Liquidity lowdown: What does repricing in money markets signify?

For much of March 2026, money markets experienced a gradual yet notable repricing, reflecting a clear shift in market sentiment following the escalation of the US/Israel – Iran war.

While the headlines generally focused on uncertainty and volatility across risk assets, money market funds (MMFs) are coming into focus again, where the value of stability and liquidity are proving increasingly important. Attention is turning to the geographical locations of the financial institutions that MMFs are invested in, as the war in Iran is highlighting how regional vulnerabilities differ. Economies like Japan, which depend heavily on oil shipments through the Strait of Hormuz, face heightened downside risks should disruptions persist.

At the start of March, one‑year certificates of deposit (CDs) from high quality issuers were yielding around 3.80%. By the end of the month, those same instruments, from the same issuers, were clearing the market closer to 4.70%. Such a substantial move just shows how quickly sentiment and expectations can shift. Floating rate CDs also cheapened over the course of the month, widening by approximately 5–8 basis points. This has made them particularly attractive for MMFs seeking to both enhance yield and protect against the risk of further increases in policy expectations. With spreads currently offered comfortably above the sterling overnight index average (SONIA), floating rate CDs have once again proven their usefulness as a tool for helping portfolios manage interest rate volatility while offering attractive returns. 

What does repricing in money markets signify?

The war in Iran has disrupted global energy supply and pushed oil prices higher. The market has been largely focused on the potential inflationary pressures this will cause. These concerns have inevitably fed into market pricing, with investors questioning whether central banks will be forced to maintain tighter financial conditions for longer than previously anticipated.

Yet beyond the immediate inflationary pressures from higher energy prices lies a more fundamental question: Can the global economy sustain a prolonged period of elevated oil prices without materially undermining growth? History suggests that sharp rises in energy costs, if sustained, act as a tax on consumers and businesses alike. While inflation may rise in the short term, longer‑term growth prospects can deteriorate just as quickly. By the end of March, expectations for UK monetary policy shifted materially, with markets pricing in more than three Bank of England (BoE) rate hikes over the coming year. This occurred even as BoE Governor Andrew Bailey warned markets against getting carried away with aggressive rate hike expectations.

It is precisely this combination of liquidity and resilience that continues to position MMFs as a potential safe haven allocation during times of uncertainty.

This disconnect between central bank guidance and market pricing has been a key driver of higher yields in money markets. Importantly, however, MMFs are structurally well positioned to navigate such environments. With short maturities, these funds can quickly reinvest proceeds from maturing assets into higher yielding assets, allowing them to adjust quickly as rates move. This helps to limit the negative capital impacts that longer‑duration asset classes may face during periods of rising yields. It is precisely this combination of liquidity and resilience that continues to position MMFs as a potential safe haven allocation during times of uncertainty. While other asset classes may struggle with sudden shifts in sentiment, money market funds offer investors a means of preserving capital – and as Warren Buffet once said, “Avoiding loss is the first law of investment success.”

Unsurprisingly, MMFs have seen significant inflows since the escalation of the Iran conflict. As yields have moved higher, the income on offer from money market funds has become more attractive. March has served as a reminder that money market pricing does remain influenced by broader macroeconomic concerns, shifting policy expectations and, increasingly geopolitical risk. However, for investors seeking certainty in an uncertain world, MMFs continue to play a critical role — by simply doing what they are designed to do best. 

For professional investors only. This material is not suitable for a retail audience. Capital at risk. This is a financial promotion and is not investment advice. Past performance is not a guide to future performance. The value of investments and any income from them may go down as well as up and is not guaranteed. Investors may not get back the amount invested. Portfolio characteristics and holdings are subject to change without notice. The views expressed are those of the author at the date of publication unless otherwise indicated, which are subject to change, and is not investment advice.