Today’s News
Investors poured USD 37 billion into money market funds (MMFs) in the week leading up to Wednesday, as they anticipated the U.S. Federal Reserve’s expected interest rate cut in September, according to Bank of America on Friday.
This surge has positioned MMFs for their largest three-week cumulative inflow since January, reaching USD 145 billion, based on data from EPFR, a financial data provider.
Image Source: David McNew
Additionally, investors allocated USD 20.4 billion into stocks, USD 15.1 billion into bonds, and USD 1.1 billion into gold during the same period, as per BofA’s weekly market flow report. Many fund managers hope that the upcoming rate cuts will decrease returns on MMFs, prompting a shift of cash into stocks and bonds.
However, BofA strategists, led by Jared Woodard, noted that historically, large investors tend to flock to money market funds before the Fed cuts rates. This is because the short-term fixed-income securities in MMFs typically offer higher returns for longer periods compared to short-term Treasury bills.
“Rate cuts are not likely to spark equity buying from the USD 6.2 trillion money market fund sector,” Woodard said. “History shows the first Fed cut precedes more cash inflows in a ‘soft’ landing, and bonds are the likely winner if it’s ‘hard.'”
Recent economic data suggests a gradual economic slowdown, or ‘soft landing,’ rather than a more severe ‘hard landing.’
According to BofA and EPFR’s data, investment-grade bonds saw their 43rd consecutive week of inflows at USD 8.1 billion, while emerging market equities experienced their 12th straight week of inflows, with USD 4.7 billion, marking the longest streak since February 2024.
Other News
U.S. Rate Cuts Loom as BoJ Warns of Hikes
Asian markets brace for U.S. rate cuts following comments by Fed Chair Jerome Powell, while the Bank of Japan signals potential hikes as Japan’s inflation accelerates.
Bank of China President Liu Jin Resigns
Bank of China Vice Chairman and President Liu Jin has resigned for personal reasons, effective immediately, with Chairman Ge Haijiao stepping in as acting president.
Asia Shares Rise Ahead of Inflation Data
Asian shares gained on Monday as investors await key U.S. and European inflation data that could prompt rate cuts. Oil prices also climbed amid Middle East tensions.
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