Podcast: Where Money Market Funds and the Repo Market Intersect

Money market funds are investment vehicles that invest in debt securities with short maturities and minimal credit risk. They are a significant source of cash for the repo markets, lending cash to a broker-dealer or hedge fund in exchange for securities, often Treasury notes. Last week, a confluence of events negatively affected liquidity in the repo markets; a change in the availability of cash caused market rates to nearly double and significant funds to be withdrawn from money market funds. A series of operations by the Federal Reserve Bank of New York injected liquidity into the system, relieving funding pressure and stabilizing rates.

In this supplement to our recent podcast, What Just Happened in the Repo Markets?, SIFMA president and CEO, Kenneth E. Bentsen, Jr. walks through the basics of money market fund operations and explains how they relate to the recent dislocation in repo markets. He is joined by Timothy C. Cameron – Managing Director and Associate General Counsel and head of SIFMA’s Asset Management Group (SIFMA AMG) – and Robert Toomey – Managing Director and Associate General Counsel and head of SIFMA’s capital markets practice.