We’ve talked quite a bit about the money market fund reforms that go into effect next month.
If you aren’t familiar, it’s a pretty simple concept. If you’re a prime fund (i.e. not a fund that invests solely in government bonds but instead buys CDs and corporate commercial paper), you’re going to have to start reporting a floating NAV. From October 14 on, $1 no longer necessarily equals $1 in prime funds anymore.
Needless to say, that’s led to a veritable exodus in favor of government MMFs – and it ain’t over yet. Have a look at the following chart from Citi which shows just how seismic of a shift this truly is:
So that’s almost $1 trillion in funds that won’t be available for unsecured lending. Which in turn means you can probably expect this to continue apace: