The crisis in the U.S. banking industry has led to a bubble in the segment of money market funds, writes MarketWatch referring to the report of Bank of America Corp.
According to analysts at the bank, over the past four weeks, assets under management of money market funds have grown by $300 billion – more than $5.1 trillion.
In addition, the bank’s experts point to the largest weekly inflows in money market investments since March 2020, the largest six-week inflows in US Treasuries in history and the largest outflows from the investment grade bond market since October 2022.
There was a surge in assets under money market funds in 2008 and 2020. However, at that time, the U.S. Federal Reserve (Fed) was lowering interest rates, not raising them. On March 22, the U.S. regulator reportedly raised the federal funds rate by 25 basis points.
“The stock and bond markets want too much of a rate cut and not enough of a recession,” BofA analysts said.
