another bubble has emerged courtesy of the banksector crisis which has already felled three us regional banks bank of america analysts led by the michael hartnett say moneymarket funds are the new hot asset they point out that assets under management for money funds has now exceeded 51 trillion up over 300 billion over the past four weeks they also counted the biggest weekly flows to cash since march 2020 the biggest sixweek inflow to treasurys ever and the largest weekly outflow from investmentgrade bonds since oct 2022 the last two times moneymarket fund assets surged in 2008 and in 2020 the federal reserve slashed interest rates hartnett is fond of the saying “markets stop panicking when central banks start panicking” and he noted a surge in emergency fed discount window borrowing has historically occurred around a big stockmarket low there is one difference this time in that inflation is a reality and that labor markets not just in the us but in other industrialized nations remains exceptionally strong the bank of america team counted 46 interest rate hikes this year including by the swiss national bank after its rescue of credit suisse last week history according to the bofa team says to sell the last interest rate hike “credit and stock markets are too greedy for rate cuts not fearful enough of recession” they say after all when banks borrow from the fed in an emergency they tighten lending standards which in turn results in less lending and that leads to less smallbusiness optimism which eventually cracks the labor market bond yields tmubmusd10y and us stock futures es00 dropped on friday as shares of deutsche bank tumbled in frankfurt the sp 500 spx has gained just under 1 this week see also moneymarket funds swell to record 54 trillion as savers pull money from bank deposits