Money-market funds’ assets fall for the first time since the banking turmoil started, snapping a trend of record inflows

• US money-market funds just saw their assets drop for the first time since early March, snapping a trend of record inflows.

• It’s also the biggest such fall since July 2020 as US taxpayers were due to file their taxes in the past week, according to Bloomberg.

• Money-market funds saw large inflows in recent months as high yields and the banking jitters fueled a flight of money into them.

US money-market funds just saw their first outflows since early March, snapping a multi-week trend of record inflows that was driven by depositors migrating cash out of banks amid the sector’s worst turmoil since 2008.

The total assets managed by such funds fell by $68.64 billion to $5.21 trillion in the week through April 19, according to data published by the Investment Company Institute. That’s the first decline since the March 10 collapse of Silicon Valley Bank (SVB) triggered a wave of banking instability.

It’s also the biggest one-week drop since July 2020, per Bloomberg, as US taxpayers were due to file their levies in the past week.

In the weeks following SVB’s collapse, money-market funds saw accelerated inflows, with their total assets hitting a record high of $5.28 trillion as of April 12, per the ICI.

That reflected a trend of depositors – worried about the safety of their savings – pulling money from smaller, more vulnerable banks and parking it elsewhere.

But money-market funds had been raking in cash even before the banking turmoil thanks to the high yields they offered, following the Federal Reserve’s interest-rate increases over the past year.

One reason why such funds have seen a decline in recent days are the tax bills due this week, Bloomberg reported. When the pandemic was raging in 2020, the US Internal Revenue Service had delayed that year’s filing deadline from April to July to give American taxpayers more time.

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