SEOUL, KOREA - As much as 10 trillion won has moved out of money market funds, open-ended mutual funds that invest in short-term debt securities, in the month of April alone. That was because corporations turned their attention toward bonds as returns for short-term money market funds have dwindled.
According to the Korea Financial Investment Association on May 8, the balance of money market funds as of the end of April was 65,211.1 billion won, down more than 10 trillion won from March's 75,329.2 billion won. The balance, about 63 trillion won at the end of last year, has rapidly increased to 81.8 trillion won in February due to a rise in short-term floating money and has since maintained the level of 75 to 80 trillion won.
The most important reason for an abrupt decline in the money market fund balance is an exodus of money hitherto held in bank deposit accounts. Han Cheol-jin, an executive responsible for bond management with money KB Asset Management, said, "The money market mutual funds deposited by banks for short-term investment have shrunk by a large margin."
In addition to the banks, others including insurance companies and corporations are also reducing their balance with money market funds. A bond manager with a large asset management company said, "After the Bank of Korea froze the benchmark rate, bond yields have edged up slightly but MMF rates still remain at the level of 2.5 and 2.6 percent."
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