I won’t overinterpret because to do so would be to risk drawing spurious conclusions.

With that caveat, I’ll state the facts: Excluding tax week, US money market funds just saw their first weekly outflow since SVB collapsed, and it (the outflow) came during a stretch that found Wall Street declaring the onset of a new bull market.

Money funds, which have absorbed a veritable tsunami of inflows in 2023, shed $4.66 billion in the week to June 14, according to ICI data released on Thursday afternoon.

The outflow was entirely attributable to institutional government (-$9.24 billion).

While $5 billion is a drop in the bucket (not even a rounding error compared to total assets, which stand at $5.45 trillion), you could suggest the small exodus has symbolic value.

What happens with money market funds from here will have implications for any number of key market debates. Analysts are still unsure about the implications of Treasury’s cash rebuild for reserves, the fate of which hinges on the extent to which money funds can be coaxed out of the Fed’s RRP facility and into T-bills. The attractive yield on offer in government obligations was a magnet for deposits fleeing a banking system suddenly seen as vulnerable (if not “risky,” per se). With equities charging higher, some of that money could be deployed into stocks by market participants who fear that 5%, rich as it is for a riskless investment, won’t compensate for missing the boat on a stock surge that looks inclined to ignore the Fed’s pretensions to a higher terminal rate.

The fate of the mountainous cash pile parked in government money market funds is thus seen as pivotal on a number of fronts. Where the portion that stays invested is deployed will ultimately decide how low reserves go this year, which will in turn determine how long the Fed can persist in QT. And where any portion that exits ends up will help determine whether the nascent bull market in equities is sustained.

I could go on, but you get the point: $5.5 trillion is still a lot of money, even in these inflationary times of ours. So goes that stash, so goes a lot of other things too. Or at least that’s the way various analysts and strategists have framed the situation.

Jerome Powell on Wednesday insisted on the notion that RRP isn’t exacerbating deposit outflows from some banks through the money market channel. I’ve suggested that’s a disingenuous talking point (and I’m not alone). In that context, you could argue outflows from government money funds are a welcome development but, again, I don’t want to read too much into a single week’s flows.

Meanwhile, the latest update on the Fed’s balance sheet showed BTFP usage hitting yet another new record at nearly $102 billion. That was up slightly from the prior week.

Discount window usage actually ticked up too. Between them, the facilities had $106.5 billion in loans outstanding, the most since April 26.

I think it’s fair to call this a trend now, and not a good one.