Global money market funds see huge demand for a seventh straight week

Reuters | April 14, 2023

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(Reuters) – Global investors were big buyers in money market funds for a seventh straight period in the week to April 12 after a strong U.S. jobs report heightened expectations that the U.S. Federal Reserve would raise interest rates in May.

Funds in the global money market drew a net $40.83 billion worth of inflows compared with a net $61.12 billion worth of purchases in the previous week, data from Refinitiv Lipper showed.

Money market funds continue “to benefit from high U.S. real rates that forces deposits out of the banking system,” brokerage Jefferies said in a note to clients.

If the fed funds rate is discounted by core personal consumption expenditure (PCE) inflation, the real interest rate is currently a positive 0.275%.

The yield on the 3-month U.S. Treasury bill, in which money market funds invest the most, surged to near a 16-year high of 5.175% on Thursday.

Global equity funds, meanwhile, obtained $545 million, marking their first weekly inflow in three weeks.

Investors purchased communication services and financial sector funds of $974 million and $664 million, respectively, while selling a net $845 million worth of healthcare funds.

Global bond funds saw inflows dipping to $3.43 billion in the week from $16.45 billion worth of net buying a week ago.

Inflows in government bond funds slipped to a nine-week low of $2.33 billion, while high-yield funds faced outflows of $172 million. Global short- and medium-term bond funds received $1.57 billion, the biggest inflow in five weeks.

Among commodities, investors purchased $402 million of precious metal funds in their fifth consecutive week of net buying, while disposing of a net $147 million worth of energy funds.

Data for 23,942 emerging market funds showed equity funds received a third weekly inflow, worth $227 million, while bond funds had $913 million worth of outflows after two weekly net purchases in a row.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Tom Hogue)