The Financial Times writes that the "Fed 'repo' plan could face fund manager resistance." The article explains, "Money market funds that are among the largest holders of US Treasury bills say they are reluctant to sell them to the Federal Reserve, presenting an obstacle to the central bank as it seeks to increase the amount of cash in short-term lending markets. The Fed announced last Friday that it would begin monthly purchases of roughly $60bn of Treasury bills, which have a maturity of less than 12 months, in an attempt to inject money into the financial system following a cash squeeze that sent overnight 'repo' lending rates surging in September.... The problem facing managers of money market funds -- which are permitted to buy assets with no more than 13 months to maturity -- is that they would rather keep the Treasury bills now in their possession than sell them to the Fed and then go back into the market to buy debt with potentially lower yields." The FT quotes SSGA's Pia McCusker, "We are not going to sell them.... It's a short-term gain and then I would have to replace it with something else at a much lower rate." The piece adds, "Money market funds are among the largest holders of Treasury bills, accounting for almost $550bn at the end of August, according to data from the Investment Company Institute. Several fund managers told the Financial Times that they have no incentive to sell without a steep increase in prices -- and a corresponding fall in yields." The article also quotes JPMAM's John Tobin, "It makes us question where are they going to find these bills.... When the Fed is going to be a large, indiscriminate buyer in the front end, that is going to put pressure on yields."

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