Money-market fund assets saw its first outflows in two months, led by the institutional sector, as quarterly tax payments came due.
About $22.3 billion flowed out of US money-market funds in the week through June 18, according to Investment Company Institute data. Total assets fell to $6.1 trillion from a record $6.12 trillion in the prior week.
Even though the bulk of payments to the US government came due in April, quarterly corporate tax bills are paid out of cash parked in money-market funds. Corporate taxes collected this month have totaled $82 billion, according to Treasury data through June 18. The government collected another $75 billion in individual filings.
Much of the decline in money-market fund assets was led by institutional funds, where outflows totaled $30.3 billion — the largest drawdown since April 17. Retail investors poured another $8 billion into money-market funds.
Cash is expected to continue piling into money funds as long as the Federal Reserve keeps rates on hold. A chorus of Fed officials this week emphasized the need for more evidence of cooling inflation before lowering interest rates, with a couple policymakers offering insight into the potential timing of such a move. The committee last week left the benchmark rate a 5.25% to 5.5% target range for the seventh straight meeting.
Retail investors have piled into money funds since the Fed began one of the most-aggressive tightening cycles in decades in 2022. On the institutional side, cash left prime money-market funds, an indication investors are starting to shift their allocations ahead of the Securities and Exchange Commission’s latest set of regulations, which are slated to take effect later this year.
In a breakdown for the week to June 18, government funds — which invest primarily in securities such as Treasury bills, repurchase agreements and agency debt — saw assets fall to $4.92 trillion, a $21.45 billion decrease. Prime funds, which tend to invest in higher-risk assets such as commercial paper, saw assets little changed at $1.05 trillion.
This article was provided by Bloomberg News.