A total of $7 trillion is now fully sidelined as a group of investors refuse to pour their cash into risk assets, according to a new report.
New figures show the amount of capital sitting on the sidelines in money market funds is at a fresh record high, reports Reuters.
Money market funds allow people to invest in lower-risk and short-term debt securities including US Treasuries.
Investors began flocking to them in 2022 when the Fed began to aggressively raise interest rates, boosting yields.
Flash-forward to today, the amount of capital in the funds continues to rise at a rapid rate – despite the fact that the Fed is now cutting rates.
“In this topsy-turvy world, MMFs have emerged as a premium destination for investors’ cash… times have not returned to ‘normal’, and Treasury yields have been below the fed funds rate for two years.”
As for if, or when, money market funds will begin to witness outflows, Bank of America strategists say it typically happens a year after the first rate cut.
That would be in September of next year.
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