Investors are now leaving a record $6.47 trillion in money market funds, according to a new report.
Bloomberg reported, citing data from the Investment Companies Association, that $11 billion flowed into funds last week alone.
Investors flocked to money market funds as the Federal Reserve raised interest rates to increase the yield on cash.
Now that the Federal Reserve has begun cutting interest rates, analysts at JPMorgan Chase & Co. are warning that the money market frenzy may be coming to an end.
“Typically, money market funds do not drain until the Fed is further along in its easing cycle and the Treasury curve normalizes and stabilizes.”
JPMorgan strategists say that during the Fed’s easing cycle, it typically takes several months for money to start leaving money markets.
This time, it may take even longer for the outflow to begin. As a key indicator, they track the yield curve between three-month Treasury bills and two-year Treasuries, which remains inverted.
Most of the new money flowing into funds over the past week has come from retail investors, with $8 billion coming in from retail investors.
The remaining $3.19 billion came from institutional investors.
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