Moody's hosted a "Money Market Funds Update Teleconference" this morning at 9 a.m., which discussed money market funds and fund analytics, U.S. Government support programs, and the outlook for the sector. Look for more details on the Moody's call tomorrow and in the pending issue of Money Fund Intelligence. Moody's also released an additional support document entitled, "U.S. Treasury Extends Temporary Guarantee Program For Money Market Funds." (See also Monday's Crane Data News, "Moody's Believes MMIFF, Govt Support Programs Alleviating MM Strains".)
The new paper, written by Moody's VP & Senior Credit Officer Marty Duffy says, "The U.S. Treasury Department last week announced an extension of Treasury's Temporary Guarantee Program for Money Market Funds until April 30th, 2009 to support ongoing stability in this market. All money market funds that currently participate in the program and meet the extension requirements are eligible to continue to participate. Moody's believes that the Program, which is financed through the Exchange Stabilization Fund, has substantially improved confidence of investors in money market funds across all sectors."
It continues, "Since it was first announced in September, the pace of redemption activity in Prime money funds has slowed -- and in some cases reversed. As more stable cash flows have translated into a reduction in the need for money funds to sell assets into disorderly markets, second order benefits including reduced spreads have also been in evidence. We also believe that the industry's widespread participation in the program in concert with other initiatives undertaken by the US Treasury and Federal Reserve, will continue to bolster investor sentiment and mitigate the likelihood of suspended redemptions in money market funds. Continued improvement in money market sentiment may also prompt funds that have already deferred redemptions to reopen."
Moody's Special Comment says, "The direct impact of the Program on Moody's ratings is rather limited, because the Program's guaranty payouts occur after a participating fund's constant share price declines significantly and a fund suspends redemptions. In addition, not all shares are covered by the Program. However, the existence of the temporary guarantee as anticipated has dampened redemption pressures, and therefore has reduced the risk of forced sales of short term assets by prime money market funds whose balances have steadied since the announcement of the Treasury plan in September."
Finally, it says, "In addition, Moody's believes that the collective impact of recently announced governmental programs is alleviating strains in money markets by adding to secondary market liquidity. Such programs include: Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF); Commercial Paper Funding Facility (CPFF) and the Money Market Investor Funding Facility (MMIFF). (Also, see our "Link of the Day" today on the extension of these programs.)
