US money market funds shed assets over the latest weekly reporting period.

Before anyone’s eyebrows turn up, allow me to downplay this “news”: The $4.289 billion drip barely shows up, even on a short-term (i.e., zoomed-in) chart.

The minuscule redemptions came on the heels of $58.366 billion worth of inflows over the preceding two weeks, during which total AUM notched consecutive record highs above $6 trillion. So far in 2024, money funds have taken in $127.696 billion.

It was notable, perhaps, that this week’s redemptions were entirely attributable to government funds, which saw $11 billion in outflows ($8.77 billion from institutional and $2.30 billion from retail). Prime funds took in $6.55 billion. Total AUM remains north of the $6 trillion mark.

This week’s flows were set against a backdrop of fading rate cut bets for 2024, following a spate of economic releases which by and large underscored the case for the “patient” approach emphasized by Fed officials.

Regular readers (all readers, I hope) know the story by now: The trajectory of MMF AUM is critical for pretty much all market participants and interested parties in one way or another, but the structural question is whether, how and to what degree, shifting dynamics for MMFs in 2024 will influence funding markets.

RRP balances fell below $500 billion on Thursday for the first time since June of 2021.

I don’t want to call this “dicey,” exactly, but the Fed can’t just carry on, nonchalant, with no plan. They need to start socializing the QT taper in a more concerted way. The parameters should be established and announced at the March meeting.

Every week that’s not a pre-meeting quiet week another Fed official talks about how “smoothly” balance sheet runoff’s proceeding. RRP transformation (into the T-bill supply deluge) facilitated that process in 2023. The Fed knows as much, and they’re aware that as soon as RRP’s drained, QT will begin to affect reserves. It won’t be painless anymore.

They’re late on this as far as I’m concerned. Not late in starting, but late in getting “out there,” so to speak, with the messaging, the parameters and the timetable. If they wait until May on that, they’re asking for problems. They don’t know any better than anyone else where LCLoR is, and it’s entirely reasonable to suggest they’re the least informed in that regard out of everyone for whom it’s a concern. Once RRP balances fall away entirely, the LCLoR threshold could be crossed overnight. That’s barely an exaggeration if it’s an exaggeration at all.

Anyway, if dealers (banks) thought it was urgent, they’d presumably pick up the phone, but again, the thresholds here are wholly indeterminate. Particularly from a system-wide perspective. You only know where LCLoR is once you cross it. By then it’s too late.

Meanwhile, Bank Term Funding Program balances were obviously flat again. The arb’s dead. There’s no point in talking about it anymore, unless of course the Fed’s compelled by the burgeoning CRE crisis to renew the program after all. Discount window usage rose slightly on the week, to $2.42 billion.