It just keeps going and going and going and…
US money funds saw a sixth straight chunky inflow in the week to September 11, data released late Thursday showed.
Those who variously predicted ongoing inflows to institutional government funds for the balance of the year were correct. That category saw a $27.32 billion influx, as more than $9 billion fled institutional prime products. Retail inflows were around $8 billion over the week, split pretty evenly across government and prime funds.
As the figure shows, these last six weeks count as a veritable bonanza. Since early August, US money fund AUM swelled by almost $190 billion. And that’s with Fed cuts (i.e., lower rates) looming on the horizon.
After this week’s net $23.37 billion haul, total assets stand at $6.32 trillion. To recycle some familiar language, the magnetism exhibited by MMFs is attributable to the allure of high yields, ongoing inflows from corporates and a prime-to-institutional switching dynamic tied to a regulatory change.
Suffice to say the prospect of lower rates hasn’t diminished the appeal of (for now) 5%-yielding, sleep-well-at-night cash. “We don’t necessarily think… lower front-end rates [will] decrease MMF attractiveness,” BNY Mellon’s John Velis remarked, adding that MMF assets may actually keep rising as the Fed cuts, which is to say AUM might swell even as rates on cash fall. “This seemingly counterintuitive result is due to the desire of MMF investors to hold cash during times of uncertainty for the economy and financial markets,” Velis went on.
It’s useful, I think, to note that bank deposits, despite being insured to $250,000, aren’t created equal. In a pinch, deposits at JPMorgan and Bank of America won’t be valued the same as deposits at shaky regionals, particularly not after March of 2023. By contrast, a T-bill’s just a T-bill. Overnight repo with the Fed’s just overnight repo with the Fed. Take that however you want to take it.
Globally, cash has seen a quarter trillion of inflows over the last six weeks, the biggest rolling six-week haul of the year.
