Investors continue piling into money market-mutual funds, causing assets to swell to more than $5.6 trillion as of Tuesday, a record level, according to data provided by Crane Data, a longtime chronicler of the money-market fund space.
Much of this is being parked at the Federal Reserve via its overnight reverse repo facility, or “RRP,” where funds can reap returns as high as 4.8% on an annualized basis, according to data from the New York Fed. Analysts and money-fund portfolio managers say that much of their inflows are coming from bank deposits, which have continued to see outflows.
After all, both money-market funds and short-dated Treasury bills offer yields that are substantially higher than the average interest rate offered to customers by U.S. banks, which currently stands at less than 0.5%, according to data from Bankrate.com. What’s more, if banks curtail lending because their deposit base shrinks, it could further tighten financial conditions and potentially lead to a deeper economic recession.
Shawn Lyons, portfolio manager at Franklin U.S. Government Money Fund, which has roughly $5 billion in assets, said his fund started using the RRP back in the months after it was introduced.
United States United States Latest News, United States United States Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Source: WSJ - 🏆 98. / 63 Read more »