You are here
Fed official warns on rush to 'government-only' U.S. money funds
By Jonathan Spicer
Reuters
Monday, February 22, 2016
NEW YORK -- The Federal Reserve's top markets official warned on Monday that a trend of U.S. money market firms converting funds from "prime" to "government-only" could be sharply reversed and harm the overall execution of policy when a new Fed tool is eventually dismantled.
In a speech on tools the U.S. central bank adopted to wrench interest rates from near zero in December, New York Fed markets chief Simon Potter warned money funds that one of those tools, an overnight repurchase facility known as ON RRP, is only temporary.
More than 100 funds have access to this facility that provides a short-term yield of 0.25 percent on cash. Many of them have begun in recent months to make the conversion from prime, which invests in a wide range of securities, to the narrower government-only structure ahead of an October deadline by the Securities and Exchange Commission for new controls on client redemptions in prime funds.
But if assets were to "grow significantly" in government-only funds, that could increase demand on the repo facility (ON RRP) since "most fund managers consider the facility to be a government investment," Potter said.
"We would not want to see growth in government-only money funds if it were predicated on a mistaken impression that ON RRP would be around indefinitely and with high capacity," he said. If the funds were to realize their error and "decline sharply, this could possibly lead to less efficient transmission of monetary policy." ...
... For the remainder of the report:
http://www.reuters.com/article/us-usa-fed-potter-idUSKCN0VV283
Buy metals at GoldMoney and enjoy international storage
GoldMoney was established in 2001 by James and Geoff Turk and is safeguarding more than $1.7 billion in metals and currencies. Buy gold, silver, platinum, and palladium from GoldMoney over the Internet and store them in vaults in Canada, Hong Kong, Singapore, Switzerland, and the United Kingdom, taking advantage of GoldMoney's low storage rates, among the most competitive in the industry. GoldMoney also offers delivery of 100-gram and 1-kilogram gold bars and 1-kilogram silver bars. To learn more, please visit:
http://www.goldmoney.com/?gmrefcode=gata
Join GATA here:
Mines and Money Asia
Tuesday-Thursday, April 5-7, 2016
Hong Kong Convention and Exhibition Centre
Hong Kong Special Administrative Region, China
http://asia.minesandmoney.com/
Mining Investment Asia
Wednesday-Friday, April 13-15, 2016
Marina Bay Sands, Singapore
http://www.mininginvestmentasia.com/
Support GATA by purchasing recordings of the proceedings of the 2014 New Orleans Investment Conference:
https://jeffersoncompanies.com/landing/2014-av-powell
Or by purchasing DVDs of GATA's London conference in August 2011 or GATA's Dawson City conference in August 2006:
http://www.goldrush21.com/order.html
Or by purchasing a colorful GATA T-shirt:
Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009:
http://gata.org/node/wallstreetjournal
Help keep GATA going
GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:
To contribute to GATA, please visit:
