Traders work on the floor of the New York Stock Exchange. [AFP]
Traders work on the floor of the New York Stock Exchange. [AFP]

Assets in US money market funds have hit a record high as investors seek shelter in cash-like instruments amid growing uncertainty over Federal Reserve policy.

Citing data from money market research firm Crane Data, Bloomberg reported Saturday that total US money market fund assets reached $8.281 trillion (approximately 11,340 trillion won) as of May 28, an all-time high.

In the week ending May 28 alone, $66 billion flowed into money market funds. Of that, $41 billion came in a single day — May 29 — as investors repositioned their portfolios at month's end.

Cumulative inflows into money market funds this year have reached $172 billion.

Money market funds pool investor capital and deploy it into short-term, high-quality assets such as government bonds, commercial paper and certificates of deposit, generating returns with minimal risk.

Analysts attribute the recent surge to renewed inflation fears stemming from the Middle East war, which has dampened expectations for Fed rate cuts and raised the prospect of rate hikes — making short-term financial products more attractive to investors.

Swap markets are currently pricing in roughly a 60 percent chance that the Fed will raise its benchmark interest rate by 25 basis points this year.

"As Fed expectations have shifted from cuts to hikes, short-term bond yields have risen, and that is driving demand for money market funds," said Steven Zeng, a strategist at Deutsche Bank.

Money market funds are widely used by Wall Street professionals, corporate treasurers and retail investors alike, in part because they reflect interest rate changes in their yields more quickly than other investment products. That combination of accessibility and competitive returns has sustained steady inflows for years.

As of May 28, the seven-day average annualized yield on US money market funds stood at 3.34 percent.


mokiya@heraldcorp.com