S&P Global Ratings published "U.S. Domestic 'AAAm' Money Market Fund Trends (Second-Quarter 2026)" recently, which tells us, "Rated government and prime MMF assets grew to $4.8 trillion by the end of the second quarter. Rated government MMF assets increased 4.3% and rated prime MMF assets increased 0.8% during the first half of the year. Flows were in line with seasonal trends, where assets dipped during tax season before rebounding." (Note: Register soon for our European Money Fund Symposium show, which will be held in just over a month, September 24-25, 2026 in Paris, France!)
They explain, "However, we observed stronger inflows during the first half of 2026 compared with the same period last year. We expect asset growth in 2026 to outpace 2025 levels based on inflows in the year to date, heightened geopolitical risk, and changing economic forecasts. Portfolio managers have mixed opinions on Federal Reserve policy, ranging from the Fed being on hold to possibly raising rates, but agree that rate cuts in 2026 are no longer realistic. Altogether, increased uncertainty and elevated rates should support market appetite for MMFs."
S&P says, "Seven-day net yields for rated MMFs have dropped modestly since the beginning of the year. Average seven-day net yields for rated government and prime MMFs fell 10 basis points (bps) and 7 bps, respectively, most of which occurred in the first quarter. During the second quarter, seven- day net yields were relatively stable but started increasing slightly, as possible rate hikes were factored into market prices."
They state, "The Federal Reserve held the fed funds rate at 3.50%-3.75% at all five of its rate settings meetings year to date. At the onset of 2026, S&P Global Ratings economists expected some form of easing but are forecasting no change to the policy rate this year, citing inflation running above the Fed's target 2%, sustained strength in the labor market and uncertainty around impacts related to the conflicts in the Middle East."
S&P tells us, "Rated government MMFs continued to hold increasing amounts of repurchase agreements (repo). Average repo exposure increased to 39% from 36% over the first six months of the year. Average Treasury bill exposure decreased to 30% from 36% during the same period, as Treasury bill issuance was suppressed. According to the Securities Industry and Financial Markets Association (SIFMA), net Treasury bill issuance was only $143 billion in the first half of 2026."
They continue, "We expect some shifting back into Treasury bills given the U.S. Treasury Department's guidance for significantly higher Treasury bill issuance for the remainder of the year. Rated government MMFs also increased exposure to both fixed and floating rate agency paper, where issuance was more robust than Treasuries. Managers found relative value especially in agency floaters, and average exposure to this asset type exceeded 9% by the end of the second quarter."
S&P also says, "Toward the end of 2025, bank deposit exposure in rated prime MMFs decreased to some of the lowest levels we've observed in recent years due to attractive repo rates. Average bank deposit exposure rebounded to some degree during the first half of the year, increasing to 11% from 7%. Concurrently, elevated repo exposure normalized, decreasing to 38% from 43%. Managers of rated prime MMFs generally used uncleared repo, citing that they could source similar or better rates in uncleared repo and were reserving their cleared repo capacity for the government strategies."
They add, "Managers also noted they're operationally prepared for the SEC's June 2027 deadline for clearing eligible U.S. Treasury repo. Exposure to U.S. government securities increased temporarily in early 2026, as managers purchased additional U.S. Treasury bills to build liquidity before tax season. Shortly after, managers relocated assets into certificates of deposit (CDs). Additionally, we observed a slight uptick in corporate note purchases, while asset-backed commercial paper (ABCP) holdings remained stable despite a rise in ABCP supply. Managers opted to limit purchases of ABCP, which is characterized by extremely short maturities, since they were extending the maturity profile of portfolios."
Finally, the update says, "Managers of rated MMFs extended portfolios during the first half of 2026 based on expectations for rate cuts, even if delayed. As forecasts evolved and rate hikes became realistic, managers of rated government MMFs started pulling in weighted average maturities (WAMs) late in the second quarter. Since the start of 2026, average WAMs for rated government MMFs peaked at 43 days and ended the second quarter at 38 days. Average WAMs for rated prime MMFs ended the second quarter above those of rated government MMFs. Rather than reducing maturity profiles, managers of rated prime MMFs took advantage of steepness in front-end credit curves and continued purchasing commercial paper and CDs, especially six and nine-month tenors. The distribution of net asset values (NAVs) per share for rated MMFs shifted upward, with most funds experiencing an increase in their NAV in the first and second quarters of 2026. The range for rated fund NAVs was 0.9994-1.0010."
In related news, Fitch Ratings also published its "U.S. Money Market Funds Monitor: 2Q26." It states, "Total taxable money market fund (MMF) assets increased by $155.47 billion from March 31, 2026, to June 30, 2026, reaching $8.20 trillion, according to Crane Data. However, quarter-end assets were below the intra-quarter high of approximately $8.22 trillion on June 15, likely reflecting U.S. estimated tax payments. Over the quarter, Government MMFs gained $71.42 billion in assets, Treasury MMFs gained $76.65 billion, and Prime MMFs gained $7.40 billion. The growth in balances likely reflected demand for liquidity around tax dates and quarter-end, as well as continued geopolitical uncertainty further supporting flows into government funds."
Fitch continues, "Taxable MMFs continued to add agencies, rising by $108.43 billion over the quarter after increasing by $86.0 billion in the prior quarter. Treasury holdings declined further, falling $140.91 billion over the quarter after a $110.93 billion decline in the previous quarter. In contrast, repo balances rebounded sharply, increasing $137.18 billion following a $59.53 billion decline last quarter. The shift suggests managers favored short-term liquidity and duration flexibility, using repo to maintain deployable cash while favoring agencies over Treasuries for incremental yield. The rotation to repos also reflects ongoing market uncertainty surrounding the Middle East conflict, the appointment of a new Fed Chairman and shifting rate expectations."
They add, "As of June 30, 2026, Institutional Government and Prime MMF net yields were 3.45% and 3.59%, respectively. Government yields declined 2 bps from the prior quarter, while Prime yields were unchanged. This stability reflects the steady federal funds rate through the period, conservative liquidity positioning, and strong demand for short dated government and high-quality money market instruments."
