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BofA, citing EPFR data, said investors put $51.6 billion into
money market funds in the week to Wednesday as the outsized
flows continued.
The failure of Silicon Valley Bank and another mid-sized lender
called Signature Bank sent shockwaves through markets in the
middle of March, and called into question the safety of U.S.
bank deposits.
BofA's analysts said the catalyst for the big move into cash had
been $500 billion in outflows from commercial bank deposits over
the past five weeks. Total bank deposits stand at around $17.2
trillion, according to Federal Reserve data.
Money market funds (MMFs) are mutual funds that invest in highly
liquid - that is, easy to buy and sell - short-term debt
products, such as those issued by governments or highly rated
companies. Companies and investors see them as effectively
equivalent to cash.
Central bank interest hikes have pushed up the yields on
short-dated debt and MMFs, making them look more attractive to
investors.
"We're in a nice yield environment," said Stephen Brewer, head
of liquidity sales at Pictet Asset Management.
"And now everyone's looking at the diversification, capital
preservation, and liquidity benefits."
Investors have also put huge sums of money into government
bonds, partly because of their safety, but also because they
think central banks will not be able to raise interest rates as
high as previously expected. Rising interest rates causes bond
prices to fall.
BofA said $65 billion has flowed into Treasury funds this year,
in the best start to a year ever recorded. It said $2.3 billion
flowed into bonds in the week to Wednesday, in a third straight
week of inflows.
A month after the initial burst of jitters, many investors are
increasingly confident that the banking problems have been
contained.
BofA said $3.9 billion flowed into stocks in the week to
Wednesday, and $500 million went into gold funds.
(Reporting by Harry Robertson Editing by Amanda Cooper and Mark
Potter)
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