Banking crisis pushed over $286B to money market funds in two weeks: Report

The banking crisis has caused many investors to rotate their portfolio investments in the past two weeks, sending more than $286 billion to United States money market funds so far in March, according to EPFR data obtained by the Financial Times.

The top winners from investors pouring cash into US money market funds over the past two weeks were Goldman Sachs, JPMorgan Chase, and Fidelity, according to the figures. The Goldman Sachs fund has received $52 billion, a growth of 13%, while the JPMorgan fund poured in almost $46 billion and Fidelity saw inflows of almost $37 billion, said the FT. The largest inflow volume in a month since the outbreak of Covid-19.

Money market funds typically offer high liquidity and low risk, which makes them a popular choice for investors during uncertain times. Today, the fund is offering its best return in years as the US Federal Reserve continues to raise interest rates to curb inflation.

Money Market Fund Assets. Source: Investment Company Institute

During the seven days ending March 22, total money market fund assets increased by $117.42 billion to $5.13 trillion, according to a report from the Investment Company Institute. Among taxable money market funds, government funds increased by $131.84 billion and prime funds decreased by $10.83 billion. Tax-exempt money market funds shrank by $3.61 billion.

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Flows in money market funds were driven by fears about the health of the financial system as banks in the US and Europe face liquidity constraints amid tightening monetary policy.

On March 24, Deutsche Bank shares fell due to an increase in the cost of insurance against potential default risks. German banks’ five-year credit default swaps, known as CDS, rose 19 basis points (bps) from the previous day, closing at 222 bps, according to Reuters, citing S&P Global Market Intelligence data.

In the United States, uncertainty remains at regional banks as default insurance for financial services firms Charles Schwab and Capital One rose last week, with the latest credit default swaps rising more than 80% to 103 bps on March 20.