- Total climbed to $6.108 trillion in the week to March 13: ICI
- Prime institutional funds saw second straight week of outflows
Money-market fund assets rose to a fresh record high on expectations short-term rates will remain elevated for longer after traders reined in bets on the first Federal Reserve cuts this year.
About $31.3 billion flowed into US money-market funds in the week through March 13, according to Investment Company Institute data. Total assets rose to $6.108 trillion from $6.077 trillion the week prior.
Fed officials have spent much of the past six weeks pushing back on market expectations for a rate reduction at their policy meeting next week. Chair Jerome Powell suggested in congressional testimony last week that the central bank is getting close to the confidence it needs to start lowering interest rates.
But market-implied expectations for Fed policy easing have faded of late on hot inflation reports, with swap contracts that predict interest-rate changes pricing in slightly less than the three quarter-point interest rate cuts by year-end. That was the median forecast of Fed policymakers from December, but those forecasts will be updated next week, and bond investors have grown concerned that sticky inflation readings will result in a less-dovish outlook. The contracts continue to fully price in an initial quarter-point cut in July.
In a breakdown for the week to March 13, government funds — which invest primarily in securities like Treasury bills, repurchase agreements and agency debt — saw assets rise to $4.97 trillion, a $34.3 billion increase. Prime funds, which tend to invest in higher-risk assets such as commercial paper, meanwhile, saw assets fall to $1.016 trillion, a $3.33 billion decline.
Retail investors have piled into money funds since the Fed began one of the most-aggressive tightening cycles in decades in 2022. In December, the Fed signaled that its interest-rate hiking campaign will end this year, projecting deeper rate cuts than previously.
On the institutional side, cash left prime money-market funds for the second straight week, an indication investors are starting to shift their allocations ahead of the Securities and Exchange Commission’s latest set of regulations slated to take effect later this year.
Written by: Alex Harris @Bloomberg
The post “Money-Market Assets Rise to Fresh Record for Third Straight Week” first appeared on Bloomberg