VMBS - Ready For Recession? Fund Managers Advocate Shift To Treasury Mortgage Bonds | Benzinga
Investors have accumulated record amounts of cash and equivalent assets as a way to hedge against the volatility of recent times.
Now, fund managers are urging investors to put that money to work, as decreasing inflation and the potential for an economic slowdown may lead to profitable opportunities in the bond markets.
According to ICI Global, capital invested into money market fund assets reached a record of $5.73 trillion last week. Money market funds are characterized by having very low volatility and very high liquidity, holding large amounts of cash and other low-risk securities in their portfolios.
Investors tend to lean towards money market investing in times of uncertainty, when availability of cash is a prime concern and tolerance to risk is low. Money market funds give better returns than cash deposits on banks, which is why investors have been flocking towards these assets since the Fed began its tightening cycle last year, which has now taken the federal funds rate to between 5.25% and 5.50%.
But, with inflation dropping to more comfortable levels, bond managers are suggesting that now is an optimal time to allocate some of those assets into the bond market.
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