Bloomberg: Money Funds, Symposium
Bloomberg writes, "Money Markets Rake In Cash as Funds Gird for Regulatory Changes." The article by Alexandra Harris explains, "The specter of regulatory change is hanging over the $4.5 trillion US money-market industry, even as the Federal Reserve's aggressive interest-rate hikes and market volatility have investors piling in. That's the backdrop that will be front of mind for the roughly 400 attendees at the Crane's Money Fund Symposium beginning Monday, a marquee event for a business that struggled the past two years while rates were near zero." It continues, "Money funds have grown by about $100 billion since April, and they hold almost $1 trillion more than at the start of the pandemic, when companies raised cash and parked it in the market for safety. Now the funds are looking to another source of growth: corporations and individuals that want to take advantage of higher rates as the Fed boosts borrowing costs to contain inflation. The key question is how proposed changes from the Securities and Exchange Commission might complicate investors' decisions. The agency unveiled recommendations last year ... with the aim of averting the kind of turmoil seen in March 2020." They quote Northern Trust Asset Management's Peter Yi, "There's a lot of assets in flight coming soon and I think it's going to be good for the industry. There's a lot of things we can look forward to despite money-market reform." The piece tells us, "There will be no shortage of other topics to discuss as industry executives gather in Minneapolis next week. The lack of Treasury bill supply may be chief among them.... The overwhelming demand for relatively few securities has pushed rates on everything from repurchase agreements to most T-bills well below the offering yield on the Fed's overnight reverse repo facility, now at 1.55%. That's why money funds account for roughly 88% of the record $2.22 trillion sitting at the so-called RRP, JPMorgan Chase & Co. strategists say. 'Every marginal dollar we’re getting right now is getting parked at the Fed,' Yi said. The pace at which the Fed hikes will determine how quickly funds can pass along higher yields to investors, and hopefully attract more cash -- particularly deposits earning next to nothing in banks, which tend to be slower to lift rates as the Fed tightens.... The central bank's move to start shrinking its mammoth balance sheet this month through what's known as quantitative tightening is also a potential boon for money funds. Barclays Plc estimates that money-fund balances could increase by $600 billion as a result by year-end."
