DIRECTIONS: Read the following and answer all the questions?
http://www.americanenglishconversation.com/
http://www.freeenglishconversation.blogspot.com/
http://www.grammar-help.blogspot.com/
Investors are pulling cash from some U.S. money market funds amid worries that their loans to European banks would go bad if Greece defaults on its debt.
A Greek default would roil the $2.7 trillion money market mutual fund industry, which Federal Reserve Chairman Ben Bernanke highlighted this week when he described the funds' exposure to European banks as "very substantial."
http://www.americanenglishconversation.com/
http://www.freeenglishconversation.blogspot.com/
http://www.grammar-help.blogspot.com/
Investors are pulling cash from some U.S. money market funds amid worries that their loans to European banks would go bad if Greece defaults on its debt.
 |
Investors pulled $3.6 billion in assets out of "prime" or non-Treasury money market funds on Thursday, according to Crane Data, a research firm that tracks the money fund industry.
Prime funds are perceived as riskier than those that buy only U.S. government securities because they can invest in securities issued by foreign banks. In contrast, assets of Treasury-only funds rose by $5.2 billion on Thursday.
The 10 biggest prime funds, whose combined assets totaled $755 billion, had half of their assets in places that were potentially exposed to European banks, according to Fitch Ratings.
The Greece fears have conjured up painful memories of the Lehman Brothers collapse in 2008, which toppled one of the largest money market funds, the Primary Reserve Fund. The latest crisis has led to a clamor among shareholders, who are suddenly curious about what's in their money funds.
"Clients now are much more sensitive. There has been sort of a tidal change, people are a little more nervous about the market now," said William Larkin, fixed income portfolio manager at Cabot Money Management in Salem, Massachusetts.
"You don't want to go in and have something that says Greece or Europe right across it, or you are going to scare them."
Banks and policymakers moved closer to a deal Friday to help Athens secure funds, but the road ahead could prove bumpy with a parliamentary vote on austerity plans next week that Greek Prime Minister George Papandreou must win to avert default.
The lingering uncertainty is likely to reinforce a push into safe-haven assets that has been apparent for weeks.
Investors' scramble for safety contributed to the 11th week of gains in two-year Treasurys, their longest rally in over 30 years, according to Reuters data.
The worries also pushed T-bill rates into negative territory this week. The ask yield on three-month bills clawed above zero Friday, a day after it ended in negative territory for the first time since Dec. 29, 2008, Tradeweb said.
Assets of institutional Treasury money market funds rose by $5.23 billion to $601.5 billion in the week ended Wednesday, while assets of non-Treasury money funds plunged by $16.62 billion to $1.069 trillion, the Investment Company Institute reported Thursday.
Analysts say corporate treasurers and money managers are withdrawing funds from institutional prime funds that invest in commercial paper and other debt issued by European banks. They are putting some of the cash into bank accounts and less risky money funds that own only U.S. Treasurys, analysts said.
But there is no evidence yet of strain in the financial system as seen during the 2007-2009 global credit crunch.
Analysts said quarter-end cash needs and tight T-bill supply exacerbated this week's money market moves.
European banks are still raising short-term funds through sales of U.S. commercial paper and certificates of deposits with a minuscule rise in borrowing costs.
Benchmark interbank rates and certain risk premiums in money markets have stabilized following last week's increase on jitters that a Greek default could spiral into an event akin to the Lehman Brothers demise.
"The market is just waiting," said Jim Lee, head of short-term markets and futures strategy at RBS Securities in Stamford, Connecticut. "If there were a situation where there was a restructuring of Greek debt, then the contagion would start."
The latest asset decline in non-Treasury money funds has not caused any negative impact on the overall commercial paper market, according to Federal Reserve data.
Money funds are the biggest buyers of commercial paper, a vital source of short-term cash for U.S. and foreign companies.
At the end of 2010, the industry held 45 percent of the $1 trillion outstanding commercial paper, according to ICI.
Still investors are raising their holdings of commercial paper that matures overnight to one week, which are seen as the safest, while they are paring their exposure to longer-dated commercial paper that matures in one to three months, J.P. Morgan short-term fixed income strategist Alex Roever said.
Weekly commercial paper issuance from top-rated banks including those from Europe averaged $2.86 billion through Thursday, compared with $2.67 billion a week ago.
The weekly supply of bank commercial paper due overnight to four days, the shortest maturity for this type of debt, averaged $1.9 billion through Thursday, up from $1.4 billion last week.
On the other hand, the issuance of bank CP due three months or longer averaged $227 million so far this week, down from $599 million last week.
Investors are pulling cash from some U.S. money market funds amid worries that their loans to European banks would go bad if Greece defaults on its debt?
A. TRUE
B. FALSE
B. FALSE
The investors are raising their holdings of commercial paper that matures overnight to one week, which are seen as the safest, while they are paring their exposure to longer-dated commercial paper that matures in one to three months, J.P. Morgan short-term fixed income strategist Alex Roever said?
A. TRUE
B. FALSE
B. FALSE
No comments:
Post a Comment