After watching the dysfunction surrounding the failures of Silicon Valley Bank and Signature Bank, Americans are withdrawing their bank deposits and placing them in other places, such as money market fund accounts. Brooke Masters, Harriet Clarfelt, and Kate Duguid report for the Financial Times:
Goldman Sachs, JPMorgan Chase and Fidelity are the biggest winners from investors pouring cash into US money market funds over the past two weeks, as the collapse of two regional US banks and the rescue deal for Credit Suisse raised concerns about the safety of bank deposits.
More than $286bn has flooded into money market funds so far in March, making it the biggest month of inflows since the depths of the Covid-19 crisis, according to data provider EPFR.
Goldman’s US money funds have taken in nearly $52bn, a 13 per cent increase, since March 9, the day before Silicon Valley Bank was taken over by US authorities. JPMorgan’s funds received nearly $46bn and Fidelity recorded inflows of almost $37bn, according to iMoneyNet data as of Friday morning.
Money market funds typically hold very low-risk assets that are easy to buy and sell, including short-dated US government debt. The yields available on these vehicles are now the best in years as they rise with interest rates, which have been lifted to 15-year highs by the US Federal Reserve in its quest to curb inflation. There were smaller net inflows in January and February, setting the stage for the strongest quarter for US money funds since the outbreak of the coronavirus pandemic three years ago.
The pace of inflows has accelerated in the past fortnight, particularly from large depositors looking for safe havens. While US officials agreed to backstop all of the deposits at SVB and Signature Bank, which failed the same weekend, they have not guaranteed those above $250,000 at other institutions.
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