Money Fund Inflows Plunge as Short-End Treasury Yield Spreads Widen
nashnova research
U.S. money-market funds took in just $158 billion in the first three quarters — less than a fifth of last year's pace — and the yield premium investors demand on T-bills over OIS has widened to its highest since late 2024, signaling growing strain at the short end.
Why has money stopped flowing into money funds?
TD Securities data: year-to-date money-fund inflows total $158 billion, versus $823 billion for all of 2025 and $840 billion for 2024. This means → this year's pace is running at roughly one-fifth of the prior two years.
Nafis Smith at Vanguard points to equity strength as the main drag: the S&P 500 is up 13% and the Nasdaq up 18% this year, reducing the incentive to park cash.
In plain terms = stocks are making enough money that investors see little reason to move into cash-like instruments.
What does the T-bill "yield premium" tell us?
The 3-month T-bill yield traded nearly 10 basis points above the matched-maturity OIS — overnight index swap, a key money-market benchmark reflecting Fed rate expectations — and last week hit the widest spread since September 2024.
The 6-month spread stood at 11.3 bps on Monday; it touched 12.5 bps last week, the highest since April 2025.
This means → investors are demanding more compensation to hold T-bills. This reflects the fact that weaker money-fund demand has already fed through into pricing.
How are rate-hike expectations shaping fund behavior?
LSEG estimates show rate futures have priced in one hike this year (25 bps) and two more by 2027.
When managers expect rates to rise, they shorten portfolio duration — the average time to maturity of their holdings — so they can reinvest at higher yields after the Fed moves. Weighted-average duration has dropped from a May peak of 42 days to 36 days.
In plain terms = fund managers are keeping their "deposits" as short as possible, waiting to lock in better rates once hikes arrive.
How heavy is the supply pipeline in Q4?
Barclays estimates the Treasury will issue roughly $225 billion in T-bills in October and another $160 billion in November.
TD Securities' Gennady Goldberg warns: "Treasury is keen to concentrate more issuance at the very front end, but the biggest source of demand is slowing — that's concerning."
This means → supply is rising while demand is fading, so the T-bill yield premium could widen further.
Could the repo market come under stress?
Analysts warn that if money funds shift cash out of the overnight repo market — the core venue for short-term lending between financial institutions — and into higher-yielding T-bills, while T-bill issuance also ramps up, repo rates could be pushed higher, raising funding costs for dealers and other participants.
That said, analysts note the repo market remains orderly for now and it is too early to sound the alarm.
Money-fund inflows typically accelerate in Q4 as investors build cash ahead of year-end liquidity needs, tax payments, and portfolio rebalancing. This reflects the key test ahead: whether that seasonal surge can close the current demand gap.
市场有风险，内容仅供研究参考，不构成投资建议。