The pace of inflows has accelerated in the past fortnight, particularly from large depositors looking for safe havens. While US officials agreed to backstop all of the deposits at SVB and Signature Bank, which failed the same weekend, they have not guaranteed those above $250,000 at other institutions.
Data from the Investment Company Institute shows the money is flowing specifically into funds that hold US government debt, which are considered the safest destinations. So-called prime funds, which hold bank debt and corporate paper, have had small outflows. The biggest inflows have gone to funds associated with blue-chip Wall Street banks and the largest investment houses.
Sara Devereux, global head of Vanguard’s fixed-income group, said: “Money market funds have seen remarkable flows in recent weeks, with the largest flows into government money market funds. Part of that is because of a flight to quality after the scare with bank closures, but it’s also because yields for money markets are currently very attractive.”
Andrzej Skiba, head of BlueBay US fixed income at RBC Global Asset Management, said: “When you have tremors in the markets with a high degree of uncertainty about major parts of the economy and across the world, not just in the US, the first impulse is to go towards safety.”