WSJ on Rising Yields and MMFs
The Wall Street Journal writes, "Rising Yields Fatten Americans' Pocketbooks. They tell us, "The summer bond-market rout is delivering a windfall to savers whose rush into higher-yielding investment products is reshaping the U.S. financial system. Americans poured $36 billion into money-market funds in the latest week, taking advantage of yields that have soared past 5% -- a figure that only recently seemed like a dream for consumers and businesses shopping for a place to park their cash. That marked the biggest weekly inflows since May, according to Refinitiv Lipper data through Aug. 16. Assets in retail money-market funds have surged more than 25% this year, according to Federal Reserve data, to a record $1.5 trillion. Funds from firms including Vanguard Group, Charles Schwab and JPMorgan Chase are offering yields above 5%.... [Money] funds recently paid an average interest rate of 5.15%, according to Crane Data, the highest level since 1999." The Journal piece continues, "For consumers and businesses, higher short-term interest rates are giving them a chance to do something they haven’t since the days before the 2008 financial crisis: park money in safe places and get paid well for it.... Of course, the epic shift of these funds isn't without its potential costs. Regional banks have come under pressure this year as savers awoke to the possibility of getting better paid elsewhere to park their funds. Deposits in noninterest-bearing deposits at U.S. banks fell 18% from a year ago in the first quarter, according to Federal Deposit Insurance Corp. data. Those fleeting deposits are raising questions on Wall Street about the viability and long-term business prospects of thousands of smaller banks." See also, the WSJ's update "Where Investors Are Finding Returns in a World of Yield."
