Investors rushed to safe cash over the past week like there was a pandemic afoot.

As one US rates team put it recently, the silver lining to bank “contagion” is that it’s not an actual, biological pathogen, but between broad risk aversion and the allure of very high yields on very safe government money market funds, the flight to “cash” was on par (get it?) with that seen in an around the original COVID panic.

For example, ICI data showed US money market fund assets swelling almost $121 billion during the week ended March 15.

That was the largest weekly inflow since April of 2020. The record, $286 billion, was set in March of that year, when investors sold everything that wasn’t tied down in an epic rush for dollars.

Of the $121 billion net inflow, $20.15 billion was retail money and the rest ($100.8 billion) came from institutions. The total parked in money market funds now exceeds $5 trillion, according to ICI.

Not surprisingly, prime funds lost $18 billion during the week. If the situation were to worsen and spiral into an outright crisis, you’d rather your cash reserves not be parked in commercial paper or other obligations which may need a Fed liquidity backstop to avoid breaking the proverbial buck. (And do note: As of last week, that group of “other obligations” includes bank deposits above $250,000 at regional lenders. That’s not government cash. Your deposit receipt is basically just an IOU from your bank. It’s only as good as the people who gave it to you.)

Suffice to say it’s now apparent to more people that the shortest-dated US government paper is safer than uninsured bank deposits, and on top of that, federal money market funds will get you somewhere in the neighborhood of 4.5% — for now, anyway.

This isn’t especially complicated: Although the FDIC doesn’t get congressional appropriations, FDIC insurance is just a government guarantee. Notwithstanding recent events, and pending what may be an epic debate on Capitol Hill, there’s a limit on that guarantee.

By contrast, T-bills, agency paper and repos collateralized by them, are the government. Your guarantee is the “full faith and credit” pledge. If you question the reliability of that guarantee, you’ll need to take it up with the Freedom Caucus.

Meanwhile, $113 billion flowed into global money market funds, according to the latest EPFR data.

That too represented the largest rush to cash since April of 2020.

As BofA’s Michael Hartnett noted, Q1 2023 inflows to cash are on track to be the highest since the original pandemic lockdowns.