Evening Brief – 03.15.24

Still Soaring

Money-market fund assets rose to a new record high for the third week in a row, even as equity prices continued their advance, adding $31 billion to $6.11 trillion (more than $100 billion in three weeks), according to Investment Company Institute data.

In a breakdown for the week ending March 13, government funds, which invest largely in securities such as Treasury bills, repurchase agreements, and agency debt, saw assets grow to $4.97 trillion, up $34.3 billion.

Prime funds, which typically invest in higher-risk assets such as commercial paper, saw assets dip to $1.016 trillion, a $3.33 billion drop, owing to a flight from the institutional sector. Institutional funds received a significant $23.5 billion inflow, while retail funds received $7.8 billion. Institutional funds received a significant $23.5 billion inflow, while retail funds received $7.8 billion.

Meanwhile, the Federal Reserve’s balance sheet rose by $3.1 billion, the largest weekly increase since the middle of January. Quantitative tightening continued, although at a considerably slower pace, down only $2.85 billion last week.

For the time being, liquidity withdrawals from the Federal Reserve’s Reverse Repo facility have stabilized. The Fed’s bank reserves were steady this week, with the equity market cap as radically detached as it was in July of last year.

Lastly, the Fed’s bank bailout facility (BTFP) has issued its final (1-year term) loan on March 11. The facility’s final week saw an increase of more than $3 billion, reaching $167 billion, which remain in the facility and will begin to mature soon; within the next four weeks, $79 billion of those loans will mature, forcing banks to obtain more money to fill the gap.

So now one needs to keep an eye on the Discount Window for symptoms of trouble in the banking sector as it aims to get new funding.