A release entitled, "Fitch: Changes to Bank Support Pose New Challenge for MMFs," tells us, "Potential changes to certain banks' ratings due to declining sovereign support could further constrain the universe of investable assets for MMFs, according to Fitch Ratings' 1Q14 U.S. money market funds quarterly report. Sovereign support has historically been correlated to both bank and financial institution default risk, so changes in sovereign support could potentially have a meaningful impact on the ratings of certain banks, notably in the U.S., EU and Switzerland. Fitch's financial institutions group outlined three paths that bank ratings could take based on countries' resolution frameworks, which ranged from no change in sovereign support to material weakening of sovereign support. This could impact money funds, as their exposures as of March to the U.S. and EU were 25% and 30%, respectively. As the Treasury Department continues to pay down T-bills, MMFs turned to other products to invest excess cash. The use of the Fed's reverse repo facility was at a record high of $282 billion for the quarter ended in March. Fitch-rated prime MMFs invested nearly 6.7% of assets altogether with the Fed. Demand for CP holdings in Fitch-rated Prime MMF increased to 23% of total assets in March, up from 21% at the end of December 2013. Government MMFs made noticeable asset allocation changes by moving into treasury FRNs while reducing T-bill holdings. Municipal funds increased allocation to VRDNs at the expense of municipal bonds during the first quarter." See also, The Wall Street Journal's latest editorial "Our Opinion Hasn't Changed", which is subtitled, "Money market funds are the glaring exception to a successful model."

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