NEW YORK--(BUSINESS WIRE)--Government and prime money market funds (MMFs) have shifted quarter-end allocations away from European banks in favor of the Federal Reserve's reverse repurchase program (RRP), according to a Fitch Ratings analysis.
MMFs on average account for 75% of RRP volume as the funds' investments have grown to $275 billion at end-June 2014 from $45 billion at end-September 2013. Fitch notes that Federal Open Market Committee (FOMC) members appear focused on the risk that broader Fed financial intermediation via RRP could distort short-term funding markets during periods of stress.
Fitch believes there is the potential for more debate about future limits on the size of the RRP facility, and the effects of the program on specific short-term credit markets that could see funding displacement if the program grows further. The next FOMC meeting is scheduled for Sept. 17-18.
Fitch's analysis can be found in the full report 'Fed's RRP Program: Where's the Money Coming From?' available at 'www.fitchratings.com.'
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research: The Fed's RRP Program: Where's the Money Coming From?
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=774490
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