Money Market Funds Get Back on Negative Track

After a rare week of inflows, tax-exempt money market funds returned to negative territory in the week ending March 1, losing $2.15 billion and settling at $379.60 billion in total assets, according to the Money Fund Report, a service of iMoneyNet.com.

Last week was the first time in nearly two months that the funds grew, rising a modest $187.7 million to $381.75 billion.

The average seven-day simple yield on the 499 tax-exempt money funds reporting this week dropped one basis point back to its record low of 0.02% after briefly rising to 0.03% last week for the first time in six weeks. The average maturity declined one day to 27 days.

Meanwhile, the 1,167 taxable funds in the report saw an outpouring of $27.67 billion, finishing at $2.718 trillion for the week ending March 2. The massive outflows came on the heels of a modest $4.25 billion inflow the previous week, when the funds settled at $2.746 trillion.

Month-end cash-flow needs as well as competition from direct instruments tied to the higher federal funds effective rate of 0.14% played a key role in the heavy outflows, according to report. The rate, which the Federal Reserve has set at between 0% and 0.25%, floated higher as the discount rate it charges banks for emergency loans was increased in mid-February.

The average seven-day simple yield for the taxable funds reporting this week remained unchanged at a record low of 0.02% for the fourth week in a row.

Overall, in the week ending March 2, the combined assets of the 1,666 money market funds in the report lost a whopping $29.82 billion and finished with total assets of $3.098 trillion. The previous week the funds rose $4.44 billion to $3.128 trillion.

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