2 min readAbstract The expiration of transaction account guarantees requires actions from treasury cash managers. While essentially all of the $2.0 trillion growth in domestic deposits since 2007 went to the 20 largest banks, the banks’ deposit credit strength declined by almost three ratings notches over the same period. Although 13 of the 20 had Aaa deposit…
2 min readAbstract This paper attempts to quantify the impact of a liquidity premium in money market funds by modeling three hypothetical portfolios of 29, 60, and 121-day weighted average maturities (WAM). Through our modeling process, we found the WAM extensions would have resulted in 0.11% and 0.31%, respectively, of additional annual yield potential over the 29-day…
2 min readOn June 24, 2009, the Securities and Exchange Commission (SEC) announced the long-anticipated proposed amendments to the 2a-7 rule that regulates money market mutual funds. The proposed changes were prompted by the extraordinary events in the money fund industry that took place after the Reserve Primary Fund’s net asset value (NAV) dropped below a constant…
2 min readAs a treasurer or a CFO, what would your reaction be if you were presented with the following description of a cash investment option? It’s a structured fixed income product sold as equity without a stated maturity date. It makes no commitment to daily liquidity, nor does it guarantee principal protection and it pays a…
2 min readExecutive Summary Tip No. 1: In a market that lacks liquidity, CPFF means liquidity. Tip No. 2: When a firm can no longer access CPFF, liquidity may deteriorate rather rapidly. Tip No. 3: Despite the appearance to the contrary, not all CPFF-eligible issuers are the same. Tip No. 4: CPFF eligibility and credit ratings are…
2 min readExecutive Summary A. Recent market turmoil uncovered rising systemic risks among money market funds: Regulatory rules failed to adequately address investment risks Defending the constant $1 share value became more difficult Money funds as commingled vehicles have inherent drawbacks B. Key factors in money market fund selections: Focus on the wherewithal of the funds’ sponsors…
3 min readExecutive Summary Institutional cash investors continue to face uncertainties and difficult choices in ultimately obtaining liquidity despite the latest liquidity announcements. Interests of institutional investors have taken a back seat in these settlements. The distinction between retail and institutional investors seems arbitrary and illogical. To avoid their own reputational risk, we think that the secondary…