Money market fund inflows slowed after a massive haul around the calendar flip, but total AUM nevertheless notched another new record in the week to January 10.

MMFs took in $9.99 billion over the latest weekly reporting period, data out late Thursday in the US showed.

The new AUM high mark was entirely attributable to an $11.4 billion inflow to prime funds. On the government side, $2.4 billion in retail redemptions offset a small institutional inflow.

Total assets now stand at $5.975 trillion.

That’s a lot of dry powder which could (ostensibly anyway) find its way into equities and bonds. Or maybe it’ll just continue to be a sponge for T-bill issuance.

In a note describing a “dip alpha” contest among market participants, Goldman’s Scott Rubner suggested households could rotate out of MMFs and into stocks.

The MMF discussion is becoming more pertinent seemingly by the week. There’s something like consensus around the idea that inflows can’t continue forever, but there’s nothing like consensus around when they’ll go into reverse, and where that money will go if/when they do.

This is playing out as the Fed begins to socialize the QT taper discussion. It’s obvious the Committee wants to stay ahead of the game vis-à-vis RRP drain and reserves.

RRP balances hit a new “since June 2021” low on Thursday at just $626 billion. The faster the facility drains, the more pressing it’ll be for the Fed to make a decision about when and how much to slow balance sheet runoff.

“The QT debate is less about monetary policy for macroeconomic reasons and more about balance sheet policy related to money market plumbing,” BNY Mellon’s John Velis remarked this week.

“Given the experiences in money markets at the ends of November and December, more acute stresses could crop up sooner, leading to renewed urgency of this discussion,” Velis added. The figure above, with annotations from Nomura’s Charlie McElligott, underscores the point.

Meanwhile, borrowing from the Fed’s Bank Term Funding program hit another record. Usage of the backstop, established in SVB’s wake, reached $147.175 billion this week.

Facility take-up began to rise dramatically (figure on the left, below) as the Fed pivoted and the market’s rate cut expectations manifested in an arbitrage opportunity for banks.

The spread was 53bps on Thursday (figure on the right, above). It was as wide as 57bps late last month.

Many observers expect the Fed to mothball the program on its one-year anniversary in March. Michael Barr appeared to confirm that, unofficially, this week.