Mischler Cash Commentary

Total domestic and offshore USD money funds climbed back to a record $9.33 trillion, driven by a record $928 billion in USD offshore funds. The domestic money market fund total is just shy of its July 6 record, as we head into September Tax payments.

Treasury-only funds keep grinding higher to $2.70 trillion combined. Bill supply's marginal buyer, with cash that needs to be put to work.

Institutional Treasury funds set a new high at $2.23 trillion, up roughly $480 billion since late 2024. Large Technology treasurers need to park their $1 trillion pile, and tariff refunds continue to support inflows.

Combined domestic and offshore Prime assets broke through a record $2.07 trillion, steadily climbing back from reform outflows.

Prime institutional assets hit a record $1.07 trillion, up about $230 billion since late 2024. Prime growth is what funds the CD, Yankee and ABCP records further down.

Total Government fund assets peaked at $4.47 trillion in June and sit near $4.39 trillion. Government funds are the repo buyers; flat assets are one reason repo volume is soft.

Government institutional funds have been the laggard after peaking at $2.90 trillion in February and have traded sideways near $2.82 trillion since. The growth has rotated to Treasury-only and Prime.

Money fund assets are only 10.7% of U.S. equity market cap, well under the 12% long-run line. Record cash, near-record low cash as a share of risk assets, speaks to the leverage in equities.

Opportunities to outperform.

Gross bills outstanding are projected to climb toward $7.5 trillion by year-end, with net supply (ex-Fed) near $6.9 trillion, standing by the phone if needed. After a September pause, the ramp resumes in the fourth quarter. Watch Repo volumes.

Bill supply as a share of money fund assets has climbed back to 86% gross and 78% net. With the Fed buying, it has not reached a critical level, but the cushion is thinner than in the spring.

Foreign official accounts have been net sellers of T-bills, roughly $60 billion at the low. Domestic money funds and the Fed are left as the marginal buyers.

Customs refunds have reached $140 billion year-to-date versus about $4 billion in 2025. The late-June step (roughly $36 billion in a week) was the largest single move; flows have slowed but not stopped, although we may be near the max, with maybe another $10 billion left.

Walmart's gross margin rose 96 basis points to 25.4% in Q2 FY27, primarily driven by tariff refunds. Refund cash lands in corporate treasurers' coffers, then money funds. It has also helped contain some inflation pressure, for now (i.e., Walmart holding prices unchanged, but still making bank!)

Q2 corporate receipts were $170 billion versus $209 billion a year ago. Q3 is tracking well below 2025 ahead of the September 15 payment date.

Cumulative corporate receipts for FY2026 are tracking near $337 billion against $460 billion for all of FY2025. September 15 is the last chance to narrow the gap; bill supply covers what it cannot.

Corporate profits are running at a record near $4.8 trillion while quarterly tax receipts fall. Bonus depreciation and capex expensing pull the tax bill forward, and Treasury funds the difference in the bill market.

SOFR volume has slipped to 35% of money fund assets from a 43% peak. Leveraged Treasury longs remain limited, so repo stays soft with fund inflows and Fed bill buying. August was a summer repo snoozer; September brings Fed and Treasury buying against a decline in bill supply.

Total dealer financing is $5.08 trillion, down from the $5.29 trillion record on July 3. Leverage was trimmed over the summer holiday; does the fall push us higher?

Treasury financing has eased to $3.45 trillion from $3.66 trillion in March and is turning higher off the August low. Decline was just in time to offset the Bill supply return. Watch the basis trade and levered money for repo's turn.

FICC repo plus bills equals about 99% of money fund assets, while dealer financing has fallen to 55% of fund assets from 58% in the spring. The funds have the balance sheet; dealers are not asking for it.

Total tri-party: Treasury and Agency MBS repo supply is moving lower as Government fund assets remain below highs, easily replaced by non-traditional supply.

Non-Traditional Equity Supply reaches a new high. No surprise given the leverage in equities.

Treasury and Agency MBS Repo supply moving lower.

Corporate non-traditional tri-party collateral supply higher.

Equity financing is $472 billion, off the $515 billion high of July 3 but well above the $345 billion low last October.

Term equity financing has climbed to $172 billion while overnight has slipped to $293 billion. Borrowers are locking in term funding, a sign they expect to hold the leverage.

The September equity basis has eased back near 80 from the June spike above 110, while SOFR-IORB holds near zero. Equity funding pressure has not spilled into Treasury repo; it is the spread to watch into quarter-end.

Margin debt is up about $500 billion since 2024 to $1.42 trillion. Equity financing fell $38 billion in July to $476 billion, but both remain near their highs. Summer sabbatical as leverage turned lower, do we run up the tab into year-end?

Margin debt and equity financing as a share of market cap are off their June peaks but well above 2024 levels. As prices rise the ratios should fall; they have not.

Other Equity financing ($264 billion) and ABCP ($498 billion) have moved in lockstep since last fall. The same non-traditional funding channel is feeding both - Prime Fund inflows have helped as non-traditional Repo and ABCP have increased - demand / supply in balance for now.

Asset-backed CP has grown about $90 billion since November (+22%) to $498 billion, near a 20-year high. Total CP stands at $1.45 trillion. ABCP may be reaching a breaking point. Supply continues as more programs enter the market. Keep a watchful eye on the dealer balance sheets.

Yankee CD outstandings reached a record $939 billion on September 2, up $122 billion from the November low. Foreign banks are funding in dollars with Prime fund cash.

Combined CP and CD outstandings are $2.36 trillion, just off the August 28 high of $2.37 trillion and up $215 billion from last November's low.

CP and CDs are 28% of money fund assets versus 42% in 2022. Record issuance, yet credit's share of the cash pool is near its lows, leaving room for Prime to absorb more.

Total agency debt eased to $2.12 trillion in August from a $2.17 trillion peak in June, still up about $150 billion year-to-date.

Agency floaters reached a record near $895 billion, up about $240 billion since January. Floaters remain the preferred tool while fixed-rate demand waits on the Fed.

Discount notes fell to about $448 billion from a $592 billion April peak. Issuers are terming out into floaters; fewer discount notes mean more demand for bills.

FY2026 interest expense is $1.27 trillion ($1.3 trillion Sept 10th) fiscal year-to-date at a 3.49% average rate (up 5bp from last month), on pace to top FY2025. The front end sets the funding cost for a third of the debt and the Fed isn't going to help this week.

Interest paid year-to-date is $1.3 trillion (+$140 billion), running roughly 12% ahead of the same point in 2025 ($1.159 trillion).

Long-term debt at the six largest AI builders (Alphabet, Microsoft, Oracle, Amazon, Meta, SpaceX) has more than doubled in three quarters, from about $215 billion to $500 billion.

Aggregate cash at the ten largest technology firms has climbed from about $595 billion to over $1 trillion since October. Bond proceeds sit in money funds and bills until capex draws them down.

If you overlay Data Center growth and therefore demand for labor, energy and services with the regional Federal Reserve Banks, you can see why Hammack, Logan and Kashkari are significantly impacted and may be driving their views on inflation and the economy. Goolsbee is concerned about inflation but hasn't been as vocal, while Atlanta has an interim president and is quiet. The eastern corridor has historically been active, so it wouldn't have the same relative impact on the economy. U.S. data center clusters: Texas, Chicago, the Ohio Valley, Atlanta. Power and grid demand follow the same map. Bottom line: data centers are driving the economy and inflation, and may be a long-term driver of energy demand and inflation.

This cycle started from 3% in 2023, like Greenspan's February 1994 surprise hike from 3%. Fed funds sit at 3.75% with Core PCE expected at 3.49% (up from 3.34%), roughly 175 basis points above where it ran in 1994-95, cutting rates in 1995-1996 by 75bps.

1998 LTCM cuts mirror Powell's (policy error) cuts of 2025. Greenspan reversed them in June 1999: "To have refrained from doing so in our judgment would have put the U.S. economy's expansion at risk." a statement that may sound similar this week. He followed with 175 basis points of tightening into 2000. The Committee hiked and dropped its bias in the same statement, and the curve rallied. We may get a hike and a hawkish statement that drives the long-end lower and helps Bessent as well. The "House" wins and Trump is ultimately happy.

Real-time Truflation core has fallen to 1.28% while Core PCE sits at 3.49% up from 3.34%. Warsh wants real-time data. This chart is the argument for waiting; the 1999 chart is the argument for moving.