market

Money-Market Inflows and the Inevitable Banking Abyss

EDITOR'S NOTES

In a world that seems stable but is actually full of deceptions, money-market funds have briefly seen more money coming in, about $24.9 billion, mocking last week’s bank deposit outflows. In this twisted financial game, both regular people and big investors are diving back in, adding $8.6 billion and $16.3 billion, not caring about the hidden risks. But while bank deposits and money market fund assets are moving in opposite directions, it’s hard not to see how pointless this all is. The Federal Reserve’s balance sheet is getting smaller fast, losing $25 billion and hitting its lowest point since May 2021. They’re still selling off assets, and it’s the most they’ve sold in more than a year. At the same time, the emergency bank funding has hit a new record of over $109 billion, quietly showing how grim the crisis really is. Regional banks are stuck facing a $109 billion hole in their accounts, their money draining away, and they only have a few months to fix it. In this fake show of financial safety, the money flowing back into money-market funds is not a sign of strength. Instead, it’s a dark reminder that in this dance of money and doubt, every step forward is actually a step toward the edge of economic ruin.

After last week’s massive (biggest since Lehman) outflows, Money Market funds saw a return to inflows last week (+24.9BN)…

Source: Bloomberg

Both Retail and Institutional funds saw inflows (+8.6BN and +$16.3BN respectively)…

Source: Bloomberg

But bank deposits remain completely decoupled from money market fund assets still…

Source: Bloomberg

The Fed’s balance sheet continued to contract, down $25BN last week to its lowest since May 2021…

Source: Bloomberg

QT continues with $18BN in securities sales last week, down to its lowest level since June 2021…

Source: Bloomberg

Usage of The Fed’s emergency bank funding facility rose $250MM lasty week to a new record high over $109BN…

Source: Bloomberg

Banks reserves at The Fed and US Equity Market Cap have recoupled from the AI Boom decoupling…

Source: Bloomberg

And the regional banks are also continuing to catch down to the reality of the $109BN hole in their balance sheets…

Source: Bloomberg

And they only have until March to fill it…

Originally published by Tyler Durden at ZeroHedge

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