Cash left money market funds for a second consecutive week in an ostensibly notable development that might’ve been attributable to tax-related flows.

After a small outflow during the prior period, money funds shed more than $18 billion in the week to June 21, data released on Thursday evening showed.

Excluding tax week in April, it was the largest outflow since December, according to ICI. Inflows to money funds were unabated following SVB’s collapse in March, until $4.7 billion hit the exits mid-month. Both that outflow and this week’s redemptions were attributable entirely to institutional money in government funds. That complicates interpretation a bit.

Regardless of the reason, the latest weekly reporting period marked the first sizable redemptions since the regional banking turmoil pushed total money fund assets to record high after record high as investors fled to the safety of US government obligations amid concerns around the stability of some regional lenders, not to mention highly attractive yields compared to savings products.

Total US money fund assets receded to $5.43 trillion this week. $22.35 billion exited government funds and, again, all of which (plus $3 billion) was institutional money. Retail investors put $2.82 billion into government funds and prime funds took in $4.55 billion.

What happens with money funds from here will have implications for any number of key market debates. I’m going to recycle some language from last week in that regard. This really is a critical piece of the puzzle.

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. So far, it does indeed look as though the TGA refill is coming mostly from RRP, but some believe lingering uncertainty around the Fed’s intentions for rates will limit the extent to which bills are absorbed through RRP transformation, thereby putting more of the onus on reserves, which is to say draining liquidity. RRP usage is oscillating around $2 trillion.

At the same time, the attractive yield on offer in government obligations was a magnet for deposits fleeing a banking system suddenly seen as vulnerable, and with stocks looking to extend gains, some of the cash parked in money funds could be deployed into equities 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.

$5.4 trillion is a lot of money, and as you’ve hopefully gathered, the fate of that mountainous cash pile is seen as pivotal on a number of fronts.

Summed up: Where the portion of money fund assets which 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.

Meanwhile, usage of the Fed’s new bank backstop facility hit yet another new record this week, at $102.735 billion.

Discount window usage, which is now just an afterthought, slipped, but not enough to offset the increase in BTFP borrowing.

Between the two facilities, banks tapped the Fed for nearly $106 billion. It was the seventh consecutive weekly increase.