FT on MMFs, Libor
The Financial Times writes, "SEC money market fund reforms help push Libor rates higher," which says, "Forget Janet Yellen. Mary Jo White just raised interest rates. While everyone has been watching the Federal Reserve chair for clues on whether there will be a change in monetary policy this month, new rules from the Securities and Exchange Commission, chaired by Ms. White, have sent a number of key rates up regardless. The SEC's long-awaited and much-needed money market fund reforms come into effect next month, reducing the attractiveness of funds that invest in commercial paper and other short-term debt issued by banks. Assets in these so-called prime funds have fallen by about $330bn to $789bn over the past three months, causing a collapse in demand for short-term paper and a big jump in Libor, the London interbank offered rate." The FT piece adds, "The current rate may be slightly elevated. Prime funds are expecting still more money to flee in the weeks before the October 14 deadline, perhaps another $200bn, but because the exact amount is not yet clear some funds are being prudent and pulling back almost entirely from the market. They will return next month. On the other hand, while demand has been temporarily reduced, so has supply, with commercial paper issuers coming to market in fewer numbers since the start of the summer." See also, WSJ's "Prime Money Market Funds Are Bracing for More Outflows"."
