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The Rush Into Money Funds Is Slowing, But They’re Still Growing

About $30.3 billion poured into US money-market funds in the week to April 12, taking total assets to an unprecedented $5.28 trillion.

(Bloomberg) -- The amount of money parked at money-market funds climbed to a fresh record in the past week, though the pace of inflows slowed for a second straight week, an indication that the banking sector is stabilizing. 

Money-market funds have been scooping up cash in recent months, fueled in large part by depositors pulling their money away from US banks. Much of that flow was driven by more attractive rates, but concern about the steadiness of some smaller lenders helped turbocharge that move last month. 

About $30.3 billion poured into US money-market funds in the week to April 12, taking total assets to an unprecedented $5.28 trillion, according to data from the Investment Company Institute. The previous record of $5.25 trillion was set just a week before.

The slowing of inflows into government money funds is “consistent with a moderation in bank outflows, which suggests a degree of stabilization in the banking system in the past couple of weeks,” said TD Securities strategist Gennadiy Goldberg.

The past week’s inflow compares with around $49.1 billion of net new cash in the prior seven-day period and is also smaller than the amounts witnessed during the recent weeks of banking system turmoil. 

The approach of the US government tax deadline next week, an occasion when many people and companies need to tap their cash stockpiles, could also potentially be acting as a downward pressure on money fund holdings. 

While fears about the state of the banking system initially spurred demand for havens, risks have abated and the focus has returned to the higher yields such investment vehicles can offer compared to bank facilities. 

In total, around $384 billion in cash has flooded into money funds since March 8, including the latest week’s additions.

In the week to April 12, government funds, which invest primarily in securities like Treasury bills, repurchase agreements and agency debt saw assets rise to $4.39 trillion, a $26.8 billion increase. Prime funds, which can invest in higher-risk assets such as commercial paper, saw assets rise to $769 billion, a $3.3 billion increase. 

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