Bloomberg posted the article, "Money Market Mess Fuels Fight Over Just Which Rulebooks to Fix," which reviews the latest discussions over yet another round of money market mutual fund regulatory reforms. They explain, "The convulsions that rocked U.S. money markets in the early days of the pandemic are spurring a new push to overhaul the rules once and for all -- if regulators and traders can agree on what's broken and how to fix it. Some point to the cash-like funds that buy swaths of short-term corporate paper, and left companies in a hole when an investor exodus halted new purchases last year. Others say these funds are scapegoats, and the real problem lies with the banks that arrange these IOUs but can't backstop them. Others, meanwhile, argue that money-market blowups are all but inevitable, and regulators simply need to prepare accordingly."
The piece quotes SSGA's Kim Hochfeld, "You can't just fix money funds and expect the problem to go away.... There are broader market issues that need to be solved." Bloomberg continues, "The last batch of reforms 'didn't really do the job,' Fed Chair Jerome Powell told CBS's '60 Minutes' program in April. It's now time to address money-market issues 'decisively' he said."
The article also quotes Tom Callahan of BlackRock, "Commercial-paper markets in times of stress can freeze.... As long as that is the dynamic, regulators can do whatever they want to prime funds. But if this issue of an unstable CP market is not addressed, then in the next crisis, regulators will be forced to come in and bail out the commercial-paper market."
Bloomberg's article continues, "Callahan -- alongside Kate Fulton, BlackRock's head of U.S. public policy -- is calling for regulators to convene a group of banks, issuers and money funds and other participants to study potential commercial-paper reforms, according to a comment letter to the Securities and Exchange Commission, sought input on possible reforms." Joseph Abate of Barclays tells them, "It's a bit more complicated than one solution fits all.... There are a lot of moving parts to this."
It states, "Given how intertwined the central bank has become in markets since the 2008 crisis, it may be inevitable that the Fed is called on to periodically bail out various asset classes. At the height of the 2020 funding strains, the central bank revived a mechanism that it had used to great effect in the previous crisis: the Money Market Mutual Fund Liquidity Facility. Yet while this almost immediately calmed markets and was barely touched once the storm had passed, the perception of an industry bailout sits uneasily with many."
Bloomberg adds, "ICI, the body that represents funds, has pushed back against the idea that money-market reforms should be instituted on the grounds of preventing any future central-bank assistance. 'We question those who say that money-market funds must be regulated so aggressively that central-bank intervention would never be needed again,' it wrote in a comment letter to the SEC. 'Holding money market funds at fault for central-bank intervention intended to calm financial markets during a time of extreme uncertainty around a global catastrophe should not be the starting point for any discussion of reforms.'"
Lastly, they write, "The FSB is expected to publish a report in July for consultation that will outline policy proposals aimed at improving money funds' resilience, though it could be long after that before anything actually changes." (Note: For those that missed our "Handicapping Money Fund Reforms webinar last Thursday, the recording is available here.)
In other news, Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics Tuesday, which track a shifting subset of our monthly Portfolio Holdings collection. The most recent cut (with data as of May 21, 2021) includes Holdings information from 69 money funds (up 6 funds from a week ago), which represent $2.062 trillion (up from $1.976 trillion) of the $4.917 trillion (41.9%) in total money fund assets tracked by Crane Data. (Our Weekly MFPH are e-mail only and aren't available on the website.)
Our latest Weekly MFPH Composition summary again shows Government assets dominating the holdings list with Treasury totaling $1.006 trillion (up from $977.3 billion a week ago), or 48.8%, Repurchase Agreements (Repo) totaling $580.5 billion (up from $577.8 billion a week ago), or 28.2% and Government Agency securities totaling $231.6 billion (down from $232.2 billion), or 11.2%. Commercial Paper (CP) totaled $83.1 billion (up from $64.7 billion), or 4.0%. Certificates of Deposit (CDs) totaled $58.6 billion (up from $48.5 billion), or 2.8%. The Other category accounted for $76.3 billion or 3.7%, while VRDNs accounted for $25.6 billion, or 1.2%.
The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $1.006 trillion (48.8% of total holdings), Federal Home Loan Bank with $129.9B (6.3%), Federal Reserve Bank of New York with $107.0B (5.2%), BNP Paribas with $57.7B (2.8%), Federal Farm Credit Bank with $45.5B (2.2%), RBC with $45.0B (2.2%), Fixed Income Clearing Corp with $40.6B (2.0%), Federal National Mortgage Association with $35.8B (1.7%), JP Morgan with $32.4B (1.6%) and Credit Agricole with $30.8B (1.5%).
The Ten Largest Funds tracked in our latest Weekly include: JPMorgan US Govt MM ($226.3 billion), Wells Fargo Govt MM ($154.4B), Fidelity Inv MM: Govt Port ($131.8B), Federated Hermes Govt Obl ($130.2B), Morgan Stanley Inst Liq Govt ($126.0B), Dreyfus Govt Cash Mgmt ($113.4B), JP Morgan 100% US Treas MMkt ($105.9B), First American Govt Oblg ($98.7B), State Street Inst US Govt ($88.3B) and JPMorgan Prime MM ($76.7B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary, or our Bond Fund Portfolio Holdings data series.)
