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U.S. money fund assets rise above $3 trillion for the first time since 2010

NEW YORK (Reuters) – U.S. money market fund assets increased for a fifth straight week to their highest level since early 2010, as investors further raised their cash pile due to recent market volatility, a private report released on Wednesday showed.

Assets of money market funds, which are seen as nearly as safe as bank accounts, jumped $35.62 billion to $3.029 trillion in the week ended Jan. 8. This marked the first time that money fund assets surpassed $3 trillion since the week ended March 9, 2010, according to the Money Fund Report published by iMoneyNet.

During this five-week stretch, money fund assets have risen by $159.53 billion.

Yields on taxable money funds are approaching levels seen on yields on short-dated Treasuries in the aftermath of the Federal Reserve’s rate increase in December.

“Cash is attractive at today’s levels. Yields have come up a lot without taking on too much risks,” said Collin Martin, director of fixed income with the Schwab Center for Financial Research in New York.

The seven-day simple yield on taxable money-market funds averaged 2.07 percent, up from 2.04 percent the previous week, but the average seven-day simple yield for tax-free and municipal money-market funds fell to 1.19 percent from 1.28 percent last week, iMoneyNet said.

The yield on two-year Treasuries US2YT=RR was 2.56 percent, down 2 basis points from late on Tuesday.

Meanwhile, taxable money market fund assets increased by $34.03 billion to $2.883 trillion, while tax-free assets rose by $1.59 billion to $146.53 billion in the latest week, Money Fund Report said.

(GRAPHIC: U.S. money fund assets – tmsnrt.rs/2N3eZa0)

While investors built up their money fund holdings, they withdrew from stock and bond funds at the start of 2019, according to the Investment Company Institute.

Equity funds saw $11.29 billion in outflows in the week ended Jan. 2, while bond funds recorded $14.16 billion in outflows, ICI said earlier on Wednesday.

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