Money market funds took in another $17 billion in the week to November 8, data released late Thursday in the US showed.
It was the third consecutive inflow and came on the heels of a hefty, $62.7 billion haul the prior week.
After recouping the entirety of tax-related redemptions from mid-October, total money fund AUM now sits at $5.712 trillion, a new record.
A little more than half of this week’s inflow went to institutional government, while prime retail chipped in $4.5 billion of the total.
Money fund demand for T-bills continues to be a critical subplot. “It’s quite clear that MMFs have been leaving the RRP to onboard Treasury bills,” BNY Mellon’s John Velis wrote this week.
RRP balances fell to just $993 billion on Thursday. It was the first time RRP was below $1 trillion since August of 2021.
“The question now is if additional bill supply will continue to be absorbed as easily as it has been so far,” Velis went on, noting that the question is becoming more pressing as bills’ share of marketable public debt bumps against the upper-end of the TBAC-recommended range. According to BNY Mellon’s data, “appetite for bills, even in the face of record issuance, remains unsated.”
The TBAC minutes released alongside the refunding announcement last week suggested dealers remain comfortable with a higher share of bills.
“RRP balances have been much more sensitive to the change in bill supply than the change in deposit betas, as there has been little rotation from MMFs to deposits even as banks meaningfully raised their deposit betas this year,” JPMorgan’s Teresa Ho remarked, in a recent note. “In some sense, Treasury is helping the Fed facilitate the continuation of QT. The increase in bill supply should pull funds out of RRP versus reserves.”
Meanwhile, usage of the Fed’s Bank Term Funding Program (the emergency backstop established in SVB’s wake) rose fairly sharply over the week to almost $113 billion, a new record.
Discount window borrowing was the lowest since September 6. Between them, borrowing from the Fed’s backstops was $115.16 billion.
As a quick aside, it’s possible, in the future, that efforts to curtail mission creep at the FHLBs will herd banks into the Fed backstops in a pinch. Whether that’s a good thing is debatable.
