WSJ on T. Rowe Prime Going Govt
The Wall Street Journal features an article entitled, "T. Rowe Price Prime Money Fund Switches to Government Focus," which says, "Another big prime money market fund has changed its stripes. The T. Rowe Price Prime Reserve Fund became the T. Rowe Price Government Money Fund effective Monday. Scores of prime money market funds, which invest in low-risk short-term debt securities and repurchase agreements, have either changed to government money market funds or liquidated this year, according to Crane Data LLC, which tracks the industry. The changes come in advance of new Securities and Exchange Commission rules that take effect on October 14. The new requirements call for certain funds, including institutional prime and tax-exempt money market funds, to allow their net asset values, or NAVs, to fluctuate instead of effectively fixing them at $1 a share, as they currently do." The piece adds, "Peter Crane, president of Crane Data, said the difference in yield between prime institutional funds, which recently yielded 0.23%, and government money market funds that invest in Treasuries, yielding 0.12%, is less than half its historical spread of 25 hundredths of a percentage point. Assets held by prime money market funds fell to $990 billion for the week ended July 27, the first time since September 1999 that the total has fallen below $1 trillion, according to a spokeswoman for the Investment Company Institute, a fund industry trade group. The total is down $18 billion from a week earlier." (See our June 24 News, "June MFI Profile: T. Rowe Price's Lynagh on Lineup; First Do No Harm.") The Journal also wrote yesterday, "It's Called Financial Repression, and Governments Around the World Are Doing It: Countries are adopting policies to encourage or require savings to be lent cheaply to the government." This article says, "Financial repression is on the rise, but savers still can avoid it. Prime money-market funds might look less attractive under the new rules, but the economic reality of what they own remains unchanged, as do the risks. Just because a fund can now suspend withdrawals or impose a fee in a crisis doesn’t mean that under the old rules money would have magically been available."
