By Harry Robertson

LONDON (Reuters) – Investors poured $37 billion into money market funds (MMFs) in the week through Wednesday, Bank of America said on Friday, as they brace for a U.S. Federal Reserve rate cut in September.

That puts money market funds on track for their largest cumulative three-week inflows since January, at $145 billion, BofA said, citing figures from financial data provider EPFR.

Investors poured $20.4 billion into stocks, $15.1 billion into bonds and $1.1 billion into gold, BofA reported in its weekly summary of inflows and outflows on global markets.

Many fund managers hope that interest rate cuts will reduce returns on money market funds and cause a flow of money into stocks and bonds.

Still, large investors tend to flock to money market funds before the Fed cuts rates. The funds offer a wide range of short-term fixed-income securities, which means they tend to yield higher returns over the long term than short-term government bonds.

“Rate cuts are unlikely to prompt equity purchases from the $6.2 trillion money market fund sector,” BofA strategists led by Jared Woodard wrote.

“History shows that the Fed’s first rate cut is associated with increased money flows in a ‘soft’ landing, and that bonds are the likely winners in a ‘hard’ landing.”

Recent economic data broadly point to a gradual economic slowdown, sometimes called a “soft landing,” as opposed to a more dramatic “hard” variant.

Data from BofA and EPFR showed that investment grade bonds attracted inflows of $8.1 billion for the 43rd consecutive week.

Emerging market equities received $4.7 billion in their twelfth straight week of inflows, the longest streak since February 2024.