Money-market fund assets rose to a record on expectations that Federal Reserve policymakers are in little rush to ease monetary policy.
About $28 billion flowed into US money-market funds in the week through June 12, according to Investment Company Institute data. Total assets rose to $6.12 trillion from $6.09 trillion in the prior week, surpassing a prior record high reached in April.
To Deborah Cunningham, chief investment officer for global liquidity markets at Federated Hermes, assets have the potential to go even further — to $7 trillion.
“There’s not a wall of cash that’s going to exit and go to riskier products,” she said at the Crane’s Money Fund Symposium in Pittsburgh. “Cash is going to continue to come in. It’ll just come from different sources.”
Retail investors have piled into money funds since the Fed began one of the most-aggressive tightening cycles in decades in 2022. Institutions, meanwhile, could shift more cash into money-market funds once the Fed does start cutting interest rates as companies outsource cash management to capture yield.
Fed officials on Wednesday penciled in just one interest-rate cut this year, compared to three when projections were last announced in March.
Chair Jerome Powell said the Fed needs to see continued evidence that inflation is moderating toward the 2% target. US central bankers have left their benchmark rate in a target range of 5.25% to 5.5% since July of last year.
In a breakdown for the week to June 12, government funds — which invest primarily in securities such as Treasury bills, repurchase agreements and agency debt — saw assets rise to $4.946 trillion, a $25.14 billion increase. Prime funds, which tend to invest in higher-risk assets such as commercial paper, saw assets rise to $1.046 trillion, a $4.92 billion increase.
This article was provided by Bloomberg News.