AFP Interviews Crane on Fed Support
Recently, the Association for Financial Professionals' posted a video on the "Impact of the Fed's MMF Liquidity Facility." The intro explains, "In this special interview, Tom Hunt, CTP, AFP's Director of Treasury Services, discusses the Federal Reserve's new Money Market Mutual Fund Liquidity Facility with Peter Crane, President of Crane Data. This interview is part of a new a series that focuses on how treasury and finance professionals manage the upheaval caused by the coronavirus pandemic. For further insights, visit AFP's Coronavirus Resource Center." In related news, James Kaitz, President and CEO of the AFP sent a letter to Secretary of Treasury Steve Mnuchin and Federal Reserve Chair Jerome Powell requesting that the Commercial Paper Funding Facility (CPFF) and the Money Market Mutual Fund Liquidity Facility (MMLF) expand eligibility to include Tier 2 CP. Kaitz says of the $90 billion market, "We believe that these expansions will help alleviate constrained credit access for these Tier 2 issuers.... The market for Tier 2 CP is largely frozen at present, with rates at two to three times their historical average -- if an issuer can even find any investors. As the Tier 2 CP market is diminished or completely frozen, these high-quality Tier 2 issuers will draw on their credit lines as an alternative source of liquidity. This change will put increased pressure on banks to find funding. As a result, banks are already limiting new loans and dramatically increasing rates above revolver pricing for any new loans.... Similarly, expanding the eligible collateral under the MMLF to include Tier 2 CP will help to restore demand and normalize rates on this high-quality paper."
