News Column

Fitch: Reverse Repo Program Gains Influence With U.S. Money Funds

June 19, 2014



NEW YORK--(BUSINESS WIRE)-- The ramp-up in the Federal Reserve Bank of New York's (FRBNY) daily reverse repurchase agreement (RRP) exercise drove the significant shifts in investment allocations, between September 2013 and May 2014, by money funds that invest exclusively in Treasury and agency securities (government MMFs), according to a Fitch Ratings report.

Fitch notes that RRP volumes have fallen off markedly since mid-May as repo rates rose, which provides more attractive investment alternatives for money funds. Despite volume declines, the gains seen during Fitch's study period provide evidence that the FRBNY has been able to influence market rates using the new RRP facility.

Total FRBNY RRP investments by government MMFs (repos) rose by $65 billion during the study period. Over the same period, combined Treasury and agency repo holdings, with broker-dealers as counterparties, declined by $38 billion.

Fitch believes this trend likely reflects growing comfort with the operations of the RRP program and more attractive rates. Decreasing reliance on repo funding among dealers also reflected the effects of Basel III regulatory considerations, as banks have been forced to re-assess the economics of short-term wholesale funding.

Fitch's analysis is based on data from the universe of government MMFs with assets totaling $881 billion as of end-May 2014. These funds allocate the largest share of total assets under management to Treasury and agency repo securities.

The full report 'Reverse Repo Program Gains Influence' is available at 'www.fitchratings.com' or by clicking on the link.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research: Reverse Repo Program Gains Influence

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=749667

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings

Robert Grossman

Managing Director

+1-212-908-0535

Fitch Ratings, Inc.

33 Whitehall

New York, NY 10004

or

William Warlick

Senior Director

+1-312-368-3141

or

Greg Fayvilevich

Director (Fund and Asset Manager Team)

+1-212-908-9151

or

Media Relations

Brian Bertsch, +1 212-908-0549

brian.bertsch@fitchratings.com

Source: Fitch Ratings


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