The growth rate of capital being poured into retail money market funds (MMFs) is at its highest level in several decades
Retail MMFs recently surpassed $1.6 trillion; a record high. Source: Koyfin @KoyfinCharts
Markets are now betting on big rate cuts next year
This chart shows that money markets have raised policy-easing wagers since the middle of October: by September 2024, the FED should have cut by 70 basis points, the ECB by 65 basis points and the BoE by 40 basis points. (pricing is derived from swap rates tied to policy-meeting dates) Source: Bloomberg
The new safety trade
-> An incredible $993 billion has gone into money market funds since the Fed started raising rates in March 2020. Inflows to money market funds are well ahead those seen in 2015, 2004, 1999 and 1994 rate hike cycles. Why take risk on your "safety" trade when you can make 5% risk-free? Source: The Kobeissi Letter
Money markets are on track for a record $1.5 trillion inflow in 2023
Source: BofA
US money-market assets have reached a new record of $5.5 trillion
US Treasuries are on course for a record year of inflows as investors chasing some of the highest yields in months pile into #cash and #bonds, according to Bank of America Corp. strategists. Cash funds attracted $20.5 billion and investors poured $6.9 billion into bonds in the week through August 9, strategists led by Michael Hartnett wrote in a note, citing data from EPFR Global. Meanwhile, US #stocks had their first outflow in three weeks at $1.6 billion. Flows into Treasuries have reached $127 billion this year, set for an annualized record of $206 billion, BofA said. The buoyant demand shows how alluring fixed-income markets remain even as the bond rally and economic slowdown many were predicting last year has failed to materialize. The yield on 10-year US Treasuries was trading at around 4.09% on Friday, up from a low of around 3.25% in April, and near a 15-year high touched last year. Source: Bloomberg, Lisa Abramowicz
The decoupling between US money market fund inflows (in green) and bank deposits (in red) continues.
Source: www.zerohedge.com, Bloomberg
The slow-motion US banking crisis is still not out of the woods...
Indeed, US Money Market funds saw a third straight week of inflows ($29 billion this past week) to a new record high of $5.15 trillion...Retail money-market funds saw inflows for the 15th straight week (and institutional funds also saw a second straight week of inflows)... Usage of The Fed's emergency bank bailout facility rose by $606 million to a new record high at $106 billion... And as highlighted on the chart below, the decoupling between money-market fund inflows and bank deposits continues.. Could the current bloodbath in bonds be the catalyst for another round of pain? Source: www.zerohedge.com, Bloomberg
Is this the biggest risk for the equity "bears"
Is this the biggest risk for the equity "bears". As highlighted by Goldman, there is a $5 Trillion “wedge” between Money Market Funds and bonds vs. equities... As investors realize that the much feared recession is not happening, they might be willing to move from the sidelines back into risk assets. Goldman's Rubner calls it a "R.I.N.O market" (Recession In Name Only).
