MarketWatch just posted "Treasury money-market funds shut the door", which gives a comprehensive update on recent events in the money fund business and includes quotes from a number of difference money fund professionals and analysts.
Writer Sam Mamudi says, "On Monday, Vanguard Group closed its Vanguard Admiral Treasury Money Market Fund and Vanguard Treasury Money Market Fund, and on Tuesday, Pimco, a unit of Allianz AG, said it had shelved plans to launch a Treasury money-market fund. In December, J.P. Morgan Funds, a unit of J.P. Morgan Chase & Co., and Fidelity Investments closed their Treasury money-market funds to new investors. The pressure on the Treasury funds has been immense."
They quote Debbie Cunningham, "There's whole host of [government] support programs to help with the liquidity and credit quality of other types of funds." MarketWatch says, "One program promises to buy debt from any money-market fund that needs to sell.... Wide spreads also make other fund types attractive."
Pimco Senior VP Paul Reisz said of their new Treasury fund, "It didn't make sense to launch that in this environment," saying "the launch was 'more likely' toward the end of the year," according to MarketWatch. They add, "Reisz said that Pimco launched Government Money Market, a fund that invests in government agency debt, because while the debt isn't explicitly guaranteed in the way Treasurys are, the level of safety is 'close enough.' And added to the higher yields, there's also more diversity of investment options," they quote Reisz.
Some speculate that "The fee pressure funds will face from lower yields, coupled with greater regulation -- for instance, an explicit guarantee of money fund assets -- could reduce profitability." Jeffries analysts wrote, "We believe the profitability of the cash management business would be severely impaired and only those with a significant footprint ... would benefit. Consolidation would likely ensue as capital requirements would drive smaller players out, and yields would be driven down as only the highest quality assets would be viable investment options."
In other news, see Bloomberg's "GE Leads Commercial Paper 'Test' as Fed's Buying Ebbs", which says, "About $245 billion of 90-day commercial paper that companies sold to the Federal Reserve starting in October will mature this week and next, central bank data show. As much as $50 billion to $70 billion of the debt may be rolled over and bought by investors, according to Barclays Capital in New York."
