Bloomberg Recaps Day 1 of MFS
Bloomberg's Alex Harris wrote last week, "Money Funds Done With Crisis 'Whack-A-Mole': Crane's Day 1 Recap," reviewing some of the highlights of our recent Money Fund Symposium in Atlanta. She says, "Money-market funds are looking to extending the duration of their investments now that they have greater confidence in the Federal Reserve's policy path and have cleared crises such as the debt-limit standoff, while expecting cash to keep pouring in, participants said Wednesday on the first day of the Crane's Money Fund Symposium." She quotes Laurie Brignac, CIO and Head of Global Liquidity at Invesco, "I'm thankful we have the debt ceiling done so we can focus on Treasury debt, manage flows and look a little more forward without having to play whack-a-mole with crises." The piece tells us, "The expectation has been that once the debt ceiling was resolved, Treasury would unleash a deluge of bill supply, which would pull funding rates higher and draw cash away from the Fed's overnight reverse repo facility. Balances at the RRP have whipsawed around $2 trillion for the past week. Tony Wong, Invesco's co-head of investments, said there's still a lot of liquidity in the system so investors are looking at how that translates to central bank policy, as well as risk appetite." Bloomberg also quotes, "Dan LaRocco, head of US liquidity at Northern Trust Asset Management, said during a panel that they're still parking a lot of cash in the RRP -- at a rate of 5.05% -- because 'it makes a lot of sense with the liquidity profile and yield' and is 'still a natural fit in a lot of our portfolios.' LaRocco also said they're not buying Treasury bills that are pricing in Fed rate cuts as the central bank is likely to pause for an extended period of time." The piece adds, "The surge in bill supply is leading primary dealers to be more 'balance-sheet conscious' because the lack of capacity tends to push up secured funding rates, such as those for repurchase agreements, according to Barclays Plc strategist Joseph Abate. Barclays sees balances at the RRP dropping to $1.2 trillion by year-end, but Abate notes there's significant uncertainty around that estimate. As for inflows, they are expected to continue because 'companies are planning to hold even more cash,' Brignac said.... `Northern Trust's LaRocco said that the cash flowing into money funds seems to be coming out of bank deposits, but 'reversing it isn't as easy as banks having a higher deposit beta.'"
