Daily Links Archives: November, 2013

Boston Fed President Eric Rosengren writes "Flirting With Money-Market Madness" in today's Wall Street Journal. He says, "SEC proposals that would increase instability are worse than no reform at all.... Five years after the financial crisis, we know what caused much of the chaos. Many aspects of the financial system have been strengthened, reducing the likelihood of future problems. And yet for money-market mutual funds, fundamental reform has not been enacted. Unfortunately, some reforms proposed by the Securities and Exchange Commission might actually work against financial stability, instead of enhancing it.... Unfortunately, the SEC's proposal would only apply to institutional prime funds and not to the more widespread retail prime funds. This overlooks the fact that more than 30 of the retail prime funds received support from their sponsors during the financial crisis, and many retail prime funds sought liquidity from the emergency liquidity facility. While only institutional prime funds experienced significant investor runs in 2008, without the extensive support provided, retail funds may have suffered the same. The more problematic SEC proposal would allow fund directors to charge an investor for redeeming from a prime money-market fund, and in some cases allow a director to temporarily suspend an investor's access to their funds for up to 30 days. While the proposal aims to manage run-like outflows, "discretionary liquidity fees" and "temporary redemption gates," as they are called, would only increase instability -- which is worse than no reform at all. The liquidity fee would force an investor to take a haircut that might not correlate with any decrease in the underlying asset value. Temporary redemption gates could block investors' access to their funds during a financial crisis -- exactly the time they need liquidity most."

Goldman Sachs filed to launch Goldman Sachs Prime Plus Fund, we learned from ignites.com. The filing says of the new fund's objective, "The Goldman Sachs Prime Plus Fund (the "Fund") seeks to generate current income while maintaining an emphasis on preservation of capital and liquidity.... The Fund pursues its investment objective by investing in a broad range of high quality, U.S. dollar-denominated money market and other fixed income instruments, including obligations issued or guaranteed by the U.S. Government, its agencies ... obligations of U.S. banks, corporate notes, commercial paper and other short-term obligations of U.S. companies, states, municipalities and other entities, fixed and floating rate asset-backed securities and repurchase agreements. The Fund may also invest in U.S. dollar-denominated obligations issued or guaranteed by foreign banks, companies and governments or their agencies, authorities, instrumentalities or sponsored enterprises. The Fund will not invest in mortgage-backed securities or derivatives.... The Fund will invest at least 85% of its total assets in securities (or the issuers of such securities) that are rated, at the time of purchase, in the highest short-term credit rating category by at least one nationally recognized statistical rating organization ("NRSRO") (A-1, P-1, or F1 by Standard & Poor’s Ratings Services ("Standard & Poor's"), Moody's Investors Service, Inc. ("Moody's") or Fitch Ratings, Inc. ("Fitch"), respectively), or, if such securities are unrated, determined by the Investment Adviser to be of comparable credit quality at the time of purchase. The remainder of the Fund's investments will carry a minimum short-term credit rating of A-2, P-2, or F2 by Standard & Poor's, Moody's or Fitch, respectively, at the time of purchase, or, if such securities are unrated, determined by the Investment Adviser to be of comparable credit quality at the time of purchase.... Except for floating rate and variable rate securities, the Fund will invest in securities that have remaining maturities of two years or less at the time of purchase, with limited exceptions where a security has maturity shortening features (e.g., demand features). Floating rate and variable rate securities must have remaining maturities of three years or less at the time of purchase, with limited exceptions where a security has maturity shortening features (e.g., demand features). The Fund will maintain a dollar-weighted average portfolio maturity ("WAM") that does not exceed 270 days and a dollar-weighted average portfolio life ("WAL") that does not exceed 365 days. The fund is not a money market fund and does not attempt to maintain a stable net asset value." Also, see the filing for WisdomTree Floating Rate Treasury Fund, which says, "The WisdomTree Floating Rate Treasury Fund (the "Fund") seeks to track the price and yield performance, before fees and expenses, of an index that measures the performance of the market for floating rate public obligations of the U.S. Treasury." Neither fund has listed expense ratios yet.

Another SEC Comment letter, this one from 39 Congressmen and labeled, "Tom Reed, et al., Members of Congress", written in late October (but posted in November), says, "We are writing to express our concern about the Securities and Exchange Commission's (SEC's) proposed changes to the regulation of money market mutual funds (MMFs) and the negative impact these changes may have on state and local governments. As former state and local government officials, we are well aware of the important role MMFs play in funding critical infrastructure and community projects throughout the country. Last year, many of us wrote to SEC Chairman Mary Schapiro asking the SEC to consider the impact of further MMF regulation on municipal financing. We were disappointed to see that the SEC's proposal would make harmful structural changes to municipal MMFs, and we urge you to consider exempting municipal funds from new regulations that would adversely affect state and local governments and taxpayers alike. Municipal MMFs play a critical role in providing state and local governments with affordable short-term funding to finance important local projects, such as highways, hospitals, colleges and water treatment facilities. In fact, municipal MMFs provide more than two-thirds of the short-term funding for such projects, making them the largest purchaser of short-term municipal debt. The SEC's proposed regulations will shrink this source of funding, leading to significantly higher borrowing costs and complications for states and municipalities. The SEC already implemented extensive reforms in 2010, which substantially improved the resiliency, safety and transparency of all MMFs. Yet on June 5, the SEC proposed additional regulations that would fundamentally alter the structure of certain funds by requiring them to abandon their stable $1 net asset value (NAV) and move to a floating NAV."

Fed Governor Dan Tarullo spoke Friday on "Shadow Banking and Systemic Risk Regulation". He says, "As illustrated, quite literally, by a chart that New York Fed staff produced a few years ago, the term "shadow banking system" encompasses a wide variety of institutions that engage in credit intermediation and maturity transformation outside the insured depository system. In my remarks today, I want to concentrate on short-term wholesale funding and, especially, the pre-crisis explosion in the creation of assets that were thought to be "cash equivalents." Such assets were held by a range of highly risk-averse investors, who were in many cases not fully cognizant that the "cash equivalents" in their portfolios were liabilities of shadow banks--the institutions depicted in the memorable graphic. In some cases, the perception of claims on shadow banks as cash equivalents was based on explicit or implicit promises by regulated institutions to provide liquidity and credit support to such entities. In other cases, the perception came about because market participants viewed the instruments held on the balance sheets of shadow banking entities--notably highly rated, asset-backed securities--as liquid and safe. While reliance on private mechanisms to create seemingly riskless assets was sustainable in relatively calm years, the stress that marked the onset of the financial crisis reminded investors that claims on the shadow banking system could pose far more risk than deposits insured by the Federal Deposit Insurance Corporation (FDIC). Once reminded of their potential exposure, investors engaged in broad-based and sometimes disorderly flight from the shadow banking system. This experience of the run on the shadow banking system that occurred in 2007 and 2008 reminds us that similar disorderly flights of uninsured deposits from banks lay at the heart of the financial panics that afflicted the nation in the late nineteenth and early twentieth centuries. The most dramatic of these episodes were the bank runs of the early 1930s that culminated in the bank holiday in 1933. Just as it was necessary, though not sufficient, to alter the environment that led to those successive deposit runs by introducing deposit insurance in order to create a stable financial system in the early-twentieth century, today it is necessary, though not sufficient, to alter the environment that can lead to short-term wholesale funding runs in order to create a stable financial system for the early twenty-first century."

ICI's most recent "Money Market Mutual Fund Assets" report shows money fund assets inched lower for the second week in a row following two weeks of inching higher. Following a plunge and rebound around the debt ceiling scare, assets have been virtually flat the past 4 weeks. It says, "Total money market mutual fund assets decreased by $3.15 billion to $2.669 trillion for the week ended Wednesday, November 13, the Investment Company Institute reported today. Taxable government funds decreased by $680 million, taxable non-government funds decreased by $860 million, and tax-exempt funds decreased by $1.61 billion.... Assets of retail money market funds decreased by $2.78 billion to $917.42 billion. Taxable government money market fund assets in the retail category decreased by $50 million to $196.48 billion, taxable non-government money market fund assets decreased by $2.17 billion to $527.76 billion, and tax-exempt fund assets decreased by $550 million to $193.18 billion.... Assets of institutional money market funds decreased by $370 million to $1.751 trillion. Among institutional funds, taxable government money market fund assets decreased by $630 million to $731.90 billion, taxable non-government money market fund assets increased by $1.31 billion to $949.10 billion, and tax-exempt fund assets decreased by $1.06 billion to $70.08 billion." Year-to-date, money fund assets are flat too, down by a mere $2 billion, or -0.1%. Institutional assets are up by $10 billion (0.5%) while Retail assets are down by $12 billion (1.2%).

ICI's latest "Estimated Long-Term Mutual Fund Flows" shows that bond funds continue to see substantial outflows. It explains, "Total estimated inflows to long-term mutual funds were $1.16 billion for the week ending Wednesday, November 13, 2013, the Investment Company Institute reported today. Flow estimates are derived from data collected covering more than 95 percent of industry assets and are adjusted to represent industry totals.... Bond funds had estimated outflows of $7.57 billion, compared to estimated outflows of $4.26 billion during the previous week. Taxable bond funds saw estimated outflows of $6.43 billion, while municipal bond funds had estimated outflows of $1.13 billion." Bond fund assets had declined by $4.3 billion, $2.4 billion, and $5.5 billion the prior three weeks, almost $15 billion in October, and they had declined by four consecutive months prior to October (down $11.3 billion in Sept., $29.1 billion in Aug., $17.1 billion in July, and $59.8 billion in June. Since May 31, bond funds have lost approximately $132 billion in assets, while money fund assets have increased by over $60 billion. See also, FT's "Money market funds are clinging on through low rates".

A release entitled, "Fitch: Bank Credit Quality & European MMF Regulations Concern Treasurers," says, "European corporate treasurers are concerned by decreasing bank credit quality, global banking and European money market fund (MMF) regulation, according to a live survey of 90 delegates at Fitch Ratings' third annual cash management conference in London last week. The event was hosted by Fitch's Fund and Asset Manager Rating group. The survey highlights the challenges faced by short-term investors, who are confronted with Basel III regulation that is reducing banks' appetite for short term funding and a potential overhaul of European MMF regulation: --70% of delegates view daily liquidity and cash flow matching as primary objectives of short-term investors. This objective came well ahead of achieving yield, which 17% listed as a primary objective. --Almost two-thirds of delegates consider the VNAV vs. CNAV issue as the most important matter in the proposed European MMF regulation. UK investors, who were more strongly represented in the audience, are more sensitive about this question than other European investors. --Three-quarters of delegates think that their allocation to MMFs would decrease if the majority of MMFs were to move to VNAV as a consequence of the proposed regulation. As a result, they would expect to reallocate cash away from MMFs into bank deposits and direct investments in short-term instruments. --40% of delegates stated that changes in bank credit quality are treasurers' biggest challenge with Basle III and MMF regulations cited equally as the second biggest challenge. --80% of delegates said that MMF ratings are explicitly mentioned in their investment guidelines. They value MMF ratings for providing inputs in their risk analysis (49%) and an assessment of the manager/investment process (28%)."

The Federal Reserve Bank of New York issued a comment entitled, "Statement to Revise Terms of Overnight Fixed-Rate Reverse Repurchase Agreement Operational Exercise, which says, "As noted in the September 20, 2013, Statement Regarding Overnight Fixed-Rate Reverse Repurchase Agreement Operational Exercise, the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York has been conducting daily, overnight fixed-rate reverse repo operations as part of an operational readiness exercise. Beginning with the operation to be conducted on Tuesday, November 19, the Desk will increase the fixed rate offered in these operations from four basis points to five basis points. All other terms of the exercise will remain the same. As an operational readiness exercise, this work is a matter of prudent advance planning by the Federal Reserve. These operations do not represent a change in the stance of monetary policy, and no inference should be drawn about the timing of any change in the stance of monetary policy in the future." See also, "Statement Regarding Overnight Fixed-Rate Reverse Repurchase Agreement Operational Exercise."

Money fund expert Viktoria Baklanova, formerly with Fitch Ratings and currently with Acacia Capital, recently penned a paper published in "`Law and Financial Markets Review" entitled, "EU proposal for regulation on money market funds". The Abstract says, "On 4 September 2013 the European Commission released a proposal that seeks to restructure the entire European money market fund (MMF) industry. This article outlines the premises of the proposal and discusses concerns related to the most controversial provisions. We believe that economically unfeasible requirements for constant net asset value (CNAV) MMFs will result in the exit of these funds. We believe that the primary objective of financial market stability cannot be achieved by eliminating CNAV MMFs in favour of variable net asset value (VNAV) MMFs. There is simply no evidence that VNAV MMFs are immune to runs. New systemic risk will emerge as a result. Other types of investment products will proliferate, including private liquidity funds, which the existing EU regulation is not addressing. The focus of the proposal is misplaced. Runs in a single fund, whether CNAV or VNAV, due to a credit event should not be the primary regulatory concern. Investing is always a risky business and regulation ought to empower investors with complete information to adequately manage these risks. We recognise that any regulatory rules will be imperfect. The never-ending search for the most efficient allocation of resources will drive investors away should the post-reform MMF structure prove too costly. The solution can be found in the balance between long-term funding needs of the real economy and the utility of these funds." (If you're unable to access, e-mail ted@cranedata.com to request a full copy of the paper.)

MSCI's RiskMetrics recently announced the availability of Money Market Stress Tests. The company, which also recently commented on the SEC's Proposed Money Market Fund Reforms, says in a marketing e-mail, "The SEC's Proposed Rule on the Money Market Fund Reform incorporates a fair number of requirements that push money market stress testing to a new level. It specifies a richer set of stress testing guidelines to be implemented, depending on which alternative would be adopted: transacting at a floating NAV or imposing a liquidity fee. MSCI, in a comment sent to the SEC in September, pointed out that stress testing could be an important piece in the new framework, so we developed sophisticated stress testing tools to help you comply with the SEC's procedures. With the new RiskMetrics Money Market Stress Tests, you can: Stress daily and weekly liquidity levels; Model issuer default correlations; and, Perform scenario analysis on historical events, like the 2008 Great Financial Crisis and 2011 Euro Crisis." In other news, the ICI released its latest weekly "Money Market Mutual Fund Assets" report, which says, "Total money market mutual fund assets decreased by $3.15 billion to $2.669 trillion for the week ended Wednesday, November 13, the Investment Company Institute reported today. Taxable government funds decreased by $680 million, taxable non-government funds decreased by $860 million, and tax-exempt funds decreased by $1.61 billion."

A press release entitled, "Cachematrix Becomes Member of Global SWIFT Network," tells us, "Cachematrix (www.cachematrix.com), the leading provider of money market fund, bank product trading and sweep technology for banks and financial institutions, announced today that it has successfully become a member of the global SWIFT network. Cachematrix has become a member of SWIFT, which is a member-owned cooperative that provides the communications platform, products and services to connect more than 10,000 banking organizations, securities institutions and corporate customers in 212 countries and territories. SWIFT enables its users to exchange automated, standardized financial information securely and reliably, thereby lowering costs, reducing operational risk and eliminating operational inefficiencies." Cachematrix CIO Matt Crooks comments, "Integrating directly with SWIFT further solidifies Cachematrix as a global leader of institutional liquidity solutions for banks and financial institutions. Our bank partners demand a wide variety of integration and settlement solutions depending on their strategic goals and technological needs. Rather than just supporting certain trading and settlement methods, like omnibus versus fully disclosed models, Cachematrix has always felt it is critical to offer a variety of solutions to cater to the market demand. As system integration experts, integrating directly with the SWIFT network was a logical next step towards strengthening our global presence. Our product solutions can now be customized to completely automate and streamline the trading processes wherever SWIFT is applicable." The release adds, "Cachematrix can now offer banks a choice. Banks can either utilize Cachematrix's new SWIFT architecture, or, if they prefer, can leverage their own existing internal SWIFT infrastructure."

Federal Reserve Chair Ben Bernanke spoke recently on "The Crisis as a Classic Financial Panic". He mentioned money funds a couple of times, saying, "In the more recent crisis, the Federal Reserve fulfilled the role of liquidity provider, consistent with the classic prescriptions of Walter Bagehot. The Fed lent not only to banks, but, seeking to stem the panic in wholesale funding markets, it also extended its lender-of-last-resort facilities to support nonbank institutions, such as investment banks and money market funds, and key financial markets, such as those for commercial paper and asset-backed securities. In both episodes, though, liquidity provision was only the first step. Full stabilization requires the restoration of public confidence. Three basic tools for restoring confidence are temporary public or private guarantees, measures to strengthen financial institutions' balance sheets, and public disclosure of the conditions of financial firms.... All three tools were used extensively in the recent crisis: In the United States, guarantees included the Federal Deposit Insurance Corporation's (FDIC) guarantees of bank debt, the Treasury Department's guarantee of money market funds, and the private guarantees offered by stronger firms that acquired weaker ones. Public and private capital injections strengthened bank balance sheets.... In contrast, reforms since 2008 have focused on critical regulatory gaps revealed by the crisis. Notably, oversight of the shadow banking system is being strengthened through the designation, by the new Financial Stability Oversight Council, of nonbank systemically important financial institutions (SIFIs) for consolidated supervision by the Federal Reserve, and measures are being undertaken to address the potential instability of wholesale funding, including reforms to money market funds and the triparty repo market."

Another of the "Comments on OFR Study on Asset Management Issues" is from James J. Angel, Ph.D., CFA, Visiting Associate Professor, University of Pennsylvania, The Wharton School. He writes, "Here are my comments on the Office of Financial Research (“OFR”) study on Asset Management and Financial Stability. First, I would like to commend the SEC for soliciting comments, while the OFR itself did not. Soliciting comments on all major staff studies is a good idea. I suggest that the SEC continue this practice not only for OFR studies, but for all future major SEC studies as well.... It is just as important for OFR to identify areas that do not threaten the financial stability of the United States as it is to identify those that do. Our regulators need to focus their limited resources on the most important areas. It is thus important for such a study to identify the sections of the asset management industry that present no threat as well as to identify firms and practices that do represent a threat. Unfortunately, this study does little to assist regulators in making such a distinction. The study is incomplete. As one who studies and teaches about regulation and financial crises, I was looking forward to a serious analysis that would provide objective and sound criteria for making a section 113 designation. Alas, I was disappointed in the result. The study provides a brief overview of the asset management industry, comparable to a chapter in an introductory textbook, along with a generic list of things that could go wrong. Indeed, the 34 page document uses the word "could" 66 time, the word "can" 72 times, and the word "may" 72 times."

ICI's latest weekly "Money Market Mutual Fund Assets" says, "Total money market mutual fund assets increased by $3.87 billion to $2.672 trillion for the week ended Wednesday, November 6, the Investment Company Institute reported today. Taxable government funds increased by $2.26 billion, taxable non-government funds decreased by $690 million, and tax-exempt funds increased by $2.30 billion." Money fund assets have risen for 3 weeks in a row (up $58.3 billion) following the resolution of the debt ceiling debate on Oct. 17. (They had declined by $80.6 billion in the 3 weeks prior to 10/17.) It adds, "Assets of retail money market funds increased by $1.35 billion to $920.19 billion. Taxable government money market fund assets in the retail category increased by $260 million to $196.53 billion, taxable non-government money market fund assets decreased by $220 million to $529.92 billion, and tax-exempt fund assets increased by $1.31 billion to $193.74 billion. Institutional: Assets of institutional money market funds increased by $2.52 billion to $1.751 trillion. Among institutional funds, taxable government money market fund assets increased by $2.00 billion to $732.53 billion, taxable non-government money market fund assets decreased by $480 million to $947.79 billion, and tax-exempt fund assets increased by $990 million to $71.14 billion. ICI reports money market fund assets to the Federal Reserve each week. Revisions are due to data adjustments, reclassifications, and changes in the number of funds reporting. Weekly money market assets for the last 20 weeks are available on the ICI website."

A statement entitled, "Treasury Assistant Secretary for Financial Markets Matthew Rutherford November 2013 Quarterly Refunding Statement," says, "The U.S. Department of the Treasury is offering $70 billion of Treasury securities to refund approximately $63.5 billion of Treasury notes maturing on November 15, 2013. This will raise approximately $6.5 billion of new cash. The securities are: A 3-year note in the amount of $30 billion, maturing November 15, 2016; A 10-year note in the amount of $24 billion, maturing November 15, 2023; and, A 30-year bond in the amount of $16 billion, maturing November 15, 2043. The 3-year note will be auctioned on a yield basis at 1:00 p.m. ET on Tuesday, November 12, 2013. The 10-year note will be auctioned on a yield basis at 1:00 p.m. ET on Wednesday, November 13, 2013, and the 30-year bond will be auctioned on a yield basis at 1:00 p.m. ET on Thursday, November 14, 2013. All of these auctions will settle on Friday, November 15, 2013. The balance of Treasury financing requirements will be met with the weekly bill auctions, cash management bills, the monthly note and bond auctions, the November 10-year Treasury Inflation Protected Security (TIPS) reopening auction, the December 5-year TIPS reopening auction, the January 10-year TIPS auction, and the initial January 2-year Floating Rate Note auction (FRN).... Regarding "Floating Rate Notes (FRNs)," they say, "Treasury intends to announce the details of the initial Floating Rate Note (FRN) auction on Thursday, January 23, 2014, with the first auction occurring on Wednesday, January 29, 2014. Settlement of the security will occur on Friday, January 31, 2014. The FRN is the first new product that Treasury has brought to market in 17 years. The FRN will have a maturity of two years and Treasury anticipates that the size of the first auction will be between $10 and $15 billion. Specific terms and conditions of each FRN issue, including the auction date, issue date, and public offering amount, will be announced prior to each auction. For more details about the new Treasury FRN product, including a term sheet, FRN auction rules, and Frequently Asked Question, please see: http://www.treasurydirect.gov/instit/statreg/auctreg/auctreg.htm. In addition, a tentative auction calendar that includes Treasury FRNs can be found at: http://www.treasury.gov/resource-center/data-chart-center/quarterly-refunding/Pages/default.aspx."

A press release entitled, "ICAP plc : MyTreasury Wins 2013 Treasury Management International Money Market Fund Dealing Portal Award," says, "MyTreasury, a leading multi-product cash investment portal, today announced it has been awarded the 2013 Treasury Management International Best MMF Dealing Portal award. This is the sixth consecutive year MyTreasury has won this award, as voted by the readers of Treasury Management International (TMI)." Justin Meadows, Chief Executive of MyTreasury, comments, "We are delighted to receive this award for the sixth year running and believe that it is recognition of the high technical quality, comprehensive coverage and dedicated support we provide to all our customers. We seek to replicate our success in money funds as we expand the platform into new products and will continue to deliver the high-quality service the financial community has come to expect of MyTreasury." The release adds, "TMI is an international publication targeted at the treasury and finance community. It is published in association with a wide range of national treasury associations including the European Association of Corporate Treasurers (EACT) and National Association of Corporate Treasurers (NACT) in North America. MyTreasury's portal has grown to $50 billion in assets under management and is currently building on the success and rapid growth of its European money fund coverage with the strategic addition of US onshore funds. The platform also benefits from a multi-product offering to compliment the treasurers' workflow including Certificate and Term/Time Deposits. Tri-party Repo will be added to the platform in 2014. Investors using MyTreasury benefit significantly from the MyTreasury/SWIFT automation service which eliminates all manual processing, thereby greatly minimising potential trading errors, failure and other inefficiencies that inevitably occur with manual intervention."

Registrations and sponsorships are now being accepted for our 4th annual Crane's Money Fund University, which will take place January 23-24, 2014, at The Renaissance Providence Hotel. Money Fund University offers attendees an affordable and comprehensive two day, "basic training" course on money market mutual funds. This year's program will feature a heavier than usual regulatory component and will also cover the history of money funds, interest rates, Rule 2a-7, ratings, rankings, money market instruments such as commercial paper and repo, and portfolio construction and credit analysis. New portfolio managers, analysts, investors, issuers, service providers, and anyone interested in expanding their knowledge of "cash" investing should benefit from our comprehensive program. Even experienced professionals should enjoy a refresher course and the opportunity to interact with peers in an informal setting. Attendee registration for Crane's Money Fund University is $500. Exhibit space is $2,000 and sponsorship opportunities are $3K, $4.5K, and $5K. (Click here to register. A block of rooms has been reserved at The Renaissance Providence Hotel. The conference negotiated rate of $159 (plus sales of tax 13% currently) is available through, December 20th. For booking information please reference the Hotel and Travel page on the website. We hope to see you in Providence! Note: We'll also be releasing the preliminary agenda for our 2014 Money Fund Symposium, which will take place in Boston (Renaissance Waterfront), June 23-25, 2014, in coming weeks.

In a "Statement to Revise Terms of Overnight Fixed-Rate Reverse Repurchase Agreement Operational Exercise," the Federal Reserve Bank of New York says, "As noted in the September 20, 2013 Statement Regarding Overnight Fixed-Rate Reverse Repurchase Agreement Operational Exercise, the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York has been conducting daily, overnight fixed-rate reverse repo operations as part of an operational readiness exercise. Beginning with the operation to be conducted on Monday, November 4, the Desk will increase the fixed rate offered in these operations from two basis points to three basis points. All other terms of the exercise will remain the same. As an operational readiness exercise, this work is a matter of prudent advance planning by the Federal Reserve. These operations do not represent a change in the stance of monetary policy, and no inference should be drawn about the timing of any change in the stance of monetary policy in the future." See also, Statement Regarding Overnight Fixed-Rate Reverse Repurchase Agreement Operational Exercise. In other news, Financial News writes "Why it's make-or-break time for European fund body," which says, "New European Commission plans affecting money market funds (mutual funds invested in short-term, very liquid debt) have put the Institutional Money Market Fund Association into the spotlight."

ICI's latest "Money Market Mutual Fund Assets" says, "Total money market mutual fund assets increased by $1.14 billion to $2.669 trillion for the week ended Wednesday, October 30, the Investment Company Institute reported today. Taxable government funds increased by $2.59 billion, taxable non-government funds decreased by $210 million, and tax-exempt funds decreased by $1.24 billion." Money fund assets, according to ICI's weekly survey, jumped the last week in September (up $35.9 billion), dropped sharply for 3 weeks (down $80.4 billion through Oct. 16), then rebounded $54.4 billion last week. The release explains, "Assets of retail money market funds decreased by $8.06 billion to $920.10 billion. Taxable government money market fund assets in the retail category decreased by $2.34 billion to $196.27 billion, taxable non-government money market fund assets decreased by $4.85 billion to $531.40 billion, and tax-exempt fund assets decreased by $870 million to $192.43 billion.... Assets of institutional money market funds increased by $9.20 billion to $1.749 trillion. Among institutional funds, taxable government money market fund assets increased by $4.93 billion to $730.52 billion, taxable non-government money market fund assets increased by $4.65 billion to $948.26 billion, and tax-exempt fund assets decreased by $370 million to $70.14 billion." Year-to-date, money fund assets are up marginally ($4 billion, or 0.2%).

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