Money Markets

October 31st, 2008 10:17 am | by John Jansen |

My money market correspondent reports that the short term money markets are awash in a mountainous sea of liquidity. The target funds rate seems “symbolic” as the central banks push to flood the system with dollar liquidity has forced the funds rate down to 25 basis points.

He notes that there are solid names finding overnight commercial paper funding as cheaply as 10 basis points.  Traditionally, with a one percent target overnights would range between 90 basis points and 1.10 percent.

He opines that the CPFF facility is taking supply out of the market and at some point will compel large institutional investors to move out on the money market yield curve. Those clients have been inactive quite some time but the punishing overnight rate will force them to do credit homework and buy some longer dated paper.

He notes that the Irish banks trade Libor plus 10 basis points to 15 basis points and with the government guarantee are sovereign debt.

Separately, money funds are still phobic about another credit event and another round of redemptions. That tends to keep them short and liquid.

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  1. 4 Responses to “Money Markets”

  2. By S on Oct 31, 2008 | Reply

    this subtle EPS pump game is doomed to fail. The lower funding costs short duration work I suppose in the real economy to help the working cap front. but those operating or thinking about investments look at demand and longer rates and those rates are all time wide. Also banks NIM expansion wikll stall as deoposit rates can;t fall or people will simply pull their money out of the ban. Why be paid nothing to have yourcapital put at risk and if there is deflation all the better for returns on vault cash. BB is desperate to stop this process but with every mofve he is exacerbating the problem.

  3. By william beales on Oct 31, 2008 | Reply

    i have been trying to see all the papper money thathas ever been out in the until states and ever time i have been trying to fine it i can never get it to come up for me too beable too see pictuire of it so can you please send me a email of the money that has ever been made i think you vere mush me email is wlbeales@hotmail,com

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