(Yicai) July 9 --Rates of return of money market funds are likely to further decline this quarter after the yield of China's first and largest online such fund Tianhong Yu'ebao Money Market Fund, owned by financial technology giant Ant Group, fell under 1.5 percent, according to experts.

The seven-day annualized rate of return of Yu'ebao, whose assets reach around CNY750 billion (USD103.1 billion), fell to 1.48 percent yesterday, a record low since Dec. 20, 2022. The yields of several other money market funds also declined to below 1.5 percent.

The yields of short-term bonds are very likely to decline, with the rates of return of money market funds expected to drop further this quarter, Golden Eagle Asset Management's fixed-income department said. It is difficult to change this swiftly due to residents' low-risk appetite in the current economic environment, with China's central bank unlikely to tighten the supply of funds rashly, it added.

Yu'ebao mainly invests in short-term and long-term government, financial, and high-grade credit bonds, a market insider told Yicai. The rates of return of these assets are closely related to the People's Bank of China's monetary policy and interbank funds, so with the loose monetary environment, the yields of investable assets universally dropped, impacting Yu'ebao's rate of return, the person added.

In addition, Yu'ebao's requirements on risk management indicators are higher than those of general funds to ensure its security, which also somewhat affects its rate of return, the market insider pointed out.

The sufficiency of funds in the market, the instability of global financial markets, slowed economic growth, reduced inflation expectations, and the further unleashed liquidity by China's central bank's policy, which intensified the downward trend of interest rates, have all led to the continuous declines in the yields of money market funds, said Zeng Hengwei, a financial planner at PaiPaiWang Investment & Management.

Despite the drop in the rates of return of money market funds, funds have continuously flown into these types of products this year. The net value of assets in money market funds tallied CNY12.48 trillion (USD1.72 trillion) in the three months ended March 31, up CNY1.21 trillion (USD166.4 billion) from the prior quarter, according to a research report by Guosheng Securities.

Editor: Martin Kadiev