Money market funds snapped a three-week streak of outflows with an emphatic, $43.7 billion haul over the latest weekly reporting period, data released late Thursday showed.
Inflows were spread across institutional and retail, and between government and prime funds.
The influx was the largest since the week ending May 24, and easily offset redemptions seen since mid-June.
Total assets reached a new high at $5.47 trillion.
As noted here during each of the last three weeks, it was exceedingly unlikely we’d seen peak money fund AUM. The Fed is virtually guaranteed to hike rates at least once more and the psychological legacy of March’s regional banking stress lives on.
It’s impossible for many banks to compete with rates on offer in government money funds. Because those funds have no credit risk and no duration risk either, the ostensible “choice” between investing in short-term government obligations and standard savings products at commercial banks is no choice at all.
Recent money fund outflows were concentrated on the institutional side and might’ve been tax-related. Over the last week, institutional inflows resumed, with $18.6 billion to government funds and $5.6 billion to prime products.
The SEC is set to vote this month on a raft of new rules for the industry including measures that would raise the share of total assets funds have to hold in cash, limit redemption fees, prevent funds from temporarily restricting redemptions and compel government funds to use a floating NAV should rates ever go negative.
Meanwhile, usage of the Fed’s bank backstop created in the wake of SVB’s failure dropped over the last week to $101.959 billion.
It was the first decline in nine weeks.
Discount window lending ticked higher, but overall, combined borrowing from the two facilities receded below $105 billion.
Walt, MM Funds are not FDIC insured. In this time of uncertainty I am concerned with the amount of money flowing to those uninsured products. Could they break the buck?
I doubt it. what caused the problem in 2008 was a panic after Lehman failure. There was no “real” reason for people to panic and rush to take their money out. It was a panic situation. The fed stepped in to back the market which was the right thing to do and the panic dissipated. Fed will step in if there is another panic. There is nothing to worry about. These are safe assets. But people lose there minds in a crisis and panic.
I hope not. I just started piling up cash to buy longer term stuff at the pivot I don’t see happening this year.