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Money Market Magnet Attracts $5.2 Trillion
Money market fund assets ballooned to a new record over the last week, closely-watched data released on Thursday afternoon in the US showed.
Although America's regional banking crisis appeared to abate this week, 4% (or more) on riskless, short-dated government paper and repos remained a highly attractive proposition to a nation of depositors suddenly aware both of foregone yield and bank failure risk, for lack of a more polite way to put it.
Almost $66 billion flowed into money funds on net d
Another possibility- anyone who had money in a CD and was told that the early termination penalty was (say) $1,000- $2,000 but was not capable of calculating the increase in yield ( even after paying the early termination fees) that they would receive from moving deposits from a CD to a UST/bill, might have delayed (or still be delaying) the transfer of their deposits.
I moved a good portion of my money into government T-Bills several months ago. I advised all of my friends about the rates, but I don’t think any of them followed my lead. There is a convenience factor. You have to set-up an account with Treasury Direct and transfer funds. There is also a $10,000 minimum purchase. Some folks are unfamiliar with the process, or simply don’t have that much sitting in their bank account above what they may feel they need to keep readily accessible. Ideally, it would take $20-30,000 to build a simple bond ladder for yourself. I bought two eight-week bills, and one four-week bill, and staggered them so one matures and renews every two-weeks.
Seems easier to just open a brokerage account and buy T-bills, in increments of $1000 face, with SIPC insurance for any excess cash.
So basically in an unprecedented rates volatility environment concentration risk in money market funds is becoming very real. From our friends at JP Morgan:
“Because they invest in fixed income securities, money market funds and ultra-short duration funds are subject to three main risks: interest rate risk, liquidity risk and credit risk. Interest rate risk measures the impact of changes in rates on the securities held by money market funds.”
Apologies, my comment was intended as a general comment, not a reply.
I guess the flipside of don’t fight the FED
Why fight the FED