Menu Close

Why Isn’t Everyone Rushing Into Money Market Funds

With interest rates skyrocketing, you’d think that money market fund assets would be surging as everyone would want to move their cash into higher yielding accounts. But it’s not happening. Maybe investors, households, and businesses are using that cash to pay off debt, instead of looking for higher yielding places to hold cash.  It’s called deleveraging.

Some interesting data here. Not as much growth as you’d think. Retail funds only up $85 billion since December per FRED data, and the OFR shows a persistent decline in government MMFs over the same time frame. This includes institutional MMFs, which are twice the size of retail funds.

image.png

ICI has granular weekly and monthly data. It shows Retail funds up only $40 billion since March, when short term rates began to rise sharply. All of the gain was in non government MMFs. Government MMFs declined.

yn3sx

Another OFR data set shows how the Treasury’s T-bill paydowns forced the MMFs out of their T-bill holdings. That money went straight into the Fed’s RRP fund for MMFs.

image.jpeg
MMFs are really a sideshow to the main event, the Primary Dealers. That’s what I focus on in my research. They’re the house. They run the markets, normally on behalf of the Fed. But the narcissists at the Fed no longer have any use for their strawmen dealers. So the Fed has abandoned them to the whims of their institutional customers.

The Bond Rally That Fooled The Majority And Didn’t Help Dealers

Join the conversation and have a little fun at Capitalstool.com. If you are a new visitor to the Stool, please register and join in! To post your observations and charts, and snide, but good-natured, comments, click here to register. Be sure to respond to the confirmation email which is sent instantly. If not in your inbox, check your spam filter.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

RSS
Follow by Email
LinkedIn
Share