What it is
Money market funds (MMFs) are investment vehicles that pool money from many investors to purchase low-risk, short-term debt securities. These securities typically include U.S. Treasury bills, certificates of deposit, commercial paper, and repurchase agreements, all maturing within a year. MMFs aim to preserve capital and provide modest income, offering liquidity comparable to a bank savings account but with slightly higher yields. They are regulated to maintain a stable net asset value (NAV), often at $1.00 per share, though this can "break the buck" in rare circumstances.
MMFs are crucial in financial markets, serving as a safe haven for cash and a funding source for corporations and governments. News stories often discuss MMF yields in relation to interest rate changes by central banks, as these rates directly impact the returns MMFs can offer. During periods of market stress, investors may flock to MMFs, increasing their assets under management. Policy discussions sometimes focus on MMF regulations to prevent systemic risk, especially after instances like the 2008 financial crisis when some MMFs struggled to maintain their $1 NAV.
Why it matters
Retail investors use MMFs for cash management, seeking safety and liquidity. Their yields reflect broader interest rate environments, impacting the return on their short-term savings.
Reviewed under editorial standardsUpdated September 26, 2026Not investment advice