FT on Record Money Market Assets
The Financial Times writes, "Yield-hungry investors push US money market assets to record $5.4tn." The piece explains, "US money market fund assets have swelled to a record high this week, as the best yields available in years and the early May collapse of First Republic Bank kept investors piling into the low-risk vehicles. Total net assets in money market funds, which invest in high-quality, short-dated debt, reached almost $5.4tn as of Wednesday, according to data from the Investment Company Institute. The figure is up from less than $5.3tn in late April and $4.8tn at the start of the year. Investors have rushed into money market funds this year due to the increasingly high yields on offer, particularly in government vehicles, fueled by the Federal Reserve's most aggressive campaign of interest rate rises in decades." It tells us, "In March, money market funds received a massive $370bn as the regional Silicon Valley Bank and Signature Bank collapsed, raising questions about the health of the wider sector. For Shelly Antoniewicz, senior economist at the ICI, rapid inflows into money market funds early this month were likely related to the demise of California-based First Republic, which had $93.5bn of deposits before it was shut down and largely sold to JPMorgan Chase at the beginning of May." The FT adds, "The flood of cash into money market funds has continued even as pressure on the banking system has eased and attention has turned to the prospects of a US government default if lawmakers in Washington fail to reach a deal to raise the country's debt ceiling. The prices of bills maturing around the time that the US is expected to run out of cash have plummeted, sending yields above 7 percent. The starring role of money market funds in markets this year may continue even after any deal to raise the federal borrowing limit. After a potential resolution, the Treasury department is expected to have to borrow vast amounts of cash in order to replenish its coffers -- roughly $750bn in Treasury bills in the four months after a deal, according to JPMorgan estimates."
