The use of emergency assistance tools by the Federal Reserve reaches a new high, with continuous inflow of funds into the money market.
The amount of emergency bank bailout funds used by the Federal Reserve increased by $606 million in one week, reaching a new record of $106 billion. At the same time, US money market funds saw inflows for the third consecutive week, totaling $29 billion last week, reaching a historic high of $5.15 trillion.
Despite the efforts of the Federal Reserve and the US government to reassure the public that the regional banking crisis in the United States has passed, depositors still seem to consider it safer and more profitable to transfer their money to money market funds.
The latest data shows that money market funds in the United States have seen continuous inflows for the third consecutive week, reaching $29 billion last week, a record high of $5.15 trillion.
Specifically, retail money market funds have seen inflows for 15 consecutive weeks, while institutional money market funds have seen inflows for two consecutive weeks.
The decoupling between the inflows of money market funds and the outflows of bank deposits continues.
At the same time, the Federal Reserve's balance sheet has shrunk for the eighth consecutive week, plummeting by $36.6 billion this week, the lowest level since July 2021.
In terms of the Federal Reserve's quantitative tightening, the central bank has resumed selling securities. This week, the size of the Federal Reserve's holdings, including Treasury bonds, has dropped by nearly $33 billion, reaching the lowest level since July 2021.
Meanwhile, the amount of emergency bank bailout funds used by the Federal Reserve has increased by $606 million in one week, reaching a new record of $106 billion.
Specifically, looking at the Federal Reserve's H4.1 data from last week:
- The scale of quantitative tightening has decreased by nearly $33 billion, mainly due to the sale of $32 billion worth of US Treasury bonds, while mortgage-backed securities remained relatively stable.
- The discount window has decreased by $300 million to $1.9 billion.
- The Federal Reserve's emergency bank bailout program (BTFP) has increased by $600 million to $106 billion.
- Other credit extensions (FDIC loans) have decreased by $4 billion to $148 billion.
Finally, the US stock market continues to deviate significantly from the Federal Reserve's bank reserves.
