Cash poured back into money market funds in the week to April 26, closely-watched flows data released on Thursday afternoon showed.
The $53.83 billion haul negated most of the prior week’s outflow, the largest in two years.
As noted here seven days ago, the $70 billion that fled US money funds during tax week in America was an anomaly, and given the distortion, was scarcely worth mentioning. This week’s reversal underscores the point.
Total money fund assets are back near $5.3 trillion.
Not surprisingly, the lion’s share of the inflow ($50.8 billion) was to government funds. The institutional / retail breakdown there was $47.55 billion to $3.24 billion. More retail money actually went to prime funds over the period.
Suffice to say concerns over the extent to which RRP is bleeding bank deposits through the money market channel will persist for the foreseeable future. If someone from the financial media doesn’t ask Jerome Powell about that dynamic during May’s post-FOMC meeting press conference, I’ll be very disappointed (in the media).
Meanwhile, usage of the Fed’s liquidity backstops rose a second week. Discount window usage was the highest since the last week of March.
Bank term funding program participation topped $80 billion for the first time. Total usage rose $11 billion to $155 billion.
I’d note that Bloomberg reporting on Wednesday suggested officials have at least considered taking measures that could curtail First Republic’s access to both the discount window and the BTFP. Thursday’s update from the Fed suggests liquidity demand remains elevated, but… well, a “few” bad apples may be spoiling the bunch here.
“Last week’s increase could have been impacted by individual tax payments, but we don’t think that is a factor this week,” TD’s Priya Misra and Molly McGown said, of the Fed borrowings. “We think this suggests deposit outflows and funding strains in some banks.”
It’s worth noting, in closing, that even as FHLB issuance has increased in recent days amid renewed concerns around First Republic, federal funds trading volumes are back near levels seen prior to last month’s theatrics, a sign of normalization.
