What is the reason for the continuous decline in the yield of money funds?
1 monetary policy
The Bank of China released a lot of liquidity to the money market by reducing RRR twice and expanding the collateral range for medium-term lending facilities once. Affected by the relationship between supply and demand, the relative sufficiency of money supply will reduce the yield of various assets in the money market. As a result, the yield of money funds investing in these assets has fallen.
2 new rules of the Monetary Fund
According to the new regulations of the Monetary Fund, institutions or individuals other than banks can't be used as advance parties, which may lead to a decrease in the sources of advance funds for such monetary funds. To this end, the money fund may need to reserve more cash to deal with daily redemption. However, the more cash reserves, the less money to invest. Even if the return on assets invested by the money fund has not changed, the reduction of investment funds will reduce the overall return.
Generally speaking, money funds have strong liquidity and low risk. If you value these two points, it is naturally appropriate to buy a money fund. After all, compared with bank demand deposits, even if the income drops, the yield of money funds is much higher.