Moody's Outlook on MMFs
A press release entitled, "Moody's: Outlook for money market funds is stable as regulatory uncertainty fades" tells us, "The outlook for money market funds globally remains stable, reflecting a settled regulatory backdrop after policy makers in Europe agreed on far-reaching regulations for the industry, says Moody's Investors Service in a report published today. Moody's expects assets under management to remain stable in both Europe and the US. In Europe, many market participants regard the final version of the new EU regulation as workable, dispelling earlier concerns that the new regime might limit managers' ability to offer stable net asset value. In the US, sweeping regulatory reform was met with an effective response in 2017. Government funds will continue to be preferred by institutional cash investors in the new regulatory regime despite growing investor confidence in variable net asset value (VNAV) prime funds. The report, "Money Market Funds -- Global: 2018 outlook stable on fading regulatory uncertainty, supportive credit conditions" is now available on www.moodys.com." Vanessa Robert, VP and Senior Credit Officer, comments, "In Europe, managers will likely hold more liquid assets to avoid triggering new redemption restrictions imposed as part of the new regime." The release adds, "US money market funds will maintain strong credit quality and keep portfolio durations short against a backdrop of tightening monetary policy. Moody's expects risk exposure to be range-bound in 2018 as US prime fund managers refrain from excessive risk trades while institutional investors assess net asset value volatility. US money market funds will also be supported by a strong US economy in 2018, with consumer and business confidence remaining high, industrial activity continuing to broaden and unemployment remaining low. This will cultivate a supportive short-term funding environment."
