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Drowning in Cash, Money Markets Seek Another Life Raft From Fed

  • More than $4 trillion in funds are focused on front-end rates
  • Concerns about the ‘integrity’ of the Fed’s 0% floor: BofA
     
Photographer: Stefani Reynolds/Bloomberg
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More and more, investors are wondering whether the Federal Reserve will tweak its monetary policy toolkit to help out money markets that are starting to drown in a sea of cash.

The Fed’s existing facilities have helped alleviate the impact of the growing dollar glut in short-term funding markets that’s outstripping the supply of investable securities and weighing down front-end rates. But officials can only continue to do so if money-market funds, which help funnel more than $4 trillion of cash investments into short-term instruments, are functioning properly.