"Money-Market Funds: Down to Zero"
SmartMoney writes "Money-Market Funds: Down to Zero". It says, "Another chapter in the financial crisis is winding down: Not only has the government stopped backing money market funds -- a vote of confidence that the industry can stand on its own -- investors in the now-closed Primary Reserve Fund are expected to be made almost whole. But that doesn't mean that money-market-fund investors don't have anything to worry about. For investors who haven't glanced at their account statements lately, the latest problem is near-zero interest rates. While the Primary Fund announced this week that it has sold the remainder of its Lehman Brothers debt (and will come close to paying investors all of their money back), money-market-fund yields are barely a ripple in the income stream. With rates so low, several fund companies have been subsidizing fees for investors." It adds, "The safety and liquidity of money-market funds could improve this year. In January, the Securities and Exchange Commission amended regulations governing money-market funds, and those changes will start taking effect in May.... According to an SEC statement, that means money-market funds will have to meet both daily liquidity requirements of 10% of assets in cash and cash equivalents, and weekly liquidity requirements of 30%. The good news is, these changes could help quell the fear of a repeat "breaking the buck" scenario, when a money-market fund trades below a dollar, says Peter Crane, president of Crane Data, which tracks money-market funds. On the other hand, they could also mean that yields will drop a bit as a result."
