February 20, 2019 / 8:27 PM / 6 months ago

UPDATE 2-U.S. money market assets post biggest drop in 2 months -iMoneyNet

(Adds analyst comments)

NEW YORK, Feb 20 (Reuters) - U.S. money market fund assets recorded their biggest weekly decline in more than two months, marking a partial reversal in the recent rush into these low-risk products in recent weeks, a private report released on Wednesday showed.

Money fund assets fell by $26.21 billion to $3.014 trillion in the week ended Feb. 19. They retreated from their highest level in about nine years attained the week before, the Money Fund Report said.

Analysts attributed the flood of cash into money funds since late December to investor uncertainties about global trade and economic growth.

Taxable money market fund assets decreased by $25.02 billion to $2.877 trillion, according to the report, published by iMoneyNet.

Tax-free fund assets fell by $1.19 billion to $137.56 billion in the latest week.

Institutional investors withdrew $29.09 billion from money funds that invest solely in government securities in the latest week. They allocated $21.00 million in prime funds that can hold riskier short-term corporate debt.

On the other hand, individual investors added $555.7 million in government-only funds and $3.49 billion in prime funds.

Prime money fund assets grew by $37 billion in January, according to Morgan Stanley, which was their biggest monthly increase since 2008.

The commercial paper market, where companies sell short-term debt to raise cash to finance inventories and payrolls, has reaped the benefits from the inflows into prime funds.

In recent weeks, prime funds have preferred three-month commercial paper over one-month issues, helping to lower some three-month borrowing costs, Morgan Stanley analysts wrote in a research note.

When inflows into prime funds slow, those three-month money rates will likely head higher, they caution.

Taxable funds’ simple seven-day yields averaged 2.05 percent, up from 2.04 percent a week ago, iMoneyNet data showed.

Tax-free funds’ simple seven-day yields averaged 1.21 percent, up from 1.10 percent last week.

Reporting by Richard Leong in New York Editing by Chizu Nomiyama and James Dalgleish

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