Moody's on MMF Maturities
Moody's issued a release, "Maturities Remain Short in Anticipation of a December Rate Hike." It says, "Weighted average maturities remain tight, especially within US dollar money market funds (MMFs) and we expect managers to continue to maintain shorter portfolio WAMs as the likelihood of a December rate hike in the US increases. Sterling MMFs' assets under management (AUM) hit their second lowest level in twelve months in the third quarter of 2015, registering a fall of 3.8% to GBP93.1 billion. US prime funds recorded a 4% growth in AUM, on the other hand, driven by a reduced appetite for risky assets; euro-denominated funds also experienced AUM growth, albeit smaller, of 2.3% to EUR55.2 billion. "Uncertainty about the health of the global economy led to a sharp increase in market volatility in the third quarter. This has reduced investor appetite for risky assets and driven growth in US prime funds' AUM," said Robert Callagy, a Vice President -- Senior Credit Officer at Moody's." It continues, "For euro prime funds, investors have adapted to the new net negative yield environment affecting those funds since the middle of Q2," added Vanessa Robert, a Vice President -- Senior Credit Officer.... The credit profiles of European and offshore prime funds improved, while US prime funds remained stable in Q3. For US funds, exposure to Aaa-rated securities in US prime funds jumped to 22% of fund assets at the end of Q3 from 18% at the end of Q2 as usage of the Federal Reserve's reverse repo facility swelled at September month-end. Offsetting this, however, was a decrease in exposure to securities rated Aa1 and Aa2, which fell to 28% from 32% during the same period. Obligor concentration in US prime funds reached its highest point in a year, with the average top three obligor concentration (as % of AUM) at 17% at the end of September up from 16% at the end of Q2, a reflection of the scarcity of high quality short-dated assets." In other news, Federal Reserve Governor Jerome Powell spoke Tuesday on "Central Clearing in an Independent World." He says, "One area where market participants are actively searching for new business models is the repo market, where there are currently several private initiatives for greater central clearing.... The tri-party repo market is used to finance general collateral pools rather than specific securities, and trades in this portion of the market are settled on the books of the two clearing banks, Bank of New York Mellon and JP Morgan Chase. Money market mutual funds and securities lenders are among the most prominent cash providers in segment 4, while securities dealers are the primary borrowers of cash."
