Tags: money market | fund | SEC | rates

FT: Prime Money Market Funds Nosedive with New SEC Rules

FT: Prime Money Market Funds Nosedive with New SEC Rules

(Dreamstime)

By    |   Friday, 16 September 2016 01:45 PM

Money market funds are bracing for $300 billion of withdrawals as new rules enacted after the 2008 financial crisis take effect next month.

The Securities and Exchange Commission's money-market reforms begin on Oct. 14, requiring that institutional prime and tax-exempt funds end an over-30-year tradition of fixing shares at $1, according to the Financial Times. Funds that hold only government debt will be able to maintain that level.

The rules reduce incentives to park money in funds that invest in commercial paper and other short-term debt issued by banks.

Assets in prime funds have fallen by about $330 billion to $789 billion in the past three months, killing demand for short-term paper and triggering a big jump in Libor, the London interbank offered rate that is used to set other borrowing costs.

"Forget Janet Yellen. Mary Jo White just raised interest rates," writes Peter Foley, columnist for the TF. "While everyone has been watching the Federal Reserve chair for clues on whether there will be a change in monetary policy this month, new rules from the Securities and Exchange Commission, chaired by Ms White, have sent a number of key rates up regardless."

Companies such as Federated Investors Inc. and Fidelity Investments, which have already cut prime fund offerings, are bracing for additional withdrawals in the next few weeks. TD Securities estimated in a Sept. 7 note that outflows may reach as much as $300 billion.

“All managers, like ourselves, are positioning around the uncertainty of the exact magnitude of the outflows,” Peter Yi, director of short-term fixed income at Chicago-based Northern Trust Corp., which manages $906 billion, told Bloomberg News.

 

 

© 2021 Newsmax Finance. All rights reserved.


StreetTalk
Money market funds are bracing for $300 billion of withdrawals as new rules enacted after the 2008 financial crisis take effect next month.
money market, fund, SEC, rates
273
2016-45-16
Friday, 16 September 2016 01:45 PM
Newsmax Media, Inc.
 
Newsmax TV Live
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved