Depositors are withdrawing billions of dollars from the traditional banking system, according to a new report from the Federal Deposit Insurance Corporation (FDIC).
Domestic deposits fell by $197.7 billion in the second quarter of this year, according to the agency’s new quarterly banking profile.
This was a 1.1% decline and a reversal from the first quarter, when U.S. banks increased deposits by $190.7.
The flight from savings comes as historic sums continue to pile up in recent years in money market funds, which offer highly competitive interest rates compared to traditional bank savings accounts.
Investments in money market funds have soared to more than $6.54 trillion as of June this year, according to new figures from the Federal Reserve Economic Data (FRED), a figure that has increased by more than $6.54 trillion per quarter since the end of 2022. It is rapidly increasing.
Money market funds give people easy access to low-risk short-term debt securities, such as U.S. Treasuries.
Investors began flocking to the fund in 2022, when the Fed began aggressively raising interest rates to stem soaring inflation, and short-term Treasury yields rose sharply.
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