Money Market Mutual Fund Repurchase Agreements

On March 18, 2020, the Federal Reserve announced the Money Market Mutual Fund Facility (MMLF). It is a credit program that lends money to banks so that they can buy assets from money funds to ensure the liquidity of these funds during the COVID 19 crisis. A money fund is a kind of investment fund that invests in high-level and short-term instruments. These instruments include means of payment, cash equivalents and high-credit bond securities (e.g. B U.S. Treasury bonds). Money funds are supposed to provide investors with high liquidity with very low risk. Money funds are also called money funds. It is important to keep in mind that money funds are not covered by the legal deposit guarantee, while money market deposit accounts, online savings accounts and certificates of deposit are covered by this type of insurance.

Like other securities, money funds are regulated under the Investment Company Act of 1940. The pension market is one of the largest and most active sectors in the short-term credit markets and is an important source of liquidity for money funds and institutional investors. Pension transactions (also known as resean agreements) are short-term secured loans, often obtained by traders (borrowers) to finance their securities portfolios and by institutional investors (lenders), such as money funds and securities lenders, as sources of secured investments. An active investor who has the time and knowledge to look for the best short-term debt – and who offers the best interest rates at the preferred risk level – may prefer to invest alone in the various instruments available. On the other hand, a less experienced investor may prefer to take the money route by delegating the task of managing money to fund operators. A cash fund invests in standard U.S. Treasury bonds, such as Treasuries, Treasuries and Treasuries. Money funds seem attractive to investors because they are not dependent – with no entry or exit fees. Many funds also offer investors preferential tax benefits by investing in tax-exempt municipal securities at the federal level (and, in some cases, at the state level). Under the provisions, a money fund invests primarily in the best-rated debt securities and is expected to mature for less than 13 months. The money fund portfolio is required to maintain a weighted average maturity (WAM) of 60 days or less.