MONEY MARKET | June 2021

Taxable Money Market

  • Tweet
  • Share on LinkedIn
  • Share via email
  • Print
  • Download
John Tobin

John Tobin

Chief Investment Officer,
Money Market Strategies and Distribution

The jobs market rebounded from Aprils worrisome report with May showing a gain in nonfarm payrolls of 559,000 just about double the April gain of 278,000. The unemployment rate also showed marked improvement, moving down to 5.8% from Aprils 6.1%. While this is obviously welcome news, the hard reality is that employers are finding it’s much easier to shut down than it is to open back up. Supply chain constraints, above normal unemployment benefits and childcare issues are all factors in hindering stronger job creation.

Despite the issues in the labor market, the U.S. economy is rebounding strongly as vaccine rates continue to rise and people look to return to a more normal way of life. Industries that had been virtually shut down, like air travel, hotels, concerts, and live sports are all showing remarkable upswings.

At its late April meeting, the Federal Reserve (the “Fed”) reiterated its determination to keep interest rates low for the foreseeable future. Inflation has moved well above the Fed’s long-term target of 2% due to April’s Consumer Price Index showing a rise of 4.2%. The Fed has stated that it views this as a transitory phenomenon. The Fed also continued its purchases of longer-term securities, however, some Fed policymakers have indicated that they believe the time for those purchases to begin to wind down is growing closer.

To date, the long end of the Treasury market has taken the inflation number in stride. The real test will come if the inflation data remains high and the Fed moves closer to tapering their bond purchases. In the short end, the problem is the opposite. Rates are hovering near zero, with the Fed Reverse Repo Facility seeing daily usage approaching $500 billion. The Fed will have to do a delicate balancing act to allow the economy to continue its remarkable recovery.

All investments involve risk, including the possible loss of principal. Certain investments involve greater or unique risks that should be considered along with the objectives, fees, and expenses before investing.

BNY Mellon Investment Management is one of the world’s leading investment organizations encompassing BNY Mellon’s affiliated investment management firms and global distribution companies. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation and may also be used as a generic term to reference the corporation as a whole or its various subsidiaries generally.

This material has been provided for informational purposes only and should not be construed as investment advice or a recommendation of any particular investment product, strategy, investment manager or account arrangement, and should not serve as a primary basis for investment decisions. Prospective investors should consult a legal, tax or financial professional in order to determine whether any investment product, strategy or service is appropriate for their particular circumstances. Views expressed are those of the author stated and do not reflect views of other managers or the firm overall. Views are current as of the date of this publication and subject to change. The information is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be and should not be interpreted as recommendations. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.

Dreyfus Cash Investment Strategies (Dreyfus CIS) is a division of BNY Mellon Investment Adviser, Inc. BNY Mellon Investment Adviser, Inc. and BNY Mellon Securities Corporation are companies of BNY Mellon. © 2021 BNY Mellon Securities Corporation, distributor, 240 Greenwich Street, 9th Floor, New York, NY 10286.