US money-market funds reach $5.46tr

July 21, 2023 (MLN): The cash parked at U.S. money-market funds rebounded this week, led by prime holdings that tend to invest in higher-risk assets such as commercial paper, Bloomberg reported.

With markets fully pricing another quarter-point interest-rate increase at next week’s Federal Reserve meeting, short-term rates above 5% continue to lure investors to money-market assets.

About $4.22 billion entered US money-market funds in the week to July 19, according to data from the Investment Company Institute. Total assets rose to $5.46 trillion in the period, and remain just shy of an all-time high of $5.47tr set in the week to July 5.

In a breakdown for the week to July 19, government funds, which invest primarily in securities like Treasury bills, repurchase agreements, and agency debt, saw assets rise to $4.49tr, a $1.01bn increase. Prime funds saw assets jump to $850.0bn, a $7.56bn increase, led by the retail sector attracting a $5.34bn inflow.

Money-market funds have started to extend the weighted average maturity of their assets, or WAMs. Until recently, they had been apprehensive about allocating their record amount of assets too far out the curve in the event of being unable to immediately take advantage of central bank rate hikes.

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