Money Market Funds Reach $6 Trillion Once More, While Fed's Bank Bailout Facility Stands at $113BN

For the third consecutive week, money market funds have experienced inflows, with an increase of $31.1BN. This has pushed the total assets to $6.03TN, marking the highest level in a month.

Weekly Breakdown to May 8

According to data from Bloomberg, government funds, which primarily invest in securities such as Treasury bills, repurchase agreements, and agency debt, saw their assets rise to $4.88 trillion. This is a $20 billion increase. On the other hand, prime funds, which typically invest in higher-risk assets like commercial paper, experienced an increase in assets to $1.03 trillion, marking an $8.6 billion increase.

Both Retail and Institutional Funds Experience Inflows

Retail and Institutional funds both saw inflows, with increases of +7.8BN and +23.3BN respectively.

Fed Balance Sheet Continues to Contract

Despite discussions about tapering QT, the Fed balance sheet continued to contract, albeit only by $9.1BN.

Fed's Bank Bailout Scheme Continues to Decline

The Fed's bank bailout scheme, which has now expired, continues to decline as the 12-month term loans run off. Last week, it dropped by a substantial $11.5BN, erasing all the arb-driven usage. However, the facility still has a significant $112.8BN left outstanding, filling gaps in bank balance sheets somewhere.

Bank Reserves at The Fed Continue to Contract

Bank reserves at The Fed continue to contract, while the US equity market cap remains dramatically decoupled.

Is Powell's Acquiescence to a Bigger, Sooner 'QT Taper' to Soften the Blow?

This leads us to question whether Powell's acquiescence to a bigger, sooner 'QT taper' is an attempt to soften the blow when this crocodile mouth snaps shut.

In conclusion, the financial landscape is constantly evolving, with money market funds reaching new heights and the Fed's balance sheet continuing to contract. It's a fascinating time to observe these developments. What are your thoughts on this matter? Feel free to share this article with your friends and engage in a discussion. Also, don't forget to sign up for the Daily Briefing, which is delivered every day at 6pm.