Thursday, June 10, 2010

More Signs of Disappearing Liquidity

For the fifth week in a row, the U.S. commercial paper market has shrunk on an unadjusted basis, according to Federal Reserve data released today.

Five weeks ago the market stood at $102.8 billion. Today, it is at $ 97.2 billion.

1 comment:

  1. You can read all about the temporarily closed CPFF facility here:

    "The legal basis for the CPFF stemmed from section 13(3) of the Federal Reserve Act, requiring the use of such a facility in “unusual and exigent circumstances.” As such, the Federal Reserve does not have the authority to make the CPFF a permanent liquidity backstop. This in turn has implications for the ongoing debate on regulatory reform. The financial market crisis of 2007-09 demonstrated the current financial architecture’s vulnerabilities to liquidity crises emanating from nondepository institutions. As such, an important component of regulatory reform focuses on improving the resiliency of money markets to financial and economic shocks. Many ongoing reform efforts aim to reduce the vulnerability of money markets to liquidity crises. These efforts focus particularly on reforming money market funds, the commercial paper market, and the repo markets."

    MMF's are already being regulated out of existence. Redemption freezes are legal as of last month. CPFF's and Repos are next? Pretty soon, the only thing you will be able to invest in are govvies.