Bloomberg's July 31 article "Money Fund Rules Seen Triggering Commercial Paper Jam", looks at the impact of SEC reforms. It says, "Corporate treasurers say a crackdown on money-market funds threatens to squeeze their access to the short-term financing they use for everything from paying the rent to meeting their payrolls. Companies from pesticide maker FMC Corp. to power generator Great Plains Energy Inc. are preparing for investors to back away from the commercial-paper market after regulations passed last week requiring some money-market funds to let their net-asset values fall below the traditional $1 a share floor. The shift may trigger a retreat from prime funds that are big buyers of the short-term corporate IOUs, precipitating an increase in borrowing costs. The rules being implemented by the U.S. Securities and Exchange Commission leave the $1 trillion commercial-paper market facing its biggest upheaval since it seized seven years ago amid the global credit crisis. A drop in demand may drive up borrowing costs on the debt, which typically matures in 270 days or less." James Gilligan, assistant treasurer at Great Plains, told Bloomberg, "I know the SEC believes others will pick up the slack of the commercial-paper market, but I'm not optimistic about that. The impact will be a contraction of investors, which will reduce the demand for commercial paper, which will drive up borrowing costs." The Bloomberg piece adds, "About $320 billion to $500 billion may exit prime money-market funds before the new rules become fully effective in 2016, according to calculations by Barclays Plc and Bank of America Merrill Lynch. Those funds hold about 25 percent of their $1.4 trillion of assets in commercial paper, according to Bank of America." The article continues, "A measure of 30-day U.S. commercial paper rates is at 13 basis points, below the 18 basis-point average for the last five years, according to data compiled by Bloomberg. A basis point is 0.01 percentage point. Gilligan, who is also a member of the Association for Financial Professionals, was one of the signatories of a letter the group sent to SEC Chair Mary Jo White opposing the proposed rule changes to allow fund asset values to float. 'A shrinking commercial paper market could force large, creditworthy companies that are currently able to sell commercial paper into other areas of debt markets,' the association said in the July 22 letter."

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