Don’t look now, but money market funds just a saw a second straight weekly outflow.

To be sure, $16 billion is a drop in the bucket. Money funds took in almost $1.2 trillion in 2023. But market participants are warming to a narrative that says the mountain of sideline cash parked in MMFs can be a source of funds for a 2024 equity rally.

Redemptions over the last two weeks sum to $27.6 billion. Again, that’s a rounding error, and it’s never a great idea to draw conclusions based on anything that happens during the final two or three weeks of a calendar year. Still, the discussion is unavoidable.

It was all institutional government outflows. Redemptions there were $33 billion. Retail products saw $10 billion of inflows. Total AUM in US money funds is now $5.87 trillion. The peak was $5.9 trillion earlier this month.

There’s considerable debate about if, when and how quickly MMF cash will rotate into stocks, bonds and other assets. Some suspect the “source of funds” melt-up narrative could play out in Q1. Others argue that if past is precedent, it could be a year before there’s a meaningful rotation.

Either way, it’s a hot topic — “the $6 trillion question,” as I called it. Goldman’s David Kostin cited an abundance of sideline cash while raising his 2024 S&P target last week.

Of course, MMFs were a big part of systemic stability in 2023. RRP transformation (i.e., MMFs rotating out of the Fed’s parking garage and into T-bills) helped mitigate reserve drain, effectively facilitating a painless QT. RRP balances are expected to fall away entirely by mid-year, and some have suggested that outflows from MMFs, should they occur, could exacerbate any nascent “plumbing” issues.

There was $778 billion parked in the RRP facility on Thursday. The low was $683 billion a week ago.

As noted here on several occasions of late, money funds will extend WAMs in an effort to keep yields high for as long as possible. That could keep assets a semblance of “sticky.”

Meanwhile, usage of the Fed’s Bank Term Funding program quietly ramped higher this month. Two of the past three weeks saw increases of more than $7.5 billion.

Usage of the backstop established in SVB’s wake topped $130 billion this week.

Between BTFP and the discount window, total borrowing from the backstops was nearly $134 billion. We’re slowly approaching levels on par with those seen in March, during the regional banking drama.