- Total swells to $6.19 trillion in week to Aug. 7: ICI
- Government fund inflows fuel increase, rising to $5 trillion
Money-market fund assets rose to a fresh record as a global selloff in risk assets earlier in the week sent investors flying into cash.
About $52.7 billion flowed into US money-market funds in the week through Aug. 7, the largest weekly inflows since the period ended April 3, according to Investment Company Institute data. Total assets rose to $6.19 trillion from $6.135 trillion in the prior week.
Mounting signs that economic growth is faltering more quickly than expected just weeks ago sparked a massive rally in global bonds on Monday as traders bet the Federal Reserve and fellow central banks would turn more aggressive in cutting rates.
The global repricing was so sharp that at one point interest-rate swaps implied a 60% chance of an emergency rate cut by the Fed in the coming week — well before its next scheduled meeting in September. Current pricing suggests about 38 basis points of cuts for September.
Even after the Fed starts reducing interest rates cash is expected to continue flowing into money funds because institutions and the likes of corporate treasurers tend to outsource cash management during those periods to capture yield, rather than grapple with it themselves. Meanwhile, retail investors have piled into money funds since the Fed began one of the most-aggressive tightening cycles in decades in 2022.
In a breakdown for the period to Aug. 7, government funds — which invest primarily in securities such as Treasury bills, repurchase agreements and agency debt — saw assets rise to $5 trillion, a $51.7 billion increase. Prime funds, which tend to invest in higher-risk assets such as commercial paper, saw assets rise to $1.05 trillion, a $550 million rise.
Written by: Alex Harris @Bloomberg
The post “Global Turmoil Drives US Money-Market Assets to All-Time High” first appeared on Bloomberg