U.S. Investors Flock to Money Market Funds, Largest Weekly Purchase Since Jan. 3

U.S. investors show strong interest in money market funds, purchasing $42.54 billion in the week leading up to Feb. 28 amidst uncertainties on interest rates and inflation.

U.S. investors showed strong interest in money market funds in the week leading up to Feb. 28, as they purchased a net $42.54 billion worth of U.S. money market funds, marking the largest weekly net purchase since Jan. 3, according to data from LSEG. This surge in buying comes amidst lingering uncertainties surrounding interest rate cuts and ahead of a key reading on inflation.

The U.S. Federal Reserve's core personal consumption expenditures (PCE) price index data, released on Thursday, revealed that the annual increase in inflation was the smallest in nearly three years. This news had investors on edge, especially following higher-than-expected readings for consumer and producer prices in recent weeks.

On the other hand, U.S. equity funds saw $196 million in inflows during the week, a welcome change from the $4.89 billion worth of net selling in the previous week. This positive sentiment was driven by Nvidia's (NASDAQ:NVDA) upbeat earnings outlooks. The tech sector, consumer discretionary, and metals & mining sectors also saw significant inflows during the week.

In terms of fund segments, U.S. growth funds received $613 million worth of inflows after experiencing outflows of $3.57 billion in the previous week. However, value funds continued to see outflows, with $449 million worth of net selling for the second consecutive week.

U.S. bond funds remained popular for the 10th consecutive week, attracting a net $1.88 billion worth of inflows. U.S. short/intermediate investment-grade funds saw the largest inflow in three weeks, with $2.59 billion coming in. On the other hand, high yield and short/intermediate government & treasury funds experienced net selling of $450 million and $267 million, respectively.

U.S. investors showed a strong appetite for money market funds and U.S. equity funds in the week leading up to Feb. 28, as they navigated uncertainties surrounding interest rates and awaited key inflation data.