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Retail money funds decline at record pace

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(Read caption) Retail money funds have declined nearly 30 percent over last year.

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The latest weekly read of Money Stock Measures showed the total level of retail money funds declining at 29.51% on a year-over-year basis, the fastest pace on record.

Primarily comprised of cash reserves from individuals through poplar retail money market funds (Fidelity, Vanguard, Schwab, etc.), the trends and total level of retail money funds generally reflects interest rates but also tends to mirror financial stress.

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The interplay between the want of a reasonable return on cash-based savings and the need for safe harbor from financial crisis is distinctly present in this series which currently appears to be suggesting that while the general level of financial stress is still elevated, the minuscule return is driving flows out of money funds.

Where the outflows are generally being driven to, of course, cannot be perfectly known but stocks, real estate, popular commodities and simply working capital for financially stressed households are likely a reasonable assumption.

The following charts plot the total level retail money funds, showing year-over-year and week-to-week trends, the level of retail money funds versus 1-month commercial paper lending rates (the primary debt instrument employed by money funds) and the level of retail money funds versus St. Louis Feds financial stress index.

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