U.S. money market funds are witnessing an unprecedented surge in inflows as investors increasingly favor safety and liquidity over risk assets.
What Happened: According to data shared by The Kobeissi Letter in a post on X, on Tuesday, money market funds have attracted $902 billion in net inflows over the past twelve months.
In comparison, debt and equity markets over the same period have witnessed inflows of $485 billion and $443 billion, respectively. So far in 2025, the post notes that money markets have drawn $200 billion in fresh inflows, while debt and equities have remained largely flat.
“Safe-haven investments are thriving,” the post says, highlighting a deepening sense of caution in the markets, with investors increasingly prioritizing preservation over the pursuit of returns.
“It appears that capital is flying into safety as elevated interest rates and economic uncertainty make cash-like instruments increasingly attractive relative to risk assets,” it says.
Money market funds are increasingly appealing to investors with funds such as the Fidelity Money Market Fund SPRXX and the Vanguard Federal Money Market Fund VMFXX now offering steady yields in excess of 4%, amid plenty of turbulence in the broader markets.
Why It Matters: Several market experts and analysts see this as a clear sign of growing investor caution, as shifting rate expectations and macro uncertainties continue to mount.
Investor Chamath Palihapitiya recently flagged the trend, saying that the “market is risk-off,” while referring to money market funds hitting a record high of $7.24 trillion in May.
Other market observers, such as The Market Ear, however, believe that these funds, parked in short-term instruments, are just “dry powder,” or cash reserves sitting on the sidelines and waiting to make their way back into the markets, on receiving the right signals.
Price Action: The U.S. 10-Year Treasury yields stand at 4.30% at the time of writing this, with 2-Year yields at 3.799%, and 1-Year at 4.03%.
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