JPMorgan Econ FI-Short-Term Market Outlook And Strategy There and back again-109894299(1)

1TeresaHoAC(1-212)834-5087teresa.c.ho@jpmorgan.comJ.P.MorganSecuritiesLLCPankajVohra(1-212)8345292pankaj.x.vohra@jpmchase.comJ.P.MorganSecuritiesLLCNorthAmericaFixedIncomeStrategy16August2024JPMORGAN•Withstillaconsiderableamountofuncertaintyaroundmonetarypolicy,short-termcreditinvestorscontinuetofavorbankCP/CDFRNsoverfixed,withvolumesnowattheirhighestpointsincelateJanuary•TherecentriseinT-billissuanceoverthepastcoupleofweekshaslikelycontributedtothelowerfacilitybalance,thoughwemightbeapproachingafloorastheuptickinnetT-billissuancestallsinearlySeptemberandMMFsmaintainsomeminimalamountofexposuretoONRRPforliquidityreasons•WeseeQTasbeinginitsendgame,withperhapsafewmoremonthsleft,andprojecttheFed’sbalancesheettoendtheyearat~$7Tn,withReservesflatatcurrentlevels,ONRRPbalancesslightlybelow$300bn,andalowerTGA•InacompletereversalfromJunemonth-end,MMFsincreasedtheirdealerrepoexpo-sureby$205bn,withsignificantgrowthinrepoexposuretoFICC,UKbanks,andFrenchbanks,andreducedtheirFedONRRPbalances•CurrentMMFs’usageoftheFed’sONRRPfacilityishighlyconcentrated.Thetop5and10individualmoneyfundsaccountfor44%and62%oftotalONRRPbalancesrespectivelyasofJulymonth-end.Morenotably,thetop2fundfamiliesaccountfor66%oftotalONRRPbalances•Assumingfundspark3-5%oftheirAUMsattheONRRPforoperationaleasetomeetunexpectedliquidityneeds,demandforON...