Rate Cut Expectations, January Seasonal Inflows Fuel MF Asset Gusher. The Investment Company Institute reports that money market mutual fund assets increased by $48.7 billion to a record $3.165 trillion in the week ended Jan. 9. Expectations of a 50 basis point cut in the target Federal funds rate, coupled with seasonally strong January inflows (due to bonuses, divididends, budgeting), drove assets sharply higher across the board. An easing of fears in the money markets, along with a rebound in the asset-backed commercial paper market, helped shift the bulk of inflows into general purpose, or prime, money funds this week. Prime money funds, which invest in commercial paper, CDs, and corporate debt, saw inflows of $33.7 billion on the institutional side and $3.7 billion on the retail side. Tax-exempt retail funds also saw significant inflows of $6.1 billion. Government and Treasury funds had been seeing large inflows at the twin troughs of the crisis in August and November. Money market funds experienced record inflows in 2007, breaking the $3 trillion barrier and increasing by over $720 billion, or 30%.

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