Money market funds took in $14.37 billion in the week to August 30, data released late Thursday in the US showed.
The respectable haul marked a return to inflows following a net $1 billion redemption during the prior week.
It was the sixth inflow in seven weeks. Money funds took in a net $128.9 billion over that stretch.
This week’s influx came courtesy of $10 billion to institutional government funds and $3.4 billion of retail flows to prime products.
Total assets hit a new record at $5.583 trillion. YTD, inflows to US money funds are $848.14 billion. Nearly $384 billion of that came in the five weeks following SVB’s implosion in March.
Treasury is still finding ready demand for the deluge of bill issuance unleashed by the debt ceiling deal (and ramped up earlier this month). Notably, RRP balances declined on Thursday to the lowest since March of 2022 ahead of month-end.
As discussed here last week, RRP appeared to flatten out this month, a potentially troublesome development. The Fed is counting on RRP transformation to mitigate reserve drain in the context of ramped-up bill supply.
More simply: Falling RRP balances are generally a good thing to the extent they reflect money market funds rotating out of the facility and into bills. If that translates into less pressure on reserves, the runway for QT to proceed is extended. The more runway for balance sheet reduction, the better.
Dealer T-bill holdings were $59 billion in the week to August 23, the latest updated showed. That was up from the prior week, but still just half the all-time high seen in early July.
Meanwhile, borrowing from the Fed’s Bank Term Funding Program edged up to a new record above $107.5 billion as of Wednesday.
Discount window usage was the highest since July 5. Total borrowing between the two facilities was $110.434 billion.
I’ll recycle some language from last week: The BTFP is here to stay. Get used to that acronym. It’s part of the system now. For better or worse.
Guess we’re not going to see the August fireworks Mike Wilson warned about:
“[F]iscal support is likely to turn into a 2% drag starting in August [which] would amount to an approximately 6% drag to nominal GDP growth over the next 12 months,” Wilson said, citing Morgan’s rates team again. “Given the recent debt ceiling deal that puts caps on additional fiscal spending, this seems like a major headwind to growth that many aren’t baking into their estimates.” He suggested that even a relatively modest additional decline in reserves associated with the TGA rebuild could be a “wake-up call” for an equity market which appears to be ignoring not only the more challenging fiscal outlook in the US, but also the less favorable backdrop for USD M2 growth globally. “Either global M2 growth is about to surge or else stocks have a long way to fall to get back in line with this metric,” Wilson remarked, referencing the figure on the left.