Quiver Quantitative - The U.S. money-market funds have reached a new zenith, with assets hitting a record $5.73 trillion, fueled by the ongoing economic turbulence and the Federal Reserve's heightened interest rates. In the week leading up to November 15, the Investment Company Institute reported a substantial inflow of $21.9 billion into these funds, marking a continued trend of investor preference for stability amidst fluctuating markets.
Government money-market funds, primarily investing in low-risk securities, led the charge with an influx of $18.9 billion, propelling total assets to $4.68 trillion. The appeal of these funds has grown significantly in light of the Fed's aggressive rate hikes, which have positioned money-market funds as an attractive alternative to traditional banking savings, offering quicker returns on the higher rates.
On the other hand, prime funds, known for their investment in commercial paper and carrying a higher risk, also witnessed an increase. They saw a rise of $5.6 billion, bringing their total to $932 billion. This uptick comes amidst speculation that the Federal Reserve may halt interest rate hikes, as recent inflation data has been more favorable than anticipated, yet Fed officials maintain the possibility of further increases.
With investors continually seeking the safety of money-market funds in an uncertain financial landscape, these funds' prominence has become more pronounced. As we await the Fed's next move, the money-market funds' rise to record levels underscores the enduring quest for secure investment havens.
This article was originally published on Quiver Quantitative