Money markets have a $750 billion problem in zero-rate world

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By Emily Barrett and Katherine Greifeld
Bloomberg News
Monday, September 8, 2020

A $750 billion industry still struggling to bounce back from the last crisis is cracking under the Federal Reserve’s lower-for-longer mantra on U.S. interest rates.

Prime money-market funds -- a long-time favorite for anyone seeking a cash-like investment with a little extra yield -- are facing an existential challenge, just four years after a regulatory overhaul to restore confidence in the wake of the global financial crisis. Assets in these vehicles dropped 20% in just six weeks this year, spurring talk of new reforms. But some of the industry's leaders are opting for another solution: Shutting them down.

... Dispatch continues below ...


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Kodiak President and CEO Claudia Tornquist said: "While we are just beginning to unlock the untapped potential of the MPD project, we view this new discovery as transformative for the project and by extension for Kodiak. Especially remarkable are the new high gold values, which we would have viewed as a successful stand-alone gold discovery in the absence of any copper. Given our 100% ownership of MPD, and its position adjacent to highways with year-round accessibility, we anticipate a very active remainder of 2020 and that 2021 will be our most exciting and productive year so far."

For the remainder of the announcement:

https://www.kodiakcoppercorp.com/news/news-releases/kodiak-drills-282-m-...



Vanguard Group, the world's second-largest asset manager, is converting a $125 billion fund so it buys government debt rather than the short-term corporate notes it has invested in for decades, and Northern Trust Corp. and Fidelity Investments have recently axed funds with a similar focus. The decisions entrench a prolonged decline for prime funds and could hurt a market that thousands of companies rely on for funding.

The strategies are collateral damage from the Fed's aggressive approach to suppressing rates for years to come. The realization that these funds, which are supposed to provide an edge over more-conservative alternatives, aren’t going to get much more attractive any time soon is a grim prospect for investors who must often stomach limits on redemptions -- known as gates -- to buy them. Asset managers are in turn finding their fees increasingly difficult to justify.

"We're anticipating a very extended period at the zero lower bound -- that's brutal for money funds," said BMO Capital Markets rates strategist Jon Hill. "What's the argument for going into a prime fund, which could get gated and which is less liquid than being in Treasury bills and repo, if you're only going to pick up a few basis points on yield?" ...

... For the remainder of the report:

https://www.bloomberg.com/news/articles/2020-09-08/money-markets-have-a-...

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