US Treasury Office of Financial Research (OFR) Publishes Money Market Fund (MMF) Monitor

The Office of Financial Research (OFR) (a department of the US Treasury) has published new research "OFR Monitor Shows Accelerating Shift to Government Money Market Funds".  

This includes a new US Money Market Fund (MMF) Monitor site which shows the detailed breakdowns of the MMFs by:    Region, Country, Sector, Credit and Asset Type.

It shows significant declines this year (approx USD 700 billion) in the size of total Prime MMFs, which can buy non-Government paper including bank paper.  The OFR attributes the shift to the Oct. 14, 2016, deadline for implementing Securities and Exchange Commission (SEC) reforms.

 

This is balanced by a similar growth in Government MMFs.  These MMFs can continue to redeem at par but are unable to invest in bank paper.

 

It is further corroboration that, in line with policy intentions since the crisis, another means of maturity transformation has been curtailed successfully - this time by the SEC.

Previously, banks could raise term funding (up to a year) from MMFs who were funded by investors who wanted (and thought they got) an at par, on demand, money market investment.

This has increased LIBOR especially for longer terms through this year.