Bloomberg BusinessWeek writes "Money Market Investors May Get Relief From Fed's Operation Twist". It says, "Investors in U.S. money market funds may get some relief from record-low returns when the Federal Reserve begins to sell short-term debt as part of its latest stimulus effort that's been dubbed Operation Twist. The rate to borrow and lend Treasuries for one day in the repurchase agreement market may rise six to eight basis points, according to Barclays Plc. Overnight general collateral repo agreements for Treasuries averaged 0.069 percent since June, while one-month Treasury bill rates averaged 0.0113 percent. The one-month bill has traded below zero almost every day since mid-August. The Fed's plan to begin selling $400 billion of Treasuries due in three years and less next month to fund purchases of a similar amount of longer-maturity debt comes as investors park cash in money funds. Investors have been seeking a refuge from Europe's debt crisis and slowing growth. Custody banks have also been hurt by persistent low interest rates, which reduce income from lending cash and securities and cut fees from the funds. Bank of New York Mellon Corp., the world's largest custody bank, said last month it will begin charging customers for 'extraordinarily high' cash deposits." The piece adds, "Demand for short-term government debt instruments has risen this year as the supply of Treasury bills fell due to reduced government sales, causing money market rates to trade below zero. The Fed has kept its benchmark rate for overnight loans at near zero percent since 2008 and purchased assets to lower long- term rates. During the six-week period ended Sept. 20, money-market mutual funds took in $66 billion, according to research firm Crane Data LLC, based in Westborough, Massachusetts. Total assets in the funds rose to $2.59 trillion, including $2.3 trillion in taxable and $1.46 trillion in prime funds."
