The outlook for global money market funds remains stable, according to a report from credit ratings agency Moody’s.
Against a backdrop of “benign” credit conditions that are bolstering banks’ credit profiles as well as rising short-term interest rates that increase the attractiveness of holding cash, the agency said that US equity market volatility and corporate borrowing could lead to more money flowing into money market funds.
Investors have traditionally piled into money market funds when risk in stocks and bonds becomes too high.
With fears over Brexit and global trade tensions rising, US money market fund assets increased by US$27.84 billion (€24.6 billion) in the week to November 6: their largest weekly rise in five months.
“As the Federal Reserve raises interest rates, money market fund yields will rise and drive inflows,” said Stefan Kahandaliyanage, an assistant vice-president at Moody’s.
“Current money market yields offer in excess of 60% of short-term government yields and have a fraction of the duration risk.”
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