The flight from Treasury money market mutual funds into Prime and Government fund continues. Our Money Fund Intelligence Daily with yesterday's data shows $3.0 billion moving out of Treasury funds, $2.5 billion moving into Government funds, and $2.4 billion moving into Prime funds. For the week, Treasury funds declined by $10.6 billion, while Prime funds increased by $30.8 billion. Since their peak on December 8 (at $695.1 billion), Treasury money fund assets have fallen by $75.8 billion, or -10.9%, to $619.3 billion. Treasuries now represent 18% of all money fund assets. Meanwhile, Prime money funds have gained $110.8 billion, or 7.1%, to $1.665 trillion, and Government money funds have gained $90.6 billion, or 13.9%, to $742.7 billion since that date.
While likely unfounded fears about "negative yields" and "breaking the buck" due to ultra-low Treasury rates may have contributed to the turnaround, Treasury funds closing to new investors also likely played a role. And of course the yawning yield differential -- Prime Institutional money funds are paying 1.24% vs. 0.16% for Treasury Institutional funds (Govt Inst are yielding 0.59%) -- has made the price of absolute safety too steep for some. As we've been saying for months, you can only stay in the bunker for so long. Pretty soon you have to go out and look for food.
An article in MarketWatch yesterday entitled, "Investors seeking higher returns move from Treasurys" also noted the trend, saying, "The flight of mutual fund investors into the relative safety of Treasury and government money market funds seems to be slowing, and possibly reversing, with fund firms and analysts seeing an increase in interest and cash into corporate money market, enhanced cash and even short duration funds."
Note that our Money Fund Intelligence Daily tracks the 500 largest money funds, so is a subset of the overall moneyfund universe. In other news, see Bloomberg writes "Reserve Fund's Fraud Started After Call With SEC, Galvin Says".
