Money-market fund assets rose to a fresh record high for the second straight week on expectations short-term rates will remain elevated for longer after traders reined in bets on the first Federal Reserve cuts this year.
About $19 billion flowed into US money-market funds in the week through March 6, according to Investment Company Institute data. Total assets rose to $6.08 trillion from $6.06 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 in March. Chair Jerome Powell suggested in congressional testimony this week that the central bank is getting close to the confidence it needs to start lowering interest rates.
Swap contracts that predict the outcome of future Fed rate decisions continued to anticipate three quarter-point rate cuts this year, with July fully priced for the first 25 basis-point reduction and over 80% odds showing for a kickoff in June.
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.
In a breakdown for the week to March 6, government funds — which invest primarily in securities like Treasury bills, repurchase agreements and agency debt — saw assets rise to $4.9 trillion, a $21.6 billion increase. Prime funds, which tend to invest in higher-risk assets such as commercial paper, meanwhile, saw assets fall to $1.02 trillion, a $3.6 billion drop, driven by an exodus from the institutional side.
This article was provided by Bloomberg News.