Money Market Funds: Record $6.3 Trillion Distributed as Rates Cut
The volume of assets in US and European money market funds reached an all-time high of $6.35 trillion.However, the prospect of declining cash returns leaves investors faced with the need to reinvest.
Directions of liquidity migration:
- Mixed stock and bond funds: Inflows of up to $850 billion are expected into balanced strategies with regular coupon income.
- Short-term corporate bonds: Fixing the spread at 120–150 bp.above the risk-free rate.
- Real estate trusts (REITs): Restoring the commercial real estate sector with cheaper refinancing.
Time lag of capital flow
Historical analysis of previous easing cycles shows that outflows from the money market begin 3–6 months after the first key rate cut, when deposit yields fall below inflation expectations.