Money Market Funds (MMFs) have become increasingly popular in Singapore over the past few years. From retail investors to high-net-worth individuals and even corporate treasuries, MMFs have often been viewed as a low-risk, highly liquid place to park spare cash while earning a modest return.
However, as of 2025, MMF yields have fallen significantly—many now offer below 1% per annum. This raises an important question: Are Money Market Funds still attractive?
This article examines the decline in yields—specifically using POEMS SMART Park as an example—compares MMFs with alternatives, and provides a strategic outlook for Singapore investors navigating a falling interest-rate environment.
1. A Personal Experience: Money Market Fund Yields in Decline
Like many Singapore investors, I allocated part of my cash holdings into a Money Market Fund, notably POEMS SMART Park, because it offered:
- high liquidity,
- low volatility,
- and previously competitive yields.
When I first invested, the fund was paying a relatively attractive 1.3% per annum. Over time, the yield slowly decreased to around 1.1% per annum, which still felt acceptable.
However, my latest review revealed something surprising:
The yield had declined further to approximately 0.95% per annum.
While I expected some decline in line with the broader interest-rate trend—especially movements in Singapore Treasury Bills (T-Bills) and Singapore Savings Bonds (SSBs)—seeing a sub-1% Money Market Fund yield underscored a new reality:
MMFs have become significantly less attractive compared to their performance in recent years.
2. Why Are Money Market Fund Yields Falling?
Money Market Fund yields closely mirror short-term interest rates. As rates drop globally and locally, MMFs naturally follow.
Here are the primary drivers behind the decline:
a. Global Central Banks Have Shifted Toward Rate Cuts
After years of elevated interest rates to combat inflation, central banks—including the U.S. Federal Reserve—have begun reducing rates or signalling forthcoming cuts.
Since Singapore’s monetary policy is tied to the exchange rate rather than interest rates, our domestic interest rates tend to move in tandem with global rate trends.
b. Lower Yields in SSBs and T-Bills
A few years ago, Singapore T-Bills were yielding 4%–4.4%. Today, yields have softened into the 1% range, and in some auctions even lower.
SSBs, which reached average 10-year returns of around 3%+, have now dipped to the low-1% range.
As these instruments form the backbone of what MMFs invest in—with short durations—their performance directly affects Money Market Fund returns.
c. Excess Liquidity Reduces the Need for Competitive Rates
Banks currently hold ample liquidity. When banks are well-funded, they don’t need to bid aggressively for short-term funding instruments, which lowers interest rates across the short-duration market.
MMFs, which invest heavily in such instruments, are directly impacted.
3. The Psychological and Practical Impact of Sub-1% Yields
A Money Market Fund yielding 1%+ feels reasonable for many investors. The move below the 1% psychological threshold is significant for several reasons:
a. Inflation Outpaces MMF Returns
With MAS core inflation around 2%–3% (varying year to year), a Money Market Fund earning 0.95% results in a negative real return.
Cash grows nominally but loses purchasing power.
b. Fixed Deposits Are Now Comparable to MMFs
In the past, MMFs often offered higher yields than fixed deposits and with significantly more liquidity.
However, fixed deposits in 2025 offer only around 1%+ per annum, which is almost identical to MMF yields.
This narrows the advantage MMFs traditionally held.
c. High-yield savings accounts sometimes offer better returns
Some banks offer promotional or multiplier accounts that can yield 1%–3%, depending on activity requirements such as salary crediting or credit card spending.
If even mid-range savings accounts match or outperform MMFs, the MMF value proposition weakens.
d. Opportunity Cost Becomes Significant
T-Bills and SSBs—though not perfect substitutes—still offer materially higher yields:
When a Money Market Fund yields less than 1%, the opportunity cost of not using these alternatives widens.
4. Comparing Money Market Funds to Key Alternatives in 2025
To determine whether MMFs remain attractive, it is useful to compare their yields, liquidity, and risk against other instruments.
a. Fixed Deposits
Pros:
- SDIC-insured (up to SGD 75,000 per bank)
- Guaranteed return
Cons:
- Requires lock-in period
- Rates no longer attractive (around 1%)
Conclusion:
Fixed deposits no longer significantly outperform MMFs—they’re roughly the same. But FDs lack liquidity unless premature withdrawal is allowed (often with penalties).
b. Singapore Treasury Bills
Pros:
- High yield relative to MMFs
- Government-backed
- 6-month and 12-month options
Cons:
- Money is locked for the tenure
- Requires auction participation
Conclusion:
T-Bills remain one of the best low-risk, short-term options for investors who can lock up funds for several months.
c. Singapore Savings Bonds
Pros:
- Extremely flexible (redeem any month)
- Capital guaranteed
- Yield curve allows for longer-term planning
Cons:
- Lower returns for short-term holding
- Monthly application limit
Conclusion:
For money you don’t need immediately, SSBs offer safe long-term storage at a better yield than MMFs.
d. High-Yield or Multiplier Savings Accounts (1%–3%)
Pros:
- High liquidity
- Yield can beat MMFs
- Great for working adults with salary crediting
Cons:
- Returns depend on meeting conditions
- Some accounts require minimum spending, bill payments, or investments
Conclusion:
If you meet the requirements, these accounts outperform Money Market Funds.
e. Cash-Management Accounts from Robo-Advisors
These accounts often rely on underlying MMFs and short-duration bond funds.
Current yields typically track MMF performance, meaning they remain low.
5. Should You Stay Invested in Money Market Funds Below 1%?
Here are key considerations before deciding:
a. Liquidity Needs
If you need instant or next-day access to cash, MMFs still outperform fixed deposits, T-Bills, and even SSBs.
b. Risk Tolerance
MMFs are low-risk but not risk-free.
Their net asset value may fluctuate slightly.
If absolute capital safety is required, SDIC-insured deposits or government securities are safer.
c. Time Horizon
If your investment horizon is short (1–3 months), the difference between 0.95% and higher-yield instruments may not justify administrative hassle.
For 6–12 months or longer, alternatives often perform better.
d. Portfolio Strategy
MMFs remain a useful parking place for:
- emergency funds
- trading float
- dividend inflows
- cash awaiting investment opportunities
In these contexts, yield may not be the primary concern.
6. Will Money Market Fund Yields Rise Again?
Interest rate cycles are cyclical. The current low-rate environment will not last forever.
Factors that could raise MMF yields:
- global inflation resurging
- stronger economic growth prompting rate hikes
- tighter liquidity conditions
- central banks reversing course
However, as of 2025, the prevailing expectation is lower global interest rates, meaning MMF yields may remain subdued throughout the year.
7. Practical Strategies for Investors in 2025
a. Diversify Cash Storage
Instead of parking everything in a Money Market Fund, consider splitting:
- MMFs for liquidity
- T-Bills for higher short-term yield
- SSBs for long-term safety
- Savings/multiplier accounts for optional higher returns
b. Use Money Market Funds as a Liquidity Hub
MMFs excel at serving as a temporary holding area—especially for investors using the POEMS platform.
c. Monitor Bank Promotions
Banks regularly adjust rates. Promos may occasionally exceed MMF yields.
d. Reassess Your Cash Allocation Regularly
Interest rates are dynamic. What is unattractive today could be favourable in 12–24 months.
8. Conclusion: Are Money Market Funds Still Worth It?
Money Market Funds earning below 1% undeniably feel far less attractive than they did during the high-yield years.
But MMFs still have undeniable advantages:
- High liquidity
- Low volatility
- Ease of use
- Seamless integration with investment platforms
Even though yields have declined, MMFs continue to serve a role in a balanced cash-management strategy—particularly for funds that require short-term accessibility.
However, if your goal is to maximise returns on idle cash, alternatives like T-Bills, SSBs, and certain savings accounts may provide better value.
In short:
MMFs remain useful tools, but not necessarily the best-yielding ones.
The key is understanding your liquidity needs, time horizon, and risk tolerance—and choosing the right mix of instruments accordingly.