Money market funds are welcoming the
Still, even as the Federal Reserve announced these plans on Monday, it stressed that it intends to keep interest rates low for extended periods.
So far, the Fed has dealt with 18 primary dealers, purchasing about $100 billion in reverse repos. In a reverse repo transaction, the Fed replaces securities with such securities as Treasuries, with the promise it will buy them back at a later date.
Three major money market fund providers,
“We would enthusiastically want to take a look at these transactions for our portfolios,” added David Glocke, manager of the money market funds at Vanguard. “It’s a great alternative to other transactions that we already do.” And a Federated spokeswoman said, “We do view this as a positive step for cash markets.”
To qualify for the program, the Federal Reserve requires fund companies to use medium-term securities margined at 100% with maturities of at least 65 days. Minimum bids are $1 billion.