According to ICI data, money market balances have skyrocketed during the week ending March 22, with a $117 billion increase similar to the $121 billion of the previous weeks, the largest since April 2020.

Retail trade has been a consistent allocator as rates have risen, while the high pace of institutional investments is set in the context of increased concerns about bank deposits. Institutional investors have primarily participated in the movement, with a total of $203 billion over the past two weeks, reversing its general downward trend since a late 2021 peak. Retail trade has continued to rise, with an injection of $35 billion. In 2022, institutional assets had fallen by $233 billion compared to a $262 billion increase for retail trade. The balances of $5.1 trillion now exceed the pandemic peak of $4.8 trillion.

Money market funds could continue to generate sustained inflows with better yields. The rise in rates and a greater risk aversion explain this movement. In addition, withdrawals of deposits resume in the context of increased U.S. banking concerns, amplifies the trend.

The growth of retail assets is occurring as market sentiment tempers, yields improve, and the stubbornly low deposit rates of US banks persist.

Ratification of liquidity in the interbank market could reverse this trend, pushing mid-sized banks into destructive competition to raise their deposit levels.

On the other hand, significantly higher interest rates could increase U.S. corporations’ allocation to money markets as part of their cash management decisions. In 2021, only 15% of the short-term assets of non-financial US corporations were invested in money market funds, according to the latest ICI data. This is far below the peak of 42% in 2008 and the 20 to 30% range before that date.