Global money market funds attract robust inflows on central bank policy caution

Nov 3 – Investors channelled substantial sums into global money market funds in the week leading to Nov. 1, seeking the safety of these assets ahead of pivotal policy decisions from the world’s leading central banks.

The move towards money markets underscored a broader sense of caution as markets braced for the US Treasury Department’s update on financing requirements against a backdrop of an expanding budget deficit.

Investors pumped in a net USD 65.6 billion into global money market funds in their biggest weekly net purchase since March 22, data from LSEG showed.

On Tuesday, the Bank of Japan loosened its yield curve control with another policy adjustment, hinting at a cautious retreat from its extensive monetary stimulus.

A day later, the Federal Reserve maintained interest rates steady, with Chair Jerome Powell signaling the potential for further tightening.

US, European, and Asian money market funds drew inflows worth USD 56.52 billion, USD 7.43 billion, and USD 3.59 billion, respectively.

Global equity funds drew a net USD 1.79 billion, the first weekly inflow in seven thanks to a surge in demand in Asia and cooling selling pressure in the US and Europe. Investors poured about USD 2.63 billion into Asian funds, the most in four weeks.

Sectoral equity funds still witnessed outflows of about USD 4.05 billion, the highest in four, as financials, healthcare and tech lost USD 1.67 billion, USD 574 million, and USD 532 million, respectively.

Global bond funds experienced USD 5.54 billion in outflows, over ten times higher than last week. Government bond funds saw redemptions of about USD 298 million, halting a 28-week buying streak. High-yield funds faced USD 1.83 billion in sales, while corporate bond funds drew USD 1.11 billion.

In commodities, precious metal funds received USD 1.13 billion worth of inflows compared to USD 1.04 billion worth of outflows in the previous week. Additionally, energy funds received USD 44 million, a second weekly inflow.

Data for emerging markets, encompassing 28,658 funds, showed investors withdrew a net USD 3.06 billion from EM equity funds, extending net selling into a 12th week. EM bond funds also suffered USD 1.62 billion worth of disposals, a 14th straight week of outflows.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Varun H K)