Significant Inflows in Bank Deposits & Money-Markets Post Tax-Day

Record Highs in Money-Market Funds

Following a minor outflow of $6.5BN last week, money-market funds witnessed a substantial inflow of $40.4BN this week. This has pushed the total Assets Under Management (AUM) to a new record high, exceeding $6.5 TN.

Surge in US Bank Deposits

US banks experienced a significant increase in deposits on a seasonally-adjusted basis, with an increase of $84BN in the week ending 10/16. This comes after last week's large outflow of deposits, which was likely due to deferred tax payments coming due.

Rebound in Total Deposits

On a non-seasonally-adjusted basis, total deposits also bounced back from last week's drop, with an increase of $66BN.

Domestic Deposits Recover

Excluding foreign deposits, domestic deposits also recovered from last week's decline. Seasonally-adjusted deposits rose by $73.7BN, while non-seasonally-adjusted deposits increased by $60.5BN.

Large Banks Dominate Deposit Inflows

Large banks dominated the deposit inflows, with an increase of $46BN NSA and $67.7BN SA. Meanwhile, small banks added $14.5BN NSA and $6BN SA.

Explosion in Loan Volumes

Despite the significant deposit inflows, loan volumes saw a surprising surge in the week ending 10/16. Large bank loans rose by $20.7BN, and small bank loans increased by $5.3BN. This marks the largest increase since April 2023.

Drain in Bank Bailout Facility

The bank bailout facility continued to be drained, with a decrease of $7.1BN this week, as the initial loans roll out of the facility.

Drain in The Fed's Reverse Repo Facility

From a liquidity need perspective, The Fed's reverse repo facility also continued to be drained this week, reaching cycle lows since the quarter-end surge.

Bottom Line

These financial movements indicate a robust recovery in the banking sector following tax-day. However, the explosion in loan volumes, coupled with the draining of the bank bailout and The Fed's reverse repo facilities, may signal potential liquidity issues. This situation, often referred to as 'tank bottoms' in the crude world, may lead to financial plumbing issues sooner rather than later. What are your thoughts on these developments? Feel free to share this article with your friends and discuss it. Don't forget to sign up for the Daily Briefing, available every day at 6pm.