U.S. money market fund assets hit record

By Dena Aubin

NEW YORK (Reuters) - Money market fund assets climbed to a record $3.7 trillion (2.4 trillion pounds) in the latest week, the 11th straight weekly record, as falling yields failed to damp investors' flight to quality, according to the Money Fund Report.

Pressured by Federal Reserve rate cuts, yields on taxable money market funds fell below 1.0 percent for the first time since 2004, according to iMoneyNet, the publisher of the report.

Taxable money market fund assets rose by $56.1 billion to a record $3.22 trillion, while tax-free assets rose by $1.3 billion to $494.9 billion, according to the report, published by iMoneyNet.

Taxable money market fund yields fell by 10 basis points to 0.94 percent, the first time since September 14, 2004, that rates fell below 1.0 percent, according to iMoneyNet. Tax-free yields fell by 17 basis points to 0.62 percent.

Investors have been pouring cash into money market funds this year as they seek alternatives to stocks and other risky assets.

The same flight to quality pushed rates on three-month Treasury bills into negative territory on Tuesday amid bets that the Federal Reserve will keep cutting rates to avoid a deep, sustained recession.

Nearly half of U.S. money market mutual funds posted no return on Tuesday as Treasury rates dipped below zero, according to fund tracker Lipper. For details, see

Money market funds have attracted nearly $400 billion in assets since the U.S. Treasury introduced a guarantee program for the funds on September 29, according to Connie Bugbee, managing editor for the Money Fund Report.