Outflows from money market funds reached epic proportions as the combined assets of 1,664 funds suffered their third-largest ever one-week decline, plummeting $75.63 billion to $2.99 trillion for the week ending March 16, according to the Money Fund Report, a service of iMoneyNet.com.
It was the first time that total money fund assets fell below $3 trillion since they hit $3.017 trillion back on Nov. 20, 2007. Cash came flooding out of mostly taxable funds as Monday’s corporate tax deadline loomed, and as a result of competition from the 0.20% effective federal funds rate that drew money for direct cash investments away from the lower-yielding money funds, according to Connie Bugbee, managing editor at iMoneyNet.
“By selling a fund position and using the cash to invest directly in the market, the investor can realize a pickup in yield,” she said.
The outflows follow a decline of $31.54 billion to $3.066 trillion the previous week.
The 499 tax-exempt money market funds reporting fell $4.93 billion to $372.11 billion for the week ending March 15, following an outflow of $2.55 billion to $377.04 billion the week before. The average seven-day simple yield for tax-exempt funds remained at an all-time low of 0.02% for a third consecutive week, while the average maturity was unchanged at 28 days.
Taxable money funds, on the other hand, lost a whopping $70.70 billion and finished with total assets of $2.619 trillion for the week ending March 16. That was more than double the $28.98 billion outflow the previous week, when they settled at $2.689 trillion.
The average seven-day simple yield for the 1,165 taxable money funds also remained in record-low territory of 0.02% for a sixth week in a row, according to the report.