Investors hold a record $8.44 trillion in money market funds yielding 3.5%, matching inflation and eliminating real returns.
A record $8.44 trillion is parked in money market funds, where yields of 3.5% align with current inflation, erasing real returns. The Crane 100 Money Fund Index averages near 3.50%, mirroring the latest headline CPI print of roughly 3.5% year-over-year.
The Fed funds rate upper bound has remained at 3.75% since December 11, 2025, down from a 4.5% peak in September. While money market funds preserve principal and offer liquidity, their inflation-adjusted returns hover near zero, with 13-week Treasury bills only slightly better at 3.8%.
Alternatives like short-duration income vehicles or structured products offer higher yields but introduce varying degrees of credit or market risk. Demand for money market funds persists due to perceived safety and simplicity despite negligible real returns.