Investing.com — Money market funds have reduced the average maturity of their holdings as uncertainty over Federal Reserve interest rate policy continues, according to recent industry data.
The weighted average maturity for the Crane Money Fund Average dropped to 38 days for the week ending July 10, down from 42 days a month earlier. The Crane 100 Money Fund Index, which tracks funds holding most industry assets, showed a decline to 40 days this month from 44 days in June.
The shift to shorter maturities reflects an unclear outlook for Fed policy. Fed Chair Kevin Warsh, known for dovish views, may face opposition from more hawkish Federal Open Market Committee members, though recent inflation data that came in softer than expected support arguments for rate cuts or an extended pause.
Fund managers generally reduce portfolio maturities when they expect interest rates to rise. Shorter-dated securities mature faster, enabling managers to reinvest at higher yields if the Fed increases rates. Holding three- or six-month Treasury bills before a rate increase can leave investors with lower yields as rates climb.
Money market fund assets reached a record near $8 trillion in the first week of July, according to Investment Company Institute data.
Managers have allocated some inflows to floating-rate notes, which adjust payouts with market conditions unlike fixed-rate debt. Treasury floating-rate note holdings increased by $32 billion at the end of June to reach a record $523 billion.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.