Yesterday, Bloomberg TV featured a rare money market mutual fund manager interview, "RiverSource Jackson Sees Lower Money Market Yields." Jamie Jackson of RiverSource, an Ameriprise Financial subsidiary, talked with Bloomberg's Betty Liu about the "implications of yesterday's Federal Reserve policy decision for bonds and money market funds."
Jackson says of the Fed cuts, "It's been a continuation of yields falling across all of the high-quality assets.... It's record-low yields for Treasuries and also for just about anything that Tier 1 money market funds are able to invest in." He interprets the Fed comment about rates staying low "for some time" as being "`at least 9 months, probably more like a year."
"I don't think it will kill the money market funds," Jackson says of the new rock-bottom rates. "We've seen very low yields before and money market funds have been able to deal with it. So what will happen is yields will continue to drop.... [But] money market funds don't necessarily invest in Fed funds.... It's good for companies, but bad for cash investors."
Finally, Jackson says, "In a vacuum, zero yields are not something that people would flock to, but there have been so many issues with so many other asset classes.... There's also a flight to quality in the retail world where people just want preservation of principal, and money market funds are still a good vehicle for that." Money funds' now meager returns "look pretty good relative to what most people have had in their portfolios the last 12 months," he tells Bloomberg.
In other news, Today's Wall Street Journal exaggerates the plight of money funds in "Money Funds Feel the Pull of Fed's Moves", saying, "The Federal Reserve's interest-rate cut two days ago may be threatening the recovery of the money-market-fund industry from September's shock waves." Also, `Reuters writes, "Credit Suisse quits managing US money0market funds". (See our "Link of the Day" too.)
