Among the many firsts ushered in by the COVID-19 pandemic, perhaps one of the more pronounced asset allocation firsts has benefited a sector historically known as one of the sleepier parts of the bond market- Money Market Funds (MMF). Initially sparked by the pandemic’s outbreak during the first quarter of 2020 and further fueled by the precipitous rise in short term interest rates since the FOMC started tightening monetary policy last March, assets in money market funds have soared to an all-time high of $5.5 trillion (ICI MMF Assets; July 5th), up $1 trillion over the last ten months and nearly $2 trillion from the end of 2019. While the largest MMF managers have been the primary beneficiaries of excess fees generated by the surge in assets under management, many are now crying foul regarding new rules imposed on MMF this week by the Securities and Exchange Commission (SEC) to prevent potential runs on MMF assets that could trigger more government backstops like those undertaken in 2008 and again in 2020.
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