Money Market Fund Assets Swell, Approach $5.3 Trillion
Surprise! Money market funds attracted another $30 billion over the latest weekly reporting period, data released on Thursday afternoon showed.
The pace is decelerating, but the dynamic is the same. Last month's financial sector drama put a spotlight on low-yielding bank deposits and, more to the point, the extent to which a choice between an uninsured deposit yielding next to nothing and riskless US government paper and repos yielding 4% or more, is no choice at all.
Over seven weeks since th
I feel like a fool that back in 2022 I wasn’t following the TIPS tips. With inflation elevated and banks unwilling to provide yield it’s not just opportunity cost but simply preservation. Staying in cash (which was certainly safer than equities and everything else correlated) in 2022 (and 2023) still means losing future purchasing power.
The usual TIPS ETFs sucked in 2022 (see SCHP TIP VTIP).
Vanguard’s VAIPX fund returned distributions of 9.35% to me in ’22. Today it is running over 7%.
I would have to think that this crowding into MMFs is creating increased demand and therefore suppressing (artificially?) the front end of the curve. Recent rates/price action would seem to indicate that the “natural” rate of the 2-year would be higher if not for this dynamic. But as H says, where would you put your money ATM? Inverted 2-year/Fed Funds curve, truly unusual times.