Euro-denominated cash funds gain from negative bank rates The increasing number of banks charging customers to deposit money has prompted investors to pour billions of euros into short-term funds in an effort to escape negative yields. Some of the biggest euro-denominated money market funds - part of the €1tn money market industry in which companies and banks can deposit and borrow short-term cash - saw assets increase 19.2 per cent in the three months to September to €85.6bn, according to Moody's. "Their assets under management rose to their highest level in 12 months," said Vanessa Robert, a vice-president at Moody's. [It] was driven by the European Central Bank's September rate cut, as some investors moved their cash from government money funds and from bank deposits to prime [money market] funds, to avoid negative yield on their investments. A growing number of banks were "charging negative remuneration to some of their customers" deposits," said Thierry Darmon, global head of treasury management at Amundi. This has led to some customers moving their money to zero or positive-yielding money market funds. Many money market funds are themselves already yielding near negative returns - in effect charging investors - as they track the record-low lending rates set by the ECB. In response, growing numbers of investors seeking short-term security n what is widely regarded as a "haven" asset are having to buy longer-dated or lower quality bonds, according to fund managers. Some have implemented a so-called "barbell" strategy, where they invest in longer dated assets, which offer better yields, while offsetting the risk of rising interest rates with investments in assets with very short-term maturities. The average maturity of money market fund assets over the period was 46 days on average, compared with 44 days in the preceding quarter. Key money market interest rates such as the euro overnight index average, dubbed Eonia, which indicates overnight lending rates, have been mired in negative territory this month. Even longer rates - such as euribor one-month and three-month rates - yield less than 2 basis points and 8 basis points, respectively. Anaemic short-term rates are unlikely to change in the near future, according to analysts. Next month the ECB is poised to inject more liquidity into the market under its "targeted longer-term refinancing operation" in which banks can access billions in cheap four-year loans.