Since the COVID-19 pandemic, nothing of this magnitude has happened in the United States.
In recent weeks, more and more US funds have been deposited in money market funds, a type of mutual fund that invests in highly liquid, short-term instruments.
And since the COVID-19 pandemic, nothing like this has happened on this scale in the United States.
Economists believe that the influx of dollars into these funds is due to the anxiety raised by the collapse of Silicon Valley Bank and the turmoil that struck the global financial markets after it.
What are money market funds?
It is a type of mutual fund that invests in highly liquid, short-term instruments.
These include cash, cash equivalents, high credit-rated securities, and short-term debt-based securities (such as US Treasury bonds).
Money market funds aim to provide investors with high liquidity with a very low level of risk.
What is going on in the United States?
According to government figures, most of the dollars were deposited in funds that invest only in government securities, such as short-term Treasury bills and Fed temporary loans.
This means, according to observers, that institutional deposits are being withdrawn from the US banking system today, especially large ones that are controlled by companies and small business deposits that are not clearly insured by the Federal Deposit Insurance Company (FDIC).
In addition, some of the cash transferred to money market funds also came from stock and bond sales that have rebounded amid banking tensions.
And a report by the American website Axios quoted experts at JPMorgan as saying last week that deposits in money market funds now seem safer than uninsured bank deposits.
Although money market funds are not fully guaranteed by the US government, they are considered a safer place for funds due to the nature of their work. These funds use the money of investors and depositors to purchase very safe and risk-free investments.
The worry about banks is that, like Silicon Valley Bank, they have invested in long-term government bonds, which could generate losses if they were forced to sell to get cash for depositors.
