The Surge of Money Market Funds MMFs have grown rapidly alongside this shift in Treasury financing. Following years of low rates that discouraged cash allocations, the Fed’s tightening cycle in response to rising inflation dramatically increased yields. The result of which drew a wave of institutional and retail capital into MMFs, which became a natural destination for cash seeking safety and policy-rate-linked returns (Chart 2).


DEMAND DRIVEN BY SEC REFORMS AND WIDENING YIELD SPREADS HAS PROPELLED MMF ASSETS TO $7.54 TRILLION, MAKING THEM KEY BUYERS OF TREASURY BILLS AMID SHIFTING INVESTOR PREFERENCES.


MMF assets have climbed to $7.54 trillion as of November 2025, up from just over $5 trillion in early 2022.


Two structural dynamics have played into this growth. First, the 2014 reform of the SEC’s rule 2a-7 led many institutional investors to MMFs for liquidity and safety, away from prime funds more exposed to credit risk. Second, the spread between MMF yields and bank deposit rates widened as banks held deposit rates substantially lower than the Fed Funds rate and MMF yields. As a result, demand for MMFs grew, and the funds became dominant buyers of Treasury bills in 2023–2024, consistently rolling over hundreds of billions in short-term government debt to meet demand (Chart 3).


Chart 2: MMFs Total AUM vs. Federal Funds Effective Rate


Source: St. Louis Federal Reserve


Chart 3: Increases in money market fund yields have significantly outpaced bank deposit rates


Source: Federal Financial Institutions Examinations Council, Board of Governors of the Federal Reserve System, and iMoneyNet. https://www.kansascityfed.org/documents/9989/EconomicBulletin24MarshSharmaAcker0207.pdf


6 | ADMISI - The Ghost In The Machine | Q4 Edition 2025


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