Money market funds (MMFs), once regarded as a preferred tool for stable wealth management, are now facing the challenge of declining returns.

According to Wind data, as of December 23, 112 MMFs in the market have seen their annualized returns drop below 1%. Among them, large-scale funds such as E Fund Cash Treasure Money Fund C, HFT Tianyi Money Fund C, and ICBC Ruyi Money Fund E reported annualized returns of less than 0.5%. Additionally, as of December 22, 92 MMFs had a 7-day annualized yield below 1%.

Since December, 14 public fund institutions have lowered management fees for related products due to contractual triggers, while many MMFs have collectively imposed purchase limits to preserve returns. Both the market and institutions are grappling with new challenges in a low-yield environment.

The decline in 7-day annualized yields has become a widespread trend. Wind data shows that as of December 23, Tianhong Yu’e Bao Money Fund, the largest MMF by size, posted an annualized return of 1.15%. By December 22, its 7-day annualized yield had fallen to 1.032%. Similarly, CCB Jiaxinbao Money Fund A and ChinaAMC Wealth Treasure Money Fund A, both with assets exceeding 300 billion yuan (primary share class only), reported annualized returns of 1.33% and 1.25%, respectively, with 7-day annualized yields at 1.140% and 1.064% as of December 22.

Tian Lihui, a finance professor at Nankai University, attributed the decline in MMF yields to three key factors driven by falling market interest rates: 1. Continued moderately loose monetary policy, leading to lower pricing of short-term assets. 2. Ample liquidity in the banking system, resulting in persistently low interbank deposit rates. 3. Inclusion of non-bank deposit rates in self-regulatory management, further compressing MMF returns.

“MMFs entering the ‘1% yield era’ is not a market failure but a natural outcome of deepening interest rate liberalization,” Tian explained. He noted that the 10-year government bond yield stands at 1.83%, reflecting synchronized declines in money market and real economy rates, which signals effective market functioning. Fund managers mitigate risks by reducing leverage and shortening durations to ensure liquidity safety when funding costs remain below product yields.

Tian advised investors to reposition MMFs as liquidity management tools rather than high-return investments. He emphasized prioritizing reasonable fees and stable strategies while aligning allocations with personal liquidity needs to achieve true financial stability.

Industry experts generally agree that as market rates stabilize and institutional measures take effect, MMFs will continue to play a central role in cash management, maintaining their core value in serving inclusive finance and meeting daily liquidity demands.