For the first time in four weeks, aggregate money market funds saw inflows this week. After 3 weeks of small outflows, the $43.7 billion surge sent money market fund to a record $5.47 trillion...
Source: Bloomberg
However, as we have previously noted, retail fund flows never stopped increasing and now institutional fund inflows have resumed (as we move through the corporate tax day).
This exaggerates the decoupling between 'rising' (seasonally-adjusted) bank deposits and rising money market fund assets...
Source: Bloomberg
Will tomorrow's bank deposit data start to show some catch down?
The Fed balance sheet shrank by $42.6 billion last week (the biggest drop since May). The Fed's balance sheet is now well below pre-SVB levels - at its smallest since Aug 2021...
Source: Bloomberg
QT continues to accelerate with The Fed selling $38.6 billion off its balance sheet last week...
Source: Bloomberg
However, under the hood of that Fed balance sheet shift is the fact that the usage of The Fed's emergency Bank Term Funding Program (bank bailout) facility shrank modestly last week (-$1.1 billion to $102 billion)...
Source: Bloomberg
The US equity market continues to charge ahead, decoupling from falling reserves at The Fed...
Source: Bloomberg
Finally, as a reminder, banks have around 8 months left under the original 12-month BTFP Fed bailout program to find a way to stabilize their balance sheets.
Not only have they failed to do so, usage of the BTFP facility remains near record highs, and yields are rising even more (great MTM losses).
