A recent "Short Duration Strategy from Citi entitled, "When will short term funding costs decline? comments, "Money market rates remain elevated after grinding up since summer, and this is a manifestation of the dysfunction in the money markets that was engendered by money market reform. The rise in non-financial CP and ABCP rates has been much more muted. This is attributable to their smaller market sizes and also the fact that non-financial CP and ABCP have much shorter tenors, which has enabled prime funds to hold on to these even while they were witnessing sharp outflows. Higher financial CP, Libor, and SIFMA rates have caused a significant increase in funding costs for short-term issuers in the financial and municipal sectors. So, when will funding costs decline for these issuers? As we discuss, this will depend mostly on the outlook for demand, which in each case, is slightly murky."

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