Money Funds Zero Pain to Worsen as Fed Maneuvers: Credit Markets
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Money-market investors who have endured almost-zero interest rates for about six years are bracing for even worse returns after the Federal Reserve limited how much cash it is willing to sop up.
The central bank is working out how best to control short-term rates after its bond buying policies aimed at suppressing borrowing costs and stimulate economic growth flooded the banking system with $2.71 trillion of excess reserves. The Fed, which is forecast to start raising rates next year, surprised market participants earlier this month when it placed a limit on how much cash it will take out of the system each night through its reverse repurchase agreement program.