Investors Leave Prime Money Funds For Government-Only Portfolios• https://www.zerohedge.com by Tyler Durden
At Charles Schwab, prime funds had $8.8 billion in net outflows this week alone, Bloomberg reports. At the same time, clients poured $14 billion into Schwab's government and Treasury funds.
That's consistent with a broader trend: Industry-wide, prime fund assets dropped $18 billion in the week ending March 15, but total money fund assets surged $121 billion. That's the biggest inflow since the early days of the Covid-19 pandemic. It pushed money fund assets past $5 trillion -- a record high for data that goes back to 2007.
Thanks to fed rate boosts, money fund yields are far above their near-zero yields that prevailed for many years. Combine those higher rates with market volatility and growing unease about bank solvency and you have a recipe for a major influx in cash into money funds.
"We are experiencing inflows across the board, generally into all of our liquidity products," Deborah Cunningham, chief investment officer for global liquidity markets at Federated Hermes tells Bloomberg. "It seems to be coming from bank deposit products more than anything else."
Those shifting from prime to government funds make a modest sacrifice of yield. For example, the Schwab Value Advantage prime fund has a 7-day yield of 4.49%, compared to 4.31% for Schwab's US Treasury fund.