Record Inflows into Money Market Funds

Massive Inflows

Last week, Money Market funds experienced a significant inflow of $121BN, the largest since the COVID lockdown crisis and even more significant than during the SVB collapse. This surge has pushed the total AUM to a new record high of $6.424 TN.

Source of Inflows

The majority of this cash influx came from institutional funds, which contributed around $113BN. This occurred in the week following The Fed rate-cut and just before China unleashed its own cash tsunami.

US Bank Deposits

Simultaneously, US banks witnessed a rise in deposits (seasonally-adjusted) by $44.2BN in the week ending 9/18, pushing total deposits to their highest level since December 2022.

Fed's Role

However, a significant discrepancy was observed. Excluding foreign deposits, US Bank deposits (on a non-seasonally-adjusted basis) fell by $65.8BN, while on a seasonally-adjusted basis, deposits increased by $35.5BN. This resulted in a $110BN spread out of nowhere.

Loan Volumes

On the other side, loan volumes have been on the rise for the third consecutive week.

Bank Reserves and Equity Market

Interestingly, bank reserves at The Fed dropped to their lowest since October 2023 this week, while the US equity market capitalization reached a new record high. This represents a significant decoupling from a historically tight relationship.

Bottom Line

The recent influx into Money Market funds and the rise in US bank deposits, coupled with the increase in loan volumes and record high equity market capitalization, present an interesting financial landscape. It's intriguing to see how these factors are interacting and what the implications could be. What are your thoughts on these developments? Feel free to share this article with your friends and discuss it further. Don't forget to sign up for the Daily Briefing, which is available every day at 6pm.