Investors moved $166.4 billion into money market funds in a single week, according to Bank of America data. This represents the largest weekly inflow since the April 2020 market crash. The shift was triggered by volatility in the bond market, where yields reached multi-year highs.
The 10-year Treasury yield climbed to 5.36%, marking its highest level in approximately 24 years, while the 30-year yield reached 5.70%. Analysts attribute this rise to factors including inflation, federal rate hikes, and a $1.9 trillion federal deficit.
Bank of America strategist Michael Hartnett suggests that capital will remain in money market funds until the Federal Reserve implements rate cuts. Currently, traders do not anticipate any rate changes during the October meeting. Total assets in money market funds have grown to nearly $8 trillion, compared to $5 trillion in 2023.
Market reactions to the rising yields have been mixed. While some analysts like Jim Bianco are turning bullish on bonds, others warn of risks to equities. The broader market shift also impacted alternative assets, with crypto funds recording outflows of $600 million, while gold attracted $2 billion in inflows.
