Chuck Jaffe's "Offshore CDs Are a Risky Solution To Low-yield Savings Woes" answered a reader question about Millennium Bank, located in St. Vincent and the Grenadines' "high-yield certificates of deposit carrying a 6.75% interest rate". Jaffe's MarketWatch column answers, "The obvious issue with Millennium Bank is that offshore banks carry no Federal Deposit Insurance Corp. protection and little recourse for domestic investors if things go wrong." He quotes Peter Crane, "Right now, with the Fed funds rate at 0.25%, anything over 3% should raise a major red flag.... And then you are going offshore so you lose any semblance of protection, so that's another major red flag." In other news, see "Moody's assigns Aaa/MR1+ rating to Western Asset Management Fund," which says the new Dublin-based ("offshore") Western Asset Euro Government Liquidity Fund obtained Moody's highest rating last Friday.
Bloomberg's "Coca-Cola Flees Commercial Paper for Safety in Bonds" says Coke "is fleeing commercial paper for the safety of long-term bonds. The world's largest soft-drink maker joins a growing number of borrowers reducing their dependence on the debt this year." It quotes our Peter Crane, "People want to push down their debt levels, build up their cash war chests and have lots of sources of funding, just in case one of the legs of their stools gets kicked out". Bloomberg also quotes WellPoint Chief Financial Officer Wayne DeVeydt, "What we've really done is hedged against another crash in the CP market.... If you have another run on the bank, which is really what happened to many companies in the fourth quarter of last year, you're not going to get access to other long-term debt." See also, Reuters' "Fund firms drop demand for money market liquidity", which says, "European fund firms, who were calling on the region's central banks for greater liquidity for money market funds, have quietly dropped their demand as flows to the sector have improved, a senior fund manager said." The article cites Kathleen Hughes, managing director and head of global liquidity EMEA at JP Morgan Asset Management.
USA Today's "Economy doesn't leave money market funds unscathed" says, "Money funds are a fixture of today's financial marketplace. Individual investors use them to park cash when moving between investments. Big institutions use them to collect interest on money they may hold only overnight. Consumers put savings in to earn a little interest, in accounts that offer checking privileges, too. But all is not well with the historically reliable money fund industry." Columnist John Waggoner gives an overview of recent issues and quotes Cathy Roy, CIO of fixed income Calvert, "The money market is the financing vehicle for every financial institution out there.... What is key now is to make sure that funds aren't reaching for yield -- which is what got them into this mess in the first place." He also quotes the SEC's Doug Scheidt, "The fact that there have been deep pockets has substantially helped keep problems from trickling down to shareholders." Scheidt speculates, "It could be that there's a market for insured and uninsured money funds." Finally, USA Today quotes our Peter Crane, "I thought (Bernanke's speech) was fabulous news for money funds and money fund investors. It means radical change is off the agenda." Finally, note Fed Chairman Ben Bernanke said in a 60 Minutes interview last night, when asked about bright spots in the government's interventions to date, said, "We're seeing progress in the money market mutual funds."
Click here for details on the TEXPO 2009 Conference, March 29-31 in Galveston Island, Texas. TEXPO is hosted by the Alliance of Texas Treasury Associations. Crane Data's Peter G. Crane, and Invesco AIM's Lyman Missimer III and William E. Hoppe, Jr. will present "Money Markets and Money Funds: Is It Safe to Go Back in the Water?" Other spring Treasury conferences include: Treasury Management of New England (TMANE), May 6-8, 2009, in Boston, where Peter Crane will present "The Shifting Landscape of Money Market Funds: Doing Your Diligence and Avoiding Landmines;" the Windy City Summit, May 20-22, 2009, in Chicago; and the New York Cash Exchange (NYCE), May 27-29, 2009, in New York, where Pete Crane will lead a panel with Dreyfus' Lou Geser, Federated's Debbie Cunningham, and SSgA's Jeff St. Peters entitled, "Near-Death Experience: Learning from the Turmoil in Money Market Mutual Funds." Finally, mark your calendars for Crane's Money Fund Symposium, which will be held August 23-25, 2009, at the Renaissance Hotel in Providence, R.I. Watch for the website to launch in coming weeks, and e-mail Pete for more info and for the preliminary agenda.
"J.P. Morgan to reopen Treasury Plus fund" writes MarketWatch. The Sam Mamudi article says, "J.P. Morgan Funds, a unit of J.P. Morgan Chase & Co., will on Thursday reopen a money-market fund that invests in Treasurys. The move reverses a recent trend of asset managers closing their Treasury money-market funds because of record demand and historically low rates. But a slackening in the demand, as investors head out and into government and corporate debt, and steadily rising rates, spurred in part by the government issuing more debt to finance its attempts to stabilize financial markets and stimulate economic growth, have eased the pressures facing managers." It quotes Peter Crane, "You can feel the momentum away from Treasurys.... You don't have to keep the velvet rope out front if there's plenty of room in the club." The MarketWatch piece says, "Since Dec. 10, Treasury money-market funds have seen net outflows of $100 billion, according to Crane Data. In the same period government money-market funds have seen net inflows of $100 billion, while prime money-market funds have seen net inflows of $110 billion."
"Money market funds: Just how safe a haven?" asks The Eagle Tribune of North Andover, Mass.. The article says, "Money market funds are not the plain cash box-spring that they've been popularly believed to be, and now it's all the more important to give yours more scrutiny. Although no one is promoting worry, investors should realize how critical recent government action may have been in preserving their money. And now, perhaps more than ever, anyone with a money market fund, or thinking of putting money into one, should know the differences between them, what to look for, and have a keen eye on what could happen if and when the government lifts its current programs to support them." The piece cites Pete Crane, saying, "The temporary government guarantee program has stabilized money market funds. Assets grew by 20 percent in 2008 and kept growing, even after the Reserve Primary fiasco." It quotes Crane, "In the kingdom of the blind, the one-eyed man is king.... Flat is the new up." In other news, see Friday's LA Times story, "Money fund yields keep falling, but cash stays put".