MONEY MARKET MINUTE

Liquidity in the wake of falling rates

[00:00:06.24] In the current economic environment, which is characterized by potential rate cuts, interest rates remain relatively high and we believe there are opportunities for money market fund investors.

[00:00:15.92] When rate cuts are priced into the market and there is an inverted yield curve, active short duration positioning can help ensure that money market funds continue to offer competitive risk-adjusted returns.

[00:00:27.44] Additionally, monetary policy loosening may lead to increased liquidity in the financial system, which typically creates ample supply of high-quality short-term securities.

[00:00:39.92] During periods of economic volatility, we believe that active cash management is critical to clients overall investment strategy.

[00:00:48.28] All investors have a cash need.

[00:00:50.68] It is important to effectively manage liquidity across different rate cycles to take advantage of same-day liquidity, diversification, operational ease and active duration management.

[00:01:01.84] Money market funds invest in high quality debt securities, which provide relatively stable and low risk opportunities to earn returns on cash reserves.

[00:01:11.32] Although rate cuts might lower the yields on short term investments, money market funds hold a mix of securities with varying maturities.

[00:01:19.72] Their ability to blend shorter and slightly longer dated securities can help balance yield and risk, and adapt to changes in the interest rate environment with more flexibility.

[00:01:30.20] Money market funds generally closely reflect central bank rate changes due to their direct investment in short term securities.

[00:01:36.96] However, a lag often exists between rate cuts and the decline in money market fund yields due to the mix of maturities in their portfolios as securities mature and are replaced by lower yielding ones, money market fund yields adjust over time.

[00:01:52.72] As the broader economic environment evolves, clients should review their specific goals and investment time horizons, and seek money market investments that provide liquidity, stability, and opportunity for yield.

[00:02:02.16] that provide liquidity, stability, and opportunity for yield.

[00:02:04.48] These qualities may help to optimize cash returns and build more resilient portfolios to more effectively navigate market fluctuations.

In the current economic environment, which is characterized by potential rate cuts, interest rates remain relatively high, and we believe there are opportunities for money market fund investors.

THE BID

Falling for cash

As interest rates decline, investors are reassessing their cash portfolios and considering the impact of monetary policy shifts over the next 12 months. Beccy Milchem, Global Head of Cash Distribution at BlackRock, emphasizes the importance of actively managing cash and shares insights on the benefits of putting cash to work globally.

THE BID podcast /
THE BID podcast /
Falling for cash
Video 02:24

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Economic turbulence: Central banks and political shifts

Central banks have responded to economic conditions with decisive actions. For example, the Federal Reserve cut interest rates by 0.50% in September due to recent labor market trends and inflation concerns. Markets expect further rate cuts by the end of the year.
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Let’s tech about the future of cash management

Dynamic markets require dynamic technology. That’s why BlackRock® Cachematrix™ is constantly evolving to help you manage cash better and faster.