Many investors have rotated their portfolio investments due to the banking crisis of the past two weeks, pumping billions of dollars in money market funds into the United States.
The banking crisis has prompted many investors to rotate their portfolio investments in the past two weeks, sending more than $286 billion into US money market funds so far in March, according to EPFR data obtained by the Financial Times. .
According to the figures, the main beneficiaries of the flow of money to US money market funds in the last two weeks have been Goldman Sachs, JPMorgan Chase and Fidelity. Goldman Sachs money funds have taken in $52bn, up 13%, while JPMorgan funds brought in almost $46bn and Fidelity had inflows of almost $37bn, the FT notes. The ticket volume is the highest for a month since the appearance of the Covid-19 outbreaks.
Money market funds typically offer high liquidity and low risk, making them a popular choice for investors in uncertain times. These funds are currently offering their best returns in years as the US Federal Reserve continues to raise interest rates to curb inflation.
During a seven-day period ending March 22, the money market fund's total assets increased by $117.42 billion to $5.13 trillion, according to a report by the Investment Company Institute. Among taxable money market funds, government funds increased by $131.84 billion and preferred funds decreased by $10.83 billion. Tax-exempt money market funds decreased by $3.61 billion.
Money market inflows are driven by fears over the health of the financial system, as banks in the US and Europe face liquidity squeezes amid tightening of monetary policy.
On March 24, Deutsche Bank shares fell due to an increase in the cost of insuring against its potential risk of default. The German bank's five-year credit default swaps, known as CDS, rose 19 basis points (bps) from the previous day, closing at 222 bps, according to Reuters, citing data from S&P Global Market Intelligence.
In the US, uncertainty still hangs over regional banks, as default insurance for financial services firms Charles Schwab and Capital One spiked last week, with the latter seeing credit default swaps rise further. from 80% to 103 bp as of March 20.
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