Global money market funds are attracting significant inflows due to cautious central bank policies

Traders work on the trading floor at the New York Stock Exchange (NYSE) in New York, U.S., October 27, 2023. REUTERS/Brendan McDermid/File Photo acquires licensing rights

Nov 3 (Reuters) – Investors poured large sums into global money market funds in the week to Nov. 1, seeking the safety of these assets ahead of key policy decisions by the world’s leading central banks.

The shift to money markets underlined a broader sense of caution as markets braced for U.S. Treasury updates on financing requirements in the context of widening budget deficits.

Investors pumped a net $65.6 billion into global money market funds in the largest weekly net buying since March 22, LSEG data showed.

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The Bank of Japan loosened its grip on the yield curve with another monetary policy adjustment on Tuesday, indicating a cautious withdrawal from broad-based monetary stimulus.

A day later, the Federal Reserve kept interest rates steady and Chairman Jerome Powell signaled the potential for further tightening.

Money market funds from the US, Europe and Asia received USD 56.52 billion, USD 7.43 billion and USD 3.59 billion, respectively.

Global equity funds earned a net $1.79 billion, the first weekly inflow in seven years, on rising demand in Asia and cooling selling pressure in the U.S. and Europe. Investors pumped about $2.63 billion into Asian funds, the most in four weeks.

Sector equity funds continued to see outflows of about $4.05 billion, the highest in four, while the financials, health care and technology sectors lost $1.67 billion, $574 million and $532 million, respectively.

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Global bond funds saw outflows of $5.54 billion, more than ten times last week. About $298 million in government bond funds was written down, breaking a 28-week buying streak. High-yield funds had sales of $1.83 billion and corporate bond funds had sales of $1.11 billion.

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On the commodities side, $1.13 billion flowed into precious metals funds compared with $1.04 billion in outflows in the previous week. In addition, energy funds received $44 million, the second weekly inflow.

Emerging markets data, covering 28,658 funds, showed investors withdrew a net $3.06 billion from emerging markets equity funds, extending net selling into the 12th week. Emerging market bond funds also experienced $1.62 billion in sales, marking the 14th consecutive week of outflows.

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Reports by Gaurav Dogra and Patturaja Murugaboopathy from Bengaluru; Editor: Varun HK

Our standards: The Thomson Reuters Trust Principles.

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