Rising Rates Likely to Shift Deposit Growth to Money Market Mutual Funds

In a recent report, Moody’s Investors Service stated that the three-year shift to deposits from money market mutual funds (MMMFs) should soon begin to reverse, prompting fiercer competition among many US banks – particularly given their growing capacity from ongoing branch expansion. Moody’s added that it expects bank deposit pricing to remain rational and so does not expect this rising pressure to hurt most bank ratings during the medium term. The report charts steady shrinkage in MMMF assets since 2001, while growth in US banks’ core deposits accelerated during the same period, which also coincided with stress in the equity markets.


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