Meanwhile, from the “worth mentioning” files…
The tax deadline appears to have prompted one of the largest outflows from money market funds on record.
According to the latest update from ICI, out Thursday evening, quite a bit of the “sideline cash” that previously resided in government funds came pouring out in the week through Wednesday. Specifically, they bled $76.4 billion during the week. It was the ninth consecutive outflow from government funds.
Prime funds, meanwhile, saw $6.4 billion in outflows.
Again, the exodus coincided with tax payments. Treasury’s cash balance hit a record $1.74 trillion on Wednesday, the largest tax obligation day of the year.
But there will surely be those inclined to take this opportunity and rekindle one of the oft-repeated rationales for staying bullish on risk assets.
For weeks, those of a bullish persuasion have argued that one catalyst for stocks going forward is a mountain of cash sitting on the sidelines waiting to be deployed. Although cash parked in money market funds began to recede in June as stocks climbed the wall of worry, the total sitting idle, earning next to nothing, remained close to a record high. That, bulls argue, is a potential source of funds.
In the same vein, the latest edition of BofA’s Global Fund Manager survey showed cash levels are elevated, as investors are “still cautious on the virus, macro, and the election”, the bank’s Michael Hartnett wrote this week. On Thursday, he flagged the second-largest outflow from cash ever, noting the tax deadline.
All told, on ICI’s data, money market fund assets decreased by $87.38 billion during the week.
Recall that during the dark days of March, the pandemic prompted investors to plow money into government funds, and pull cash from prime products, a development that forced intervention from the Fed.
Still, nearly $4.6 trillion is essentially collecting dust, and the likes of JPMorgan have recently suggested that with government bond yields near zero (or below), and yields on high-grade US corporate bonds now basically on par (no pun intended) with dividend yields in equities, those looking to deploy sideline cash with have little in the way of alternatives outside of stocks.
Well duh. The filing deadlines (two) were moved to July 15. But a lot of people simply parked what they owed in money funds until their bills came due. As noted, that was not TINA money.
Now back to your regularly scheduled show.
It was funny watching media outlets try to parse this last night. You could tell nobody wanted to touch it because they didn’t know how to frame it with the tax date and they were all scared to say something wrong. They don’t have the luxury of starting off with something like “Meanwhile, from the ‘worth mentioning’ files”
I wish I could say that I had thought of this before you posted it, but I didn’t. And it was right in front of me to see. But that won’t stop me from ridiculing others who missed it as well!!
One factor adding to these quantities is the estimated tax deadlines are really on 3rd payment due Sept 15 so I assume that would influence all this ….