Bloomberg writes, "No Relief for Mom and Pop's Money Funds When Fed Tightens." It says, "Investors parking cash in the safest of U.S. assets probably won't see immediate relief from depressed returns when the Federal Reserve starts raising interest rates. The possibility of as many as two rate increases by year-end has failed to outweigh a mismatch between supply and demand for the shortest and safest of debt, with Treasury bill rates maturing through October locked at about zero percent. Global regulatory changes are boosting the need for high-quality assets from bills to repurchase agreements to bank deposits just as the supply is sliding." It adds, "Ahead of the first policy tightening since 2006, even more money may temporarily flow into the safest of government debt." Bloomberg quotes Northern Trust's Peter Yi, "Some core fixed-income investors are just concerned about rising rates. As they wait for the market to sell off in longer-maturity instruments, they may temporarily park themselves in cash and cash-like securities." The piece adds, "A mix of post-crisis regulations has boosted demand for repurchase agreements, where investors temporarily lend cash and take in securities as collateral, just as banks are backing away from the transactions as they have become costly as regulators push to shore up banks capital. A Fed reverse repo program, which the central bank has been testing since 2013 as one of several tools to manage its eventual removal of monetary accommodation, has provided some relief by giving investors a new place to park funds. Yet strategists say the market's current size, at $300 billion for overnight deals, won't suffice or alleviate downward pressure on rates." In other news, money fund assets were down for the second straight week (which included a quarterly tax payment date, June 15), according to ICI's latest weekly "Money Market Mutual Fund Assets." The release says, "Total money market fund assets decreased by $11.06 billion to $2.60 trillion for the week ended Wednesday, June 17, the Investment Company Institute reported today. Among taxable money market funds, Treasury funds (including agency and repo) decreased by $2.42 billion and prime funds decreased by $9.13 billion. Tax-exempt money market funds increased by $500 million. Assets of retail money market funds increased by $3.04 billion to $866.43 billion. Among retail funds, Treasury money market fund assets increased by $380 million to $191.77 billion, prime money market fund assets increased by $2.42 billion to $495.29 billion, and tax-exempt fund assets increased by $240 million to $179.36 billion. Assets of institutional money market funds decreased by $14.09 billion to $1.73 trillion. Among institutional funds, Treasury money market fund assets decreased by $2.81 billion to $764.54 billion, prime money market fund assets decreased by $11.55 billion to $901.05 billion, and tax-exempt fund assets increased by $260 million to $66.88 billion." Year-to-date, money market fund assets are down $134 billion or 4.9%.

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