$7.89 trillion sits in money market funds, none of it FDIC-insured
Money market funds run on SEC Rule 2a-7, not deposit insurance. What the 2023 reforms changed, how a 7-day yield works and what it pays on $10,000.
◆ The Signal
30-second read
- What happened
- US money market funds held $7.89 trillion in the week ended September 30, 2026, according to the Investment Company Institute's release of October 1, 2026. Government funds held $6.50 trillion of it.
- Why
- A money market fund is a mutual fund that buys very short-term debt under SEC Rule 2a-7, which caps maturities and sets liquidity floors. It is an investment, not a bank deposit, so the FDIC does not insure it.
- The numbers that matter
- $7.89 trillionMoney market fund assets, week ended Sep 30, 2026 (ICI)82.4%Share held in government funds, same week (calculation)3.58%7-day yield, one large government fund, as of Oct 2, 20260.63%FDIC national rate, money market deposit accounts, September 2026
- Why it matters
- On $10,000, a 3.58% yield works out to $29.83 a month before tax if it held steady for a year, against $5.25 at the 0.63% national deposit rate. The difference comes with different protection.
- What happens nextas we saw it on 7 Oct 2026
- The Federal Open Market Committee next meets on October 27–28, 2026, according to the Federal Reserve's calendar. ICI publishes its money market fund asset series weekly.
Where the money sits
Institutional government funds alone hold more than every retail fund combined.
| Institutional government | 4520.5 |
|---|---|
| Retail government | 1979.1 |
| Retail prime | 985.7 |
| Institutional prime | 249.9 |
| Retail tax-exempt | 141.6 |
| Institutional tax-exempt | 14.4 |
$ billions, week ended Wednesday, September 30, 2026Source: Investment Company Institute, Release: Money Market Fund Assets, October 1, 2026
Go deeper
In the week ended Wednesday, September 30, 2026, Americans and their institutions held $7.89 trillion in money market funds, according to the Investment Company Institute's weekly release of October 1, 2026. Not a dollar of it is covered by federal deposit insurance.
That is not a loophole or a scandal. It is the design. A money market fund is a mutual fund that buys short-term IOUs, and it is regulated by the Securities and Exchange Commission under a single rule, Rule 2a-7. A money market deposit account at a bank shares three words with it and almost nothing else. Knowing which one you hold decides who stands behind the money.
What Rule 2a-7 requires
The rule's job is to keep a fund's holdings short, high-quality and easy to sell. It does this with hard numerical limits rather than broad principles.
| Requirement | Limit |
|---|---|
| Remaining maturity of any single security | No more than 397 calendar days |
| Weighted average maturity of the portfolio | No more than 60 calendar days |
| Weighted average life of the portfolio | No more than 120 calendar days |
| Daily liquid assets (cash, Treasuries, paper maturing within one business day) | At least 25% of total assets |
| Weekly liquid assets (adds items maturing within five business days) | At least 50% of total assets |
| Illiquid securities | No more than 5% of total assets |
Source: 17 CFR 270.2a-7, paragraphs (d)(1) and (d)(4), eCFR text up to date as of October 1, 2026
Fact
Half of every fund must be cash or close to it within a week
Under the rule as amended in 2023, a money market fund must hold at least 25% of its total assets in daily liquid assets and at least 50% in weekly liquid assets. The SEC's final rule describes the change as increasing both minimums to those levels.
Under the rule as amended in 2023, a money market fund must hold at least 25% of its total assets in daily liquid assets and at least 50% in weekly liquid assets. The SEC's final rule describes the change as increasing both minimums to those levels.
The point of the liquidity floors is arithmetic. If half the portfolio turns into cash within five business days, a fund can meet heavy withdrawals without dumping longer-dated paper at a loss.
Three kinds of fund, two kinds of investor
Fact
The SEC sorts funds by what they buy and who may own them
A government money market fund invests 99.5% or more of its total assets in cash, government securities and repurchase agreements backed by them. A tax-exempt (municipal) fund generally invests 80% or more in municipal securities. A prime fund buys taxable short-term corporate and bank debt. A retail fund must limit its beneficial owners to natural persons; everything else is institutional.
A government money market fund invests 99.5% or more of its total assets in cash, government securities and repurchase agreements backed by them. A tax-exempt (municipal) fund generally invests 80% or more in municipal securities. A prime fund buys taxable short-term corporate and bank debt. A retail fund must limit its beneficial owners to natural persons; everything else is institutional.
Data
Government funds dominate
ICI's release of October 1, 2026 put government funds at $6,499.62 billion, prime funds at $1,235.66 billion and tax-exempt funds at $155.96 billion in the week ended September 30. Retail funds held $3.11 trillion and institutional funds $4.78 trillion. Total assets fell by $45.45 billion from the week before.
ICI's release of October 1, 2026 put government funds at $6,499.62 billion, prime funds at $1,235.66 billion and tax-exempt funds at $155.96 billion in the week ended September 30. Retail funds held $3.11 trillion and institutional funds $4.78 trillion. Total assets fell by $45.45 billion from the week before.
Wealth Signal calculation
Four in five dollars are in government funds
$6,499.62 billion ÷ $7,891.25 billion = 82.4% in government funds. Institutional funds: $4,784.85 billion (government $4,520.51 + prime $249.94 + tax-exempt $14.40) ÷ $7,891.25 billion = 60.6%. Component sums can differ from ICI's totals by $0.01 billion because of rounding.
$6,499.62 billion ÷ $7,891.25 billion = 82.4% in government funds. Institutional funds: $4,784.85 billion (government $4,520.51 + prime $249.94 + tax-exempt $14.40) ÷ $7,891.25 billion = 60.6%. Component sums can differ from ICI's totals by $0.01 billion because of rounding.
Fact
Some funds hold a $1.00 price; others float
Investor.gov, the SEC's investor site, says most retail and government money market funds seek to keep their net asset value at a stable $1.00 per share, while institutional prime and institutional tax-exempt funds must let it float like other mutual funds. If a stable-price fund's value per share deviates by more than half a cent from $1.00, it must re-price. The SEC calls this “breaking the buck”.
Investor.gov, the SEC's investor site, says most retail and government money market funds seek to keep their net asset value at a stable $1.00 per share, while institutional prime and institutional tax-exempt funds must let it float like other mutual funds. If a stable-price fund's value per share deviates by more than half a cent from $1.00, it must re-price. The SEC calls this “breaking the buck”.
Why the SEC rewrote the rules in 2023
Data
It has happened, and it spread
The SEC states that the Reserve Primary Fund “broke the buck” on September 16, 2008, when its net asset value fell below $1 per share. The fund held $785 million in Lehman-issued securities. In an SEC fact sheet dated June 5, 2013, the agency said that the same week institutional prime funds saw investors withdraw “approximately $300 billion (14 percent of their assets).”
The SEC states that the Reserve Primary Fund “broke the buck” on September 16, 2008, when its net asset value fell below $1 per share. The fund held $785 million in Lehman-issued securities. In an SEC fact sheet dated June 5, 2013, the agency said that the same week institutional prime funds saw investors withdraw “approximately $300 billion (14 percent of their assets).”
Data
March 2020 brought a second run
The SEC's 2023 final rule records that from March 11 to 24, 2020, publicly offered institutional prime funds had a 30% redemption rate, which it put at “about $100 billion”, including outflows of “approximately 20% of assets” in the week of March 20 alone.
The SEC's 2023 final rule records that from March 11 to 24, 2020, publicly offered institutional prime funds had a 30% redemption rate, which it put at “about $100 billion”, including outflows of “approximately 20% of assets” in the week of March 20 alone.
Under the rules in force before the 2023 amendments, a fund whose weekly liquid assets fell below 30% could charge a liquidity fee of up to 2% or suspend redemptions for up to 10 business days in a 90-day period, according to the final rule.
Fact
What the July 12, 2023 amendments changed
The SEC adopted the reforms on July 12, 2023, and they took effect on October 2, 2023. They removed redemption gates from Rule 2a-7, cut the link between fees and the weekly liquid asset level, and raised the liquidity minimums to 25% daily and 50% weekly. They require institutional prime and institutional tax-exempt funds to charge a liquidity fee when daily net redemptions exceed 5% of net assets, unless the fund's liquidity costs are de minimis, defined in the rule as less than 0.01% of the value of shares redeemed. If those costs cannot be estimated in good faith, the fee is 1%. Any non-government fund may also charge a discretionary fee of up to 2% if its board decides it is in the fund's best interest.
The SEC adopted the reforms on July 12, 2023, and they took effect on October 2, 2023. They removed redemption gates from Rule 2a-7, cut the link between fees and the weekly liquid asset level, and raised the liquidity minimums to 25% daily and 50% weekly. They require institutional prime and institutional tax-exempt funds to charge a liquidity fee when daily net redemptions exceed 5% of net assets, unless the fund's liquidity costs are de minimis, defined in the rule as less than 0.01% of the value of shares redeemed. If those costs cannot be estimated in good faith, the fee is 1%. Any non-government fund may also charge a discretionary fee of up to 2% if its board decides it is in the fund's best interest.
Wealth Signal calculation
When the mandatory fee started to bite
The SEC fact sheet gave funds twelve months after the effective date to comply with the mandatory fee and six months for the higher liquidity minimums. October 2, 2023 plus twelve months is October 2, 2024; plus six months is April 2, 2024. On a $10,000 redemption, the 1% default fee would be $100; a 2% discretionary fee would be $200.
The SEC fact sheet gave funds twelve months after the effective date to comply with the mandatory fee and six months for the higher liquidity minimums. October 2, 2023 plus twelve months is October 2, 2024; plus six months is April 2, 2024. On a $10,000 redemption, the 1% default fee would be $100; a 2% discretionary fee would be $200.
Interpretation
The fee is aimed at the institutions, not the households
Mandatory fees apply only to institutional prime and institutional tax-exempt funds, which together held $264.34 billion in the week ended September 30, 2026, 3.3% of the total. A household holding a retail government fund is outside the mandatory-fee rule entirely.
Mandatory fees apply only to institutional prime and institutional tax-exempt funds, which together held $264.34 billion in the week ended September 30, 2026, 3.3% of the total. A household holding a retail government fund is outside the mandatory-fee rule entirely.
What a 7-day yield actually measures
Fact
It is one week's income, stretched to a year
The SEC's Form N-MFP sets out the method: take the net change in the value of a hypothetical account holding one share over the seven days, excluding capital changes; divide by the starting value to get the base-period return; multiply by 365/7. Funds report a 7-day gross yield, which by the form's instructions does not deduct fund operating expenses, and a 7-day net yield calculated under Form N-1A's rules.
The SEC's Form N-MFP sets out the method: take the net change in the value of a hypothetical account holding one share over the seven days, excluding capital changes; divide by the starting value to get the base-period return; multiply by 365/7. Funds report a 7-day gross yield, which by the form's instructions does not deduct fund operating expenses, and a 7-day net yield calculated under Form N-1A's rules.
Two consequences follow. The figure is backward-looking: it describes the last seven days, not the twelve months ahead. And it moves daily, because the fund's holdings roll over in days or weeks at whatever rates prevail then.
Interpretation
Why government fund yields track the Fed
A government fund's portfolio turns over within weeks, so its income resets with short-term rates. The Federal Reserve set its target range at 3.75%–4.00% on September 16, 2026. A published yield a little below that range is what one would expect once fund expenses are deducted, though the gap also reflects the fund's holdings.
A government fund's portfolio turns over within weeks, so its income resets with short-term rates. The Federal Reserve set its target range at 3.75%–4.00% on September 16, 2026. A published yield a little below that range is what one would expect once fund expenses are deducted, though the gap also reflects the fund's holdings.
What it means for your money
Fact
The bank account is insured; the fund is not
The FDIC insures money market deposit accounts at insured banks up to $250,000 per depositor, per bank, per ownership category. Its list of uninsured products includes mutual funds. Investor.gov states that money invested in a money market fund is not backed by the FDIC like bank accounts are, and that there is a risk of losing some or all of it.
The FDIC insures money market deposit accounts at insured banks up to $250,000 per depositor, per bank, per ownership category. Its list of uninsured products includes mutual funds. Investor.gov states that money invested in a money market fund is not backed by the FDIC like bank accounts are, and that there is a risk of losing some or all of it.
Data
Two published rates
Schwab's page for the Schwab Government Money Fund, Investor Shares, showed a 7-day yield of 3.58% as of October 2, 2026, with and without waivers, a net expense ratio of 0.34% and total net assets of $32.2 billion. The FDIC's national rate for money market deposit accounts under $100,000 was 0.63% in September 2026, an average weighted by each institution's share of domestic deposits.
Schwab's page for the Schwab Government Money Fund, Investor Shares, showed a 7-day yield of 3.58% as of October 2, 2026, with and without waivers, a net expense ratio of 0.34% and total net assets of $32.2 billion. The FDIC's national rate for money market deposit accounts under $100,000 was 0.63% in September 2026, an average weighted by each institution's share of domestic deposits.
Wealth Signal calculation
Monthly income on $10,000
At 3.58%: $10,000 × 3.58% = $358 a year, ÷ 12 = $29.83 a month. At 0.63%: $10,000 × 0.63% = $63 a year, ÷ 12 = $5.25 a month. Difference: $24.58 a month, before tax. This assumes each rate stays where it was for twelve months, which a 7-day yield does not promise.
At 3.58%: $10,000 × 3.58% = $358 a year, ÷ 12 = $29.83 a month. At 0.63%: $10,000 × 0.63% = $63 a year, ÷ 12 = $5.25 a month. Difference: $24.58 a month, before tax. This assumes each rate stays where it was for twelve months, which a 7-day yield does not promise.
The national rate is an average. Individual banks pay rates above and below it, so the comparison shows the mechanism rather than the best deal on either side. The fund named here is used because its sponsor publishes its yield in a form anyone can check; it is not an endorsement, and other funds with different expense ratios publish different yields.
- What you give up for the extra yield: FDIC insurance. A fund's protection is Rule 2a-7's limits on maturity, quality and liquidity, not a federal backstop.
- What you check first: whether the account says “deposit” or “fund”, and whether it is government, prime or tax-exempt.
- What moves the yield: short-term interest rates, which follow Federal Reserve policy, and the fund's expenses, which are deducted before the yield you see.
- Where it fits: many households use either product for an emergency fund; the arithmetic above shows the trade, and the choice is the reader's.
This piece does not claim any money market fund is safe from loss, that yields will stay at the levels shown, or that a fund is better than a bank account for any reader. It does not recommend any fund. The 7-day yield is a snapshot of one week, and the monthly income figures are arithmetic on that snapshot, not a projection. ICI's figures describe the week ended September 30, 2026.
Sources
- Release: Money Market Fund Assets, October 1, 2026 (week ended September 30, 2026)Investment Company Institute · Oct 4, 2026 · Primary source
- 17 CFR 270.2a-7, Money market funds (eCFR, up to date as of October 1, 2026)Securities and Exchange Commission rule, via eCFR (Office of the Federal Register) · Oct 4, 2026 · Primary source
- SEC Adopts Money Market Fund Reforms and Amendments to Form PF Reporting Requirements for Large Liquidity Fund Advisers (Press Release 2023-129, July 12, 2023)Securities and Exchange Commission · Oct 4, 2026 · Primary source
- Fact Sheet: Money Market Fund Reforms (Release 33-11211)Securities and Exchange Commission · Oct 4, 2026 · Primary source
- Money Market Fund Reforms; Form PF Reporting Requirements for Large Liquidity Fund Advisers; Technical Amendments to Form N-CSR and Form N-1A, Final Rule (Release 33-11211)Securities and Exchange Commission · Oct 4, 2026 · Primary source
- Money Market Fund Reforms, File No. S7-22-21: final rule page (effective dates)Securities and Exchange Commission · Oct 4, 2026 · Primary source
- Money Market Funds (Investing Basics)Securities and Exchange Commission, Investor.gov · Oct 4, 2026 · Primary source
- Money Market Funds: Investor Bulletin (November 4, 2024)Securities and Exchange Commission, Investor.gov · Oct 4, 2026 · Primary source
- Form N-MFP, Monthly Report for Money Market Funds (instructions, Items A.19 and B.8)Securities and Exchange Commission · Oct 4, 2026 · Primary source
- SEC Charges Operators of Reserve Primary Fund With Fraud (Press Release 2009-104, May 5, 2009)Securities and Exchange Commission · Oct 4, 2026 · Primary source
- Reforming Money Market Funds: Fact Sheet (Press Release 2013-101 related materials, June 5, 2013)Securities and Exchange Commission · Oct 4, 2026 · Primary source
- Understanding Deposit InsuranceFederal Deposit Insurance Corporation · Oct 4, 2026 · Primary source
- Schwab Government Money Fund, Investor Shares (SNVXX): fund page, data as of October 2, 2026Schwab Asset Management (fund sponsor) · Oct 4, 2026 · Primary source
- National Rate: Money Market <100M (MMNDR), September 2026, updated September 21, 2026FDIC via FRED, Federal Reserve Bank of St. Louis · Sep 28, 2026 · Primary source
- FOMC statement, September 16, 2026Federal Reserve Board · Sep 16, 2026 · Primary source
- Meeting calendars and information — 2026 FOMC MeetingsBoard of Governors of the Federal Reserve System · Sep 28, 2026 · Primary source
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