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Money Market Assets Dive, Fed Backstop Usage Rises Amid Tax Distortions
US money market fund assets plunged by almost $70 billion over the weekly reporting period which included tax day for most Americans.
The outflow, the largest in two years, came on the heels of a historic cash influx as March's banking sector turmoil served to turbocharge deposit flight in favor of high-yielding, short-term government obligations.
The exodus in the week to April 19 erased around 15% of the net inflow to money funds witnessed since the beginning of March.
Total money market
Is it surprising to see 1 month T-bill yield falling hard in a week when govt MMFs are shedding $70BN?
My guess is that’s related to debt ceiling worries. Demand is very elevated for paper that matures pre-X-date, so you’re getting a lot of richness there, both in absolute and relative terms.
What’s going to happen to demand for treasuries of any duration in the case we are in technical default at the same time a recession begins (exacerbated by the default)?
164 bp spread between 4w and 8w bills? Is this the Treasury market telling us to sell in May and go away?
1 and 2 month are behaving very differently, though.
Some estimates of the x-date are now in June.