Money Market Funds Shorten Maturities Amid Federal Reserve Rate Uncertainty
Money market funds are adopting a more defensive strategy by shortening the average maturity of their portfolios due to ongoing uncertainty regarding the U.S. Federal Reserve's interest rate path. This shift includes reducing Treasury bill holdings and increasing allocations to repurchase agreements, as managers balance limited overnight returns with the duration risk associated with longer maturities. The move comes as fund assets approach record highs near $8 trillion, with interest rate futures suggesting a potential Fed rate hike in late 2026.