest Weekly MFPH Composition summary again shows Government assets dominating the holdings list with Repurchase Agreements (Repo) totaling $1.479 trillion (up from $843.6 billion a week ago), or 58.2%; Treasuries totaling $599.4 billion (up from $294.9 billion a week ago), or 23.6%, and Government Agency securities totaling $265.6 billion (up from $101.2 billion), or 10.5%. Commercial Paper (CP) totaled $83.1 billion (up from a week ago at $51.7 billion), or 3.3%. Certificates of Deposit (CDs) totaled $37.3 billion (up from $19.1 billion a week ago), or 1.5%. The Other category accounted for $53.4 billion or 2.1%, while VRDNs accounted for $23.3 billion, or 0.9%.
The Ten Largest Issuers in our Weekly Holdings product include: the Federal Reserve Bank of New York with $931.8 billion (36.7%), the US Treasury with $599.4 billion (23.6% of total holdings), Federal Home Loan Bank with $192.9B (7.6%), Fixed Income Clearing Corp with $165.6B (6.5%), Federal Farm Credit Bank with $69.3B (2.7%), JP Morgan with $45.9B (1.8%), RBC with $34.1B (1.3%), Citi with $32.3B (1.3%), Barclays PLC with $27.6B (1.1%) and BNP Paribas with $25.8B (1.0%).
The Ten Largest Funds tracked in our latest Weekly include: Goldman Sachs FS Govt ($252.8B), Fidelity Inv MM: Govt Port ($152.4B), Federated Hermes Govt ObI ($145.1B), Morgan Stanley Inst Liq Govt ($136.1B), Dreyfus Govt Cash Mgmt ($118.9B), BlackRock Lq FedFund ($116.7B), Fidelity Inv MM: MM Port ($100.5B), Goldman Sachs FS Treas Instruments ($96.3B), BlackRock Lq Treas Tr ($95.8B) and Allspring Govt MM ($88.1B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary.)
