Money-market funds are investing less in a Federal Reserve borrowing program and more in Treasury notes issued by the government in the hopes of borrowing up to $1 trillion by the end of the year.
The Fed’s reverse repo agreements, which allows the government to borrow from money-market funds overnight in exchange for securities such as T-bills, registered a major drop on Tuesday, falling below $2 trillion for the first time since June 2022, after peaking above $2.5 trillion in December.
The declining use of the program suggests a future even flow of cash into short-term markets, which would reduce potential risks to stocks’ rally.
Yields on Treasury bills have now climbed high enough to entice money-market funds to go buy them, offering rates of 5.113%, compared to reverse repo’s 5.05%.
