Money market funds saw a second week of outflows as AUM appears to have peaked near $6 trillion.

Nearly $9 billion in institutional government fund redemptions more than offset modest inflows elsewhere. The $1.39 billion net outflow was a drop in the proverbial bucket, but it nevertheless merits a mention given investor focus on the wall of cash parked in MMFs.

This week’s outflow came on the heels of a $14 billion net redemption last week, but thanks to a record two-week inflow to start 2024, AUM is up substantially YTD.

The debate around when MMFs will begin to see sizable, sustained outflows is ongoing. The questions are the same. Where will the money be deployed? Will any exodus be somehow destabilizing given MMFs’ role in supporting liquidity conditions during 2023, and so on.

Next week brings the Treasury refunding announcement and markets are keen on any new color regarding the coupon/bill mix. RRP balances slipped to $557.68 billion on Thursday. We’re at a critical juncture for the MMF-RRP-QT nexus. The Fed’s very likely to discuss tapering balance sheet runoff next week and an announcement will likely come over the next two or three meetings to avoid running things too close vis-à-vis RRP drain.

“The T-bill curve is inverted,” BNY Mellon’s John Velis noted earlier this week, adding that “issues maturing past late-May are offering lower yields” than the RRP facility.

“Would MMFs be likely candidates to buy [bills yielding less than RRP], especially at the same clip they have been since the middle of last year?” Velis wondered.

Meanwhile, usage of the emergency bank backstop established in SVB’s wake hit a new record near $168 billion this week. I dedicated a separate article to BTFP given the headlines it garnered recently and the Fed’s decision to slam the door on the free-money arb. You can read that piece here.