More than likely the loans are because wthdrawal demands are so strong that the funds can not liquidate their short-term paper at face value and will have to hold the paper until maturity.
Showing posts with label MoneyMarketFunds. Show all posts
Showing posts with label MoneyMarketFunds. Show all posts
Friday, October 10, 2008
$149 Billion Loaned To Money Market Mutual Funds
Over the last week $145.9 billion worth of loans were made to money market mutual funds—via banks—to help the funds meet withdrawals, according to data released by the Fed.
More than likely the loans are because wthdrawal demands are so strong that the funds can not liquidate their short-term paper at face value and will have to hold the paper until maturity.
More than likely the loans are because wthdrawal demands are so strong that the funds can not liquidate their short-term paper at face value and will have to hold the paper until maturity.
Friday, September 19, 2008
Forget A Seven Day Halt; Reserve Seeks to Halt Fund Redemptions Period; Has $60 Billion In Withdrawal Requests!!
The Reserve said it has filed, on behalf of the Primary Fund and the U.S. Government Fund, an application with the U.S. Securities and Exchange Commission (SEC) seeking an order to be allowed to suspend investor withdrawals or delay redemptions.
"The funds' investment adviser is unable to dispose of securities to fund redemptions without impairing the net asset value of each fund," the company said in a statement.
The Primary Fund has received redemption requests of about $60 billion this week, the company said. And investors have wanted to pull out about $6 billion from the $10 billion U.S. Government Fund, it added.
"The funds' investment adviser is unable to dispose of securities to fund redemptions without impairing the net asset value of each fund," the company said in a statement.
The Primary Fund has received redemption requests of about $60 billion this week, the company said. And investors have wanted to pull out about $6 billion from the $10 billion U.S. Government Fund, it added.
-Robert Wenzel
Things That Go Poof
From my iGoogle page, I monitor a number of news feeds.
The headline below, obviously, would catch my eye. The Fed is now backstopping the mutual fund industry and, yet, corporate officials are apparently still hesitant to park money there. My enquiring mind wanted to know more. I clicked on the story. Poof, Wham, Bam, Gone.
I even googled the first sentence. No luck the only link that shows up is the dead link. I hope the reporter survived.
File under Censorship?
Corporate Treasurers Remain Wary Of Money-Market Funds - CNNMoney.com
SAN FRANCISCO -(Dow Jones)- An explicit government guarantee of money-market funds will likely put a floor under the struggling $3.4 trillion market, but corporate cash that fled it won't be tempted back until both stability and yields rise...
-Robert Wenzel.
The headline below, obviously, would catch my eye. The Fed is now backstopping the mutual fund industry and, yet, corporate officials are apparently still hesitant to park money there. My enquiring mind wanted to know more. I clicked on the story. Poof, Wham, Bam, Gone.
I even googled the first sentence. No luck the only link that shows up is the dead link. I hope the reporter survived.
File under Censorship?
Corporate Treasurers Remain Wary Of Money-Market Funds - CNNMoney.com
SAN FRANCISCO -(Dow Jones)- An explicit government guarantee of money-market funds will likely put a floor under the struggling $3.4 trillion market, but corporate cash that fled it won't be tempted back until both stability and yields rise...
-Robert Wenzel.
Treasury Announces Guaranty Program for Money Market Funds
September 19, 2008
hp-1147
Treasury Announces Guaranty Program for Money Market Funds
Washington
- The U.S. Treasury Department today announced the establishment of a temporary guaranty program for the U.S. money market mutual fund industry. For the next year, the U.S. Treasury will insure the holdings of any publicly offered eligible money market mutual fund – both retail and institutional – that pays a fee to participate in the program.President George W. Bush approved the use of existing authorities by Secretary Henry M. Paulson, Jr. to make available as necessary the assets of the Exchange Stabilization Fund for up to $50 billion to guarantee the payment in the circumstances described below.
Money market funds play an important role as a savings and investment vehicle for many Americans; they are also a fundamental source of financing for our capital markets and financial institutions. Maintaining confidence in the money market fund industry is critical to protecting the integrity and stability of the global financial system.
Concerns about the net asset value of money market funds falling below $1 have exacerbated global financial market turmoil and caused severe liquidity strains in world markets. In turn, these pressures have caused a spike in some short term interest and funding rates, and significantly heightened volatility in exchange markets. Absent the provision of such financing, there is a substantial risk of further heightened global instability.
Maintenance of the standard $1 net asset value for money market mutual funds is important to investors. If the net asset value for a fund falls below $1, this undermines investor confidence. The program provides support to investors in funds that participate in the program and those funds will not "break the buck".
This action should enhance market confidence and alleviate investors' concerns about the ability for money market mutual funds to absorb a loss. Investors in money market mutual funds with a net asset value that falls below $1 would be notified that their fund triggered the insurance program.
The Exchange Stabilization Fund was established by the Gold Reserve Act of 1934. This Act authorizes the Secretary of the Treasury, with the approval of the President, "to deal in gold, foreign exchange, and other instruments of credit and securities" consistent with the obligations of the U.S. government in the International Monetary Fund to promote international financial stability. More information on the Exchange Stabilization Fund can be found at http://www.treas.gov/offices/
-30-
Thursday, September 18, 2008
Putnam Investments Closes $12B Money-Market Fund
Putnam Investments has closed a $12.3 billion money-market fund.
The Prime Money Market Fund was open only to institutional investors. Putnam said in a statement that its board decided to close the fund last night after receiving a large number of redemption requests. The company said it could honor those requests only by selling assets at a loss, reducing the value of the remaining shares.
Putnam said it decided instead to liquidate the fund and spread any losses evenly among all the investors. "We wanted to treat all shareholders equally," said spokeswoman Laura McNamara. She said it was "premature" to discuss how much of a loss, if any, shareholders will incur.
Wednesday, September 17, 2008
Wachovia Money Market Funds Have Exposure To Lehman Brothers Bad Debt
Wachovia Corp. said three money funds offered through its money management subsidiary Evergreen Investments did have exposure to Lehman Brothers, which filed for bankruptcy Monday. The funds are Evergreen Institutional Money Market Fund, with 1.94 percent of total assets held in Lehman debt as of the close on Friday, before Lehman's collapse; Evergreen Money Market Fund, with 1.66 percent; and Evergreen Prime Cash Management Fund, with 0.97 percent.
Yesterday, the oldest money market mutual fund in the country said its $64 billion Reserve Primary Fund "broke the buck", i.e. traded below $1.00, because of Lehamn debt securities it held that had to be marked down to zero. The fund also froze all redemptions for seven days.
Wachovia, on the otherhand, said it "will support the value of Lehman credit held in the funds" by pouring cash into the funds from the parent company to ensure the funds don't fall short of maintaining at least $1 for every dollar invested in them.
-EPJ Newsdesk
Yesterday, the oldest money market mutual fund in the country said its $64 billion Reserve Primary Fund "broke the buck", i.e. traded below $1.00, because of Lehamn debt securities it held that had to be marked down to zero. The fund also froze all redemptions for seven days.
Wachovia, on the otherhand, said it "will support the value of Lehman credit held in the funds" by pouring cash into the funds from the parent company to ensure the funds don't fall short of maintaining at least $1 for every dollar invested in them.
-EPJ Newsdesk
We Can See Clearly Now: Money Market Funds Go Transparent
To following should be read while humming the notes from the Johnny Nash song:
I can see clearly now, the rain is gone,
I can see all obstacles in my way
Gone are the dark clouds that had me blind
It’s gonna be a bright (bright), bright (bright)
Sun-Shiny day.
I think I can make it now, the pain is gone
All of the bad feelings have disappeared
In the wake of problems at Reserve Primary Funds, because of holdings of Lehman debt that had to be markdown to zero, some money market funds are announcing that they will list on a daily basis the securities they hold.
Oppenheimer Funds Inc. said it would start posting holdings of its three money funds daily on its web site beginning Thursday.
Daily postings of fund holdings "will provide the transparency that shareholders want from their money market funds," OppenheimerFunds Chief Executive John Murphy said in a message on the firm's Web site.
The firm said its money funds "do not have holdings of some of the companies currently in the news, nor do they have direct exposure to subprime mortgage-related securities."
Invesco Ltd. said today it will start posting daily holdings updates, and said its U.S. money funds have no exposure to troubled financial services companies.
BlackRock Inc., Legg Mason Inc., Charles Schwab Corp. and Federated Investors Inc. were among other firms today that reported their money market funds have no Lehman exposure.
Wachovia money market funds do have exposure to Lehman bad debt, see story here.
I can see clearly now, the rain is gone,
I can see all obstacles in my way
Gone are the dark clouds that had me blind
It’s gonna be a bright (bright), bright (bright)
Sun-Shiny day.
I think I can make it now, the pain is gone
All of the bad feelings have disappeared
In the wake of problems at Reserve Primary Funds, because of holdings of Lehman debt that had to be markdown to zero, some money market funds are announcing that they will list on a daily basis the securities they hold.
Oppenheimer Funds Inc. said it would start posting holdings of its three money funds daily on its web site beginning Thursday.
Daily postings of fund holdings "will provide the transparency that shareholders want from their money market funds," OppenheimerFunds Chief Executive John Murphy said in a message on the firm's Web site.
The firm said its money funds "do not have holdings of some of the companies currently in the news, nor do they have direct exposure to subprime mortgage-related securities."
Invesco Ltd. said today it will start posting daily holdings updates, and said its U.S. money funds have no exposure to troubled financial services companies.
BlackRock Inc., Legg Mason Inc., Charles Schwab Corp. and Federated Investors Inc. were among other firms today that reported their money market funds have no Lehman exposure.
Wachovia money market funds do have exposure to Lehman bad debt, see story here.
-Robert Wenzel
Gold Up $88.50 per Ounce
Gold is trading in the 24 hour spot market at $863.20 up $85.50 per ounce.
On news of the 7 day freeze on redemptions of a money market mutual fund, investors are seeking complete safety, gold is soaring and money is pouring into treasury bills. The current yield on 3 month T-blls is 0.558%--the lowest level since 1954.
-EPJ Newsdesk
On news of the 7 day freeze on redemptions of a money market mutual fund, investors are seeking complete safety, gold is soaring and money is pouring into treasury bills. The current yield on 3 month T-blls is 0.558%--the lowest level since 1954.
-EPJ Newsdesk
Mutual Fund Industry Group Issues Statement
ICI Statement on Money Market Mutual Funds
Washington, DC, September 16, 2008 - Investment Company Institute President and Chief Executive Officer Paul Schott Stevens today issued the following statement:
"Today, Reserve Management Corporation announced that one of its money market mutual funds is unable to maintain a $1.00 net asset value (NAV), an event triggered by unprecedented market conditions that have affected a wide range of financial firms. This type of event--known as "breaking the buck"--is extremely rare.
"Money market mutual funds have been a successful financial product for millions of investors. Although money market funds are not guaranteed, investors have benefited from the security, liquidity, and diversification that these funds provide under stringent and effective regulation. Today, money market funds hold $3.5 trillion in assets for a wide range of individual and institutional investors.
"ICI is working closely with its members and with regulators, including the U.S. Securities and Exchange Commission and the Federal Reserve, to maintain open communications about market conditions and their impact on funds.
"The fundamental structure of money market funds remains sound. These funds are subject to strict regulation governing credit quality, liquidity, diversification, and transparency. Rule 2a-7, administered by the SEC, strictly limits the types of securities in which money market funds can invest. Securities held by money market funds must be judged highly credit-worthy by both objective and subjective tests, and Rule 2a-7 imposes strict requirements for diversification of assets. The provisions of Rule 2a-7 have operated to help money market funds maintain a stable NAV of $1.00 per share. While not obligated to do so, fund sponsors have voluntarily lent support to their money market funds with credit lines or cash infusions in a number of recent instances.
"In the only previous instance of a money market fund breaking the buck, Community Bankers, a small institutional money market fund, paid investors 96 percent of their principal."
-EPJ Original Documents
What Happens If There Is A Run On Money Markets? Is There A "Money Market Mutual Fund Holiday" Ahead?
News that the Reserve Primary Fund, the oldest mutual fund in the country with $64 billion under management, has broken the buck and frozen resumptions for 7 days, is not good.
Edges of panic are beginning to appear throughout the system. There is a flight to absolute safety. 3-month T-Bills are trading to yield 0.558% ( yield not seen since 1954!). Gold, as I write, is up over $88.50.
Clearly, gold and Treasury bills are the only safe havens in investors eyes. If another money market mutual fund freezes redemptions, all out panic could ensue. How exactly does the government stop that panic? The possibility of freezing all money market funds in a "money market mutual fund holiday," Ã la the Great Depressiom "Bank Holidays", can not be ruled out. The Fed and Treasury would then buy themselves some time to pump money into the entire money market mutual fund system, somehow.
Pray it doesn't come to this, but if money market mutual fund redemptions begin to soar, I see no alternative.
-Robert Wenzel
The EPJ Dictonary: Breaking The Buck
A money market fund (MMF)is said to be "Breaking the Buck" when its net asset value drops below $1.00 per share.
-EPJ Dictionary
-EPJ Dictionary
Tuesday, September 16, 2008
Holy Sh*t: Money Market Breaks Buck; Freezes Redemptions
One the largest money market funds has put a seven-day freeze on investor redemptions after the net asset value of its shares fell below $1.
Reserve Primary Fund, a $64 billion fund managed by money market fund inventor The Reserve, said late Tuesday that its $785 million holding of Lehman Brothers Holdings debt has been valued at zero.
As of 4 p.m., the value of the fund's share was 97 cents. The Reserve said that redemption requests received before 3 p.m. will be paid out at $1 a share.
"Effective today and until further notice, the proceeds of redemptions from The Primary Fund will not be transmitted to the redeeming investor for a period of up to seven calendar days after the redemption," The Reserve said in a statement.
On Monday, Wachovia said it would pump money into three Evergreen money market funds. Evergreen would not disclose how much is being put into the funds.
BlackRock Inc. sent a letter to its money market shareholders on Monday telling them that its funds had no Lehman debt.
"We do not have any holdings of Lehman Brothers paper, nor is Lehman a counterparty to any repurchase agreements in our 2a-7 registered money market funds," noted Simon Mendelson, managing director in BlackRock's COO global cash management group.
Reserve Primary Fund, a $64 billion fund managed by money market fund inventor The Reserve, said late Tuesday that its $785 million holding of Lehman Brothers Holdings debt has been valued at zero.
As of 4 p.m., the value of the fund's share was 97 cents. The Reserve said that redemption requests received before 3 p.m. will be paid out at $1 a share.
"Effective today and until further notice, the proceeds of redemptions from The Primary Fund will not be transmitted to the redeeming investor for a period of up to seven calendar days after the redemption," The Reserve said in a statement.
On Monday, Wachovia said it would pump money into three Evergreen money market funds. Evergreen would not disclose how much is being put into the funds.
BlackRock Inc. sent a letter to its money market shareholders on Monday telling them that its funds had no Lehman debt.
"We do not have any holdings of Lehman Brothers paper, nor is Lehman a counterparty to any repurchase agreements in our 2a-7 registered money market funds," noted Simon Mendelson, managing director in BlackRock's COO global cash management group.
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