U.S. money market funds draw inflows for fifth straight week

(Reuters) – U.S. money market funds received inflows for a fifth straight week after recent data pointed to a still-strong labor market, bolstering bets for a rate hike by the Federal Reserve in May.

According to Refinitiv Lipper data, U.S. money market funds drew a net $20.51 billion worth of inflows in the week to April 12. It was, however, the smallest weekly net purchase since March 8.

Investors are favoring money market funds over bank deposits amid a rally in short-term interest rates, with the real interest rate turning positive by some measures, analysts said.

The yield on the 3-month U.S. Treasury bill, in which money market funds invest the most, surged to a near 16-year high of 5.175% on Thursday.

Meanwhile, equity funds saw outflows dropping to a three-week low of $1.09 billion.

U.S. small-cap equity funds obtained $490.3 million worth of inflows after facing three weekly outflows in a row, but large-, and mid-cap funds recorded $919 million and $276 million worth of withdrawals, respectively.

Investors purchased U.S. communication services and financial sector funds of $951 million and $661 million, respectively, while selling $658 million worth of healthcare funds.

Meanwhile, U.S. bond funds obtained $1.7 billion worth of inflows when compared with $8.97 billion worth of net buying in the previous week.

U.S. government bond funds received $2.44 billion worth of inflows, the smallest amount in eight weeks, while loan participation, and U.S. short and intermediate investment-grade funds saw outflows of $542 million and $264 million, respectively.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Devika Syamnath)