Bloomberg writes "Money-Market Funds Contemplate a Return to Abyss of Low Rates," which tells us, "The specter of a return to ultra-low U.S. interest rates is haunting money-market funds. Cash is flooding into these highly liquid vehicles for investing in short-term debt for now, and the amount of assets held in taxable money-market funds this year poked back above $3 trillion for the first time in close to a decade. But there is growing disquiet among those who run and invest in them about the problems that might be caused by potential rate cuts from the Federal Reserve." The article continues, "Treasury yields that veer closer to zero could prompt those with spare cash to seek out alternatives, and may also make the job of actually running the money that remains in such funds more difficult, according to investors and strategists at a conference in Boston earlier this week.... If the Fed does ease, prime retail funds are most vulnerable to outflows, according to Mark Cabana, head of U.S. interest-rate strategy at Bank of America Corp. That's because money funds “will be seen as less desirable” amid a re-steepening of the Treasury yield curve, he said during a panel discussion at the Crane's Money Fund Symposium. Alex Roever, JPMorgan Chase & Co.'s head of U.S. rates strategy, said that money funds have historically tended to suffer from outflows around one-to-two years after Fed reductions, and the low overall level of rates plays a greater role in driving that than the actual process of easing. Of course, the problem of low yields is just one of the many challenges facing the short-end of the U.S. interest-rate market. While that topic dominated discussion at this year's Crane's conference, attendees also grappled with issues ranging from America's debt ceiling to the Secured Overnight Financing Rate and sponsored repurchase agreements."

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