Wells Fargo Advantage Money Market Funds also issued its latest "Portfolio Manager Commentary," earlier this week, the first under the leadership of Laurie White, who takes over for the retiring Dave Sylvester. Wells PMs review the major stories of 2014 in their Commentary, and add, "[T]he credit environment was an oasis of calm during the year. As we get further from the depths of the financial crisis, it is clear that balance sheets in general have begun to heal and the financial conditions of many entities have greatly improved. The credit environment is so changed, in fact, that when December brought news of another political crisis in Greece and renewed speculation it would leave the eurozone, short-term markets did not even blink, and the story barely even made the news cycle! ... U.S. government money market rates were amazingly stable this year, with no significant credit or political events such as a European debt crisis or U.S. debt ceiling showdown to drag rates temporarily out of their near-zero malaise. Only in December did rates stray from their ranges for reasons discussed below. There were three main themes during the year and, while we have frequently discussed them in these commentaries, they continue to drive the market. First, although we've trumpeted the likely negative effects on short-term interest rates due to various banking regulations, the regulations, such as those addressing liquidity and leverage, have proven to constrain supply and spur demand perhaps even more than we envisioned. The demand for Treasury securities maturing in fewer than three months has kept their yields near zero even when other government rates, such as those for repo and discount notes, have risen. In addition, "free-market" repo supply -- that is, repo not executed with the Fed -- continues to shrink, especially on reporting dates such as month- and quarter-ends. When outsized demand meets dwindling supply, yields fall, even if authorities want them to rise. This brings us to the second main theme of 2014, which is the Fed's impact on the money markets through the evolving testing of its RRP program.... The third theme of 2014, the chance of the Fed raising interest rates, lurked beneath the surface most of the year, present though little seen, until it bubbled up with a strong December payroll report on December 5." Wells adds, "Similarly to the government markets, the two main themes this year in the prime markets continue to be a limited selection of high-quality assets and persistently low interest rates."

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