FT on MMF Inflows, Recent Outflows
The Financial Times writes, "Money market funds spring a leak after year of record inflows." The article states, "A sharp rise in interest rates has cranked up mortgage payments for consumers and escalated borrowing costs for companies around the world over the past 19 months. But it has also lifted the available yields on money market funds to their highest level in years -- prompting investors to pour a record $1tn into the asset class since January. The cascade this year, concentrated mainly in the US, has come in stages. Initially, it was spurred by the Federal Reserve firing the starting gun on rate rises -- translating into much improved returns on money market funds, which typically hold short-dated assets, such as government debt. The inflows then accelerated in March and April as fears over the health of the banking sector pulled some investors away from their traditional deposit accounts." The FT continues, "However, even as these concerns eased, the inflows into money market funds broadly persisted, fueled by expectations that the Fed will keep borrowing costs 'higher for longer' before starting to cut them. Citing figures from data provider EPFR, strategists at Bank of America Securities now project record full-year fund inflows of $1.3tn. This enthusiasm for money market funds has been driven by both institutional and private investors." They add, "This enthusiasm for money market funds has been driven by both institutional and private investors. 'Retail investors have been extremely attracted to the 5 per cent yield that they can get on a money-market fund and are putting more and more money into them,' says Shelly Antoniewicz, deputy chief economist at the Investment Company Institute.... But, despite overall inflows in the year to date, October marked a partial reversal of the tide, with $36bn leaving US money market funds on a net basis. That marked the biggest monthly decline since April 2022." [Editor's Note: The article incorrectly states that inflows in 2023 are a record. Crane Data shows inflows in March and April 2020 as the record.]
