MMFs on Edge Over SVB Says Ignites
Yesterday, ignites published the piece, "Money Funds on Edge Amid Fears of SVB, Signature Contagion." They write, "The Friday collapse of Silicon Valley Bank and related fall on Sunday of Signature Bank sparked volatile markets on Monday amid fears of potential contagion to other banks and sectors of the economy. Money market funds, which experienced a run at the onset of the pandemic in March 2020, on Monday appeared to be weathering the tumult. 'Risk everywhere has increased noticeably [due to the bankruptcies], but money market funds are several levels removed from the tip of the spear here,' said Peter Crane, chief executive of Crane Data." The article continues, "Money funds represented $5.2 trillion in assets as of Friday, according to Crane Data. Investors pulled about $7 billion from the funds that day [Friday], which Crane characterized as 'minimal,' given the products' huge asset base. Investors yanked about $100 billion from institutional prime money funds during a two-week period in March 2020." [Note: Crane Data's MFI Daily showed a very big jump in assets on Monday, March 13, though, with MMFs rising $37.7 billion to a record $5.328 trillion.] Federated Hermes' Deborah Cunningham tells ignites, "As of Monday, the firm's money funds had not been materially impacted by those holdings, she said.... Federated Hermes also spent time on Monday trying to reassure its money fund shareholders that 'the profile of SVB versus the profile of the banking institutions that are high-quality, minimal credit risk that we use in money market fund portfolios are vastly different,' Cunningham said." The article says, "Money funds 'ought to be better positioned than during the global financial crisis due to regulatory changes,' Stephen Dover, chief investment strategist at Franklin Templeton Institute, wrote in a Sunday update.... Money funds may even see an increase in assets from investors seeking a safe haven during the current bout of market stress, Crane said. The biggest impact from the bank collapses may be on whether the Fed changes course with its tightening policy, which aims to rein in record-high rates of inflation. When interest rates fall, money funds often get an initial 'burst of assets' because investors seek to buy the lag, essentially buying older, higher-yielding securities that money funds hold, Crane said." See also Barron's latest news piece, "People Are Flocking Into Money-Market Funds. There's a Small Risk."
