New Money Market Rules Might Cause Shortage in Treasury Bill Market

On October the 14th, 2016, new rules to prevent a run in money market funds will take hold, courtesy of the government, which will force massive purchases of U.S. Bills. In other words, firms who manage money market funds ($600b) will need to float their NAV and abandon their fixed $1 a share price.

So now all of these fund managers will be forced into a funnel, there to bow down and to purchase U.S. Bills. To feed into this frenzy and raise a little extra dough in the process, the government will boost supply by $250b, far below the estimated $400b that analysts say is needed.

Gone are the days when old men could sashay in and out of money market funds as if they were cash. These fuckers will need to bend the knee and buy government funds only, else deal with NAV volatility and liquidity risk.

“When it comes to Treasurers and their roles and responsibilities, the last thing they want is uncertainty,’’ said Brandon Semilof, a managing director at StoneCastle Cash Management, which manages more than $10.6 billion and works primarily with the nation’s community banks.

“The inflows to government funds should mean relatively lower Treasury bill yields and repo rates,” said William Marshall, an interest-rate strategist at Credit Suisse Group AG.

“We expect some fairly large outflows,” said Peter Yi, director of short-term fixed income at Northern Trust Corp., which manages $906 billion. “We don’t want to find ourselves selling credit instruments into a distressed market.”

God bless the United Steaks of America and its $20t in super-duper safe debt.