Global money market funds see big demand as rate cut euphoria fades

(Reuters) – Investors moved hefty amounts into global money market funds in the seven days leading to Jan. 3 as caution set in ahead of key U.S. employment reports which may influence expectations of Federal Reserve rate cuts.

According to LSEG data, investors poured a massive $111.44 billion into global money funds on a net basis during the week, the biggest weekly amount since March 22, 2023.

U.S. unemployment data on Thursday indicated a still resilient U.S. labour market, tempering prospects of deep rate cuts by the Federal Reserve this year. The release of monthly U.S. payrolls figures later in the day would further influence expectations about the timing and pace of rate cuts.

Both U.S. and European money market funds witnessed aggressive buying as they drew $56.92 billion and $56.05 billion, respectively, in inflows. Asian money market funds, however, witnessed $3.86 billion worth of outflows.

Conversely, global equity funds recorded about $230 million worth of outflows after having received $15.95 billion in inflows in the previous week.

The industrials sector funds led outflows, with a net $292 million leaving, followed by $247 million and $242 million worth of respective net selling in metals & mining, and healthcare.

In the bond market, global bond funds received $9.72 billion, the most significant weekly inflow since Dec. 6. Corporate bond funds continued to attract interest with $1.49 billion in inflows, a second consecutive week of net buying.

Notably, U.S. short-term government bond funds attracted $3.2 billion, marking their first weekly inflow in nine weeks. However, global high-yield bond funds experienced about $108 million in net selling, their first weekly outflow in three weeks.

Among commodities, investors pulled a net $805 million out of precious metal fund, breaking their four-week-long buying string. Energy funds also had about $20 million worth of outflows.

Data encompassing 29,076 funds in the emerging markets showed that equity and bond funds both attracted inflows for a second successive week, totalling $1.05 billion and $1.59 billion, respectively.

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