Crane Data Subscribers
SEC Chairman Cox Says Money Market Funds $1 NAV Not Threatened. Securities & Exchange Commission Chairman Christopher Cox, in testimony before today's Senate Banking Committee hearing hearing, said, "[T]he Commission staff has been active in working with the managers of money market funds as they cope with the downgrading of ratings and the declines in value of securities in which their funds have invested. Commission rules limit money market funds to investing in high-quality, short-term investments in an effort to ensure that these bedrocks of the financial system are reliable in all market conditions. Losses by a money market fund would be reflected by the fund re-pricing its securities below $1.00 (known as "breaking the buck"). Only one fund, and that of very modest size, has ever broken the buck [Community Bankers U.S. Govt MMF] since the development of money market funds in the 1970s. The Commission is closely monitoring the fund industry and while we have seen some instances of funds requiring infusions of capital from the corporate parents of fund advisers, we are not aware of any money market fund that is threatened with having to reprice below $1.00." (See Reuters article, "No money market funds below $1 threshold, SEC says".) Yesterday, rumors were circulated that a "Citi" money market fund broken the buck, though the information turned out to be false. (See our, "'Break The Buck' Rumors False, No Money Mkt Funds Trading Below $1".) The danger of a money market mutual fund dropping below $1 a share has declined dramatically over the past month as falling rates have boosted the value of existing holdings and as massive asset inflows have diluted the small remaining positions of SIV-related securities. Crane Data does not expect any money funds to break the buck over the current liquidity crisis.
