The rush into cash continues unabated.
Money market fund assets ballooned by an additional $117.4 billion over the latest weekly reporting period.
The second consecutive outsized haul came atop a $121 billion inflow the prior week. Over four weeks, more than $300 billion (on net) flowed into money market funds, which now have an unprecedented $5.13 trillion in assets, according to ICI.
The flight to cash is most assuredly a product of fear, but the highest yields in more than 15 years help make the case.
The $117 billion inflow was the second-largest since April of 2020. The record, $286 billion, was set in March of that year, when investors sold everything that wasn’t tied down in the epic rush for dollars that accompanied the original COVID panic.
EPFR’s data showed $143 billion flowed into global money market funds over the week.
Not surprisingly, the breakdown for US money funds showed inflows were entirely concentrated in government funds for a second week.
Prime funds shed $11 billion, bringing the two-week exodus to almost $30 billion.
I’ll recycle some language from earlier this month: If the bank situation were to worsen and spiral into an outright crisis, you’d rather your cash reserves not be parked in commercial paper or other obligations which may need a Fed liquidity backstop to avoid breaking the proverbial buck. That’s why the inflows are all government funds.
Of course, as of this month, the group of obligations that may need to be funded by a Fed liquidity backstop includes bank deposits above $250,000 at regional lenders. Data released late Thursday showed usage of the Fed’s new bank term funding facility more than quadrupled over the last week, as banks apparently migrated from the discount window to the new program+.
Commenting on the record AUM for money market funds and the recent rush to cash, BofA’s Michael Hartnett noted that the “prior two surges were in 2008 and 2020” and “coincided with big Fed cuts.”
This is disintermediation from banks and a flight to quality. So if you are the fomc you raise rates and continue qt. BRILLIANT! Because you are data dependent!!!
It seems that we are well on our way to the complete nationalization of the US banking system.
I have never thought the US government was better at allocating capital than private companies, however, I also think our country might be destroyed if we allow the failure of the US banking system.
I am currently thinking that in my lifetime, my checking/debit account will be with the Federal Reserve, or some government agency- not with the local community bank where I currently have these types of accounts.
“I also think our country might be destroyed if we allow the failure of the US banking system.”
Yes. Yes, that is a safe assumption. If there is no US banking system, there will be various kinds of anarchy, and not just in the US. Fortunately, that outcome isn’t on the menu.
Is there any chance of returning to Glass-Steagall and having boring private banks again? (I mean it’s all made up anyways so why not make it deliberately stable instead of incentivized to self-destruct)…
Instead of this fiction “it’s the Fed’s fault, when we all saw double digit inflation the brilliant highly compensated financial experts had no idea the Fed would raise interest rates “… and the Fed’s “invisible hand of the market” is making everything par…