Investors are running away from money market funds and their low yields, shifting to bonds and perhaps payment of their bills.
So far this year, investors pulled $666 billion from money market funds and placed a record $363 billion into bond funds, according to the Investment Company Institute.
And surprisingly enough, given the 67 percent stock rally over the past nine months, investors withdrew $11.3 billion from stock funds, with $9.4 billion of the outflow coming since October.
Investors have sought the higher yields provided by bonds, even diving into the junk sector.
But bonds don’t account for all of the cash exiting the money markets.
"More money is flowing out of money funds than is going into bond funds — something that's only happened twice in 26 years," Vincent Deluard, strategist at TrimTabs.com, tells USA Today.
"It shows how deep the recession is. They may be taking money out to pay the bills or the mortgage."
It’s not surprising that investors would exit money market funds. Their yields average only 0.03 percent, according to iMoneyNet.
But the outflow from stocks suggests the bull market is on shaky ground.
A Federal Reserve rate hike, which some expect in the next six months, would rip that ground asunder, many experts say.
“The first time they hint at an increase, the market pulls back 2 to 8 percent over the next two weeks,” Burt White, chief investment officer at LPL Financial, tells Bloomberg.
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