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Banking crisis injected more than $286 billion into money market funds in two weeks: Report

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The banking crisis has led many investors to pivot their portfolio investments over the past two weeks, sending more than $286 billion into US money market funds so far in March, according to EPFR data. . got by the Financial Times.

According to the figures, the biggest winners from investors who have flooded US money market funds with liquidity over the past two weeks are Goldman Sachs, JPMorgan Chase and Fidelity. Goldman Sachs money market funds received $52 billion, up 13%, while JPMorgan funds paid out nearly $46 billion and Fidelity saw inflows of nearly $37 billion, according to the FT. The volume of influx is the largest for a month since the emergence of the Covid-19 epidemics.

A money market fund typically offers high liquidity and low risk, making it a popular option for investors during times of uncertainty. Currently, these funds are offering their best returns in years as the US Federal Reserve continues to raise interest rates to curb inflation.

Assets of the money market fund. Source: Institute of Investment Companies

Over a seven-day period ending March 22, the money market fund’s total assets increase from $117.42 billion to $5.13 trillion, according to a report by the Investment Company Institute. Among taxable money market funds, public funds increased by $131.84 billion and prime funds fell by $10.83 billion. Tax-exempt money market funds decreased by $3.61 billion.

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Money market inflows are driven by fears surrounding the health of the financial system as banks in the United States and Europe face liquidity constraints amid tighter monetary policy.

On March 24, shares of Deutsche Bank fell due to an increase in the cost of insuring against its potential default risk. The German bank’s five-year credit default swaps, known as CDS, climbed 19 basis points (bps) from the previous day, closing at 222 bps, according to Reuters, which cited data from S&P Global Market Intelligence.

In the United States, uncertainty still hangs over regional banks as default insurance for financial services firms Charles Schwab and Capital One soared last week, with the latest seeing swaps on credit default jump more than 80% to 103 basis points as of March 20.