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U.S. funds reap benefits of record inflows to money markets

Investors poured the most cash since October 2013 into global money markets on the heels of trade tensions and turmoil in developing economies.

At $45 billion, U.S. funds were the biggest beneficiaries of the $55 billion inflow in the week through June 6 — the second-highest on record — according to EPFR Global. Allocations into U.S. inflation-protected bond vehicles also hit their highest since the fourth quarter of 2016, according to the data provider.

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Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Friday, May 27, 2016. U.S. stocks edged higher, with the S&P 500 on course for its biggest weekly advance since March, while investors awaited remarks from Federal Reserve Chair Janet Yellen for hints on the timing of the next interest-rate increase. Photographer: Michael Nagle/Bloomberg

“With the global growth story losing some of its shine, tariff-related rhetoric increasing in volume and a populist government taking office in Italy, investors opted for liquidity in early June,” Cameron Brandt, director of research, wrote in a note. European equity and emerging-market fixed income were big losers.

Passive funds are the decisive victor in attracting cash.
December 13

Woes in developing economies and trade frictions were on full display this week, with Friday’s G-7 meeting in Quebec underscoring President Trump’s isolation on the international stage, creating a more complex outlook for market risk.

Money managers can also snap up positive real returns on cash-like instruments in the U.S., effectively for the first time since the crisis. Three-month U.S. Treasury bills yield about 1.9%, up from 1.4% at the start of the year.

Still, EPFR data suggest bullish sentiment endures. U.S. equity funds extended their longest inflow streak since the fourth quarter of 2017, taking in about $1 billion overall, and Chinese bond funds saw the highest allocation in over 17 months.

“Investors did respond — cautiously — to some of the bright spots in the global growth picture,” Brandt said.

Bloomberg News