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Short-term investments: the new market boom

Short-term investments: the new market boom

According to BofA, money market funds invest in short-term, highly liquid instruments such as cash and short-term debt securities.

Assets invested in US money market funds hit a new all-time high of $4.9 trillion this year as rising short-term interest rates sent investors flocking to cashBofA Global Research reported on Friday.

Money market funds invest in short-term, highly liquid instruments such as cash and short-term debt securities.

So far this year, $192 billion in cash has been invested, $18.1 billion in the week to Wednesday, according to BofA. A week earlier, $68.1 billion in cash was invested, more than at any time since the height of the 2020 pandemic.

Market expectations of further rate hikes by the Federal Reserve, which have boosted US yields, have also made money market funds more attractive. The return on six-month Treasury bills reached 5.34% on Tuesday, its highest level since 2006.

For the rest, according to the report, there were weekly inflows in fixed income funds worth 8,200 million dollars and exits in variable income funds for 500 million, while in gold they amounted to 4 million.

Japan’s equity funds posted the biggest outflow ($3 billion) since April 2018, according to BofA, a turnaround as Japanese stocks have been favored by foreign investors in recent weeks.

BofA also warned that rapidly rising rates globally and market discounting of further rate hikes have generated what they call “March shock vibrations.”

“There are many potential catalysts for a systemic deleveraging event triggering political panic and an end to Fed tightening…and investors should be prepared at that time to deploy cash into new yielding leadership assets.” higher at a time of higher inflation,” they said.

Source: Ambito

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