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Banking crisis pushed over $286B to money market funds in two weeks: Report

March 26, 2023No Comments

The banking crisis has prompted many investors to rotate their portfolio investments in the past two weeks, sending more than $286 billion into money market funds in the United States so far in March, according to EPFR data. obtained by the Financial Times.

According to the numbers, the top gainers from investors who pumped cash into US money market funds in the last two weeks are Goldman Sachs, JPMorgan Chase and Fidelity. Goldman Sachs money funds have taken in $52bn, up 13%, while JPMorgan funds invested almost $46bn and Fidelity saw inflows of almost $37bn, says the FT. Ticket volume is the highest in a month since the emergence of the Covid-19 outbreaks.

A money market fund typically offers high liquidity and low risk, making it a popular choice for investors in uncertain times. These funds are currently offering their best returns in years as the US Federal Reserve continues to raise interest rates to curb inflation.

Money market fund assets. Source: Institute of Investment Companies

During a seven-day period ending March 22, the total assets of the money market fund increase at $117.42 billion to $5.13 trillion, according to a report by the Investment Company Institute. Among taxable money market funds, government funds increased by $131.84 billion and preferred funds decreased by $10.83 billion. Tax-exempt money market funds contracted by $3.61 billion.

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Money market inflows are driven by fears over the health of the financial system, as banks in the US and Europe face liquidity constraints amid tightening of monetary policy.

On March 24, Deutsche Bank shares fell due to a increase in the cost of insuring against its potential risk of default. The German bank's five-year credit default swaps, known as CDS, rose 19 basis points (bps) from the previous day, closing at 222 bps, according to Reuters, which cited data from S&P Global Market Intelligence.

In the US, uncertainty still hangs over regional banks, as default insurance for financial services firms Charles Schwab and Capital One spiked last week, with the latter seeing credit default swaps rise further. from 80% to 103 bp as of March 20.