U.S. Money Market Funds Shorten Duration to 40 Days Since May Amid Fed Policy Uncertainty

According to Crane Data, U.S. money market funds with assets exceeding $8 trillion have significantly shortened their weighted average portfolio duration from 45 days to 40 days since mid-May, as managers reduce interest rate risk amid uncertainty over Federal Reserve policy. The shift reflects growing caution following recent market volatility driven by oil price surges and mixed signals from Fed officials and inflation data.

Repurchase agreements (Repo) have emerged as the primary safe haven, with June holdings jumping $36 billion to $1.89 trillion. Floating-rate Treasury securities also attracted record inflows, reaching $523 billion in June, allowing funds to lock in three-month Treasury yields without extending duration. Money market funds reduced their Treasury holdings by approximately $105 billion last month despite expanding government debt supply.