* Year-end moves feed flows into money market funds
* Cash from TAG bank accounts add inflows in week
* Assets in institutional government funds fall
By Richard Leong
NEW YORK, Dec 12 U.S. money market fund assets
rose to their highest level since late February in the latest
week as investors favored holding more cash at year-end and some
prepared for the possible expiry of a federal insurance program
on large bank accounts, according to data released on Wednesday.
Money fund assets grew for a fourth straight week,
increasing by $8.86 billion to $2.629 trillion in the week ended
Dec. 11, the Money Fund Report said.
As the year draws to a close, traders prefer to boost their
cash holdings by reducing bets on stocks and other risky assets.
In addition, some corporate traders and cash managers have
been withdrawing money from checking accounts in anticipation
that an unlimited government guarantee on them will not be
On Dec. 31 the Federal Deposit Insurance Corp was set to
terminate its transaction account guarantee, known as TAG. The
program insures bank deposits of more than $250,000, the amount
the FDIC normally covers, in checking accounts that do not pay
TAG was created in September 2008 during the height of the
global financial crisis in a bid to help stabilize the banking
system. It was meant to reassure depositors that their money was
safe and to ensure that businesses and local governments had
access to cash.
The program, which was originally set to end three years
ago, has pitted checking accounts used by companies and
government agencies against money market funds due to TAG's
explicit federal guarantee, analysts said.
On Tuesday, the Senate passed a "cloture vote" by a
comfortable margin so it could proceed with developing a bill
that would continue TAG for another two years.
Analysts said the renewal of TAG still faces a tough fight
among lawmakers because it could worsen the federal deficit. The
Congressional Budget Office estimated TAG could add $110 million
to the deficit over 10 years.
Most analysts said the best shot that TAG will live on is an
attachment to the deal on the U.S. budget if it is reached by
"We still believe there is a good chance that the coverage
will expire as scheduled," Priya Misra, head of U.S. rates
strategy at Bank of America Merrill Lynch, wrote in a research
note published late on Tuesday.
MOST FUND ASSETS RISE AGAIN
Total taxable money market fund assets rose by $5.93 billion
to $2.353 trillion, while overall tax-free assets were up by
$2.92 billion to $275.72 billion.
Most fund categories - tracked by the Money Fund Report,
published by iMoneynet - experienced asset increases in the
The biggest increase occurred among prime institutional
funds, which can invest in commercial paper and other slightly
riskier investments than U.S. Treasuries. Their assets grew by
$5.82 billion in the latest week to $993.48 billion.
The only asset decline was among institutional government
money funds whose assets fell $2.43 billion to $663.3 billion.
Yields on taxable and tax-free money market funds were
unchanged from the previous week at 0.02 percent, according to