US Funding Markets Absorb $120 Billion as Structural Shifts Unlock Bank Capacity
Updated
Updated · Bloomberg · May 28
US Funding Markets Absorb $120 Billion as Structural Shifts Unlock Bank Capacity
2 articles · Updated · Bloomberg · May 28
$120 billion has flowed into US money market funds this month, extending a recent buildup of cash across short-term funding markets.
Wall Street strategists say the surplus reflects deeper structural changes that are freeing billions of dollars of balance-sheet capacity at the biggest banks.
That liquidity glut marks a sharp reversal from 2025, when funding strains drove ultra-short-term rates sharply higher.
Those stresses were severe enough to push the Federal Reserve to halt its balance-sheet runoff, underscoring how durable the current cash abundance now appears.
The Fed faces a dilemma: shrink its massive balance sheet or maintain market stability. Can it actually achieve both without causing a shock?
As cash floods the banking system, could the opaque, fast-growing private credit market be incubating the next financial crisis?