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Money Market Funds Venture Back To Europe - But Only Secured 'Core' Credit

Tyler Durden's picture


The headlines proclaimed - confidence is back and the money-market funds are buying European debt again. This makes perfect sense, Europe is fixed and they are backing up the Corzine truck!! Well, no! According to the report from JPMorgan, Prime MMF assets rose $16bn but the bulk was in secured exposure to German and French banks - not exactly the kind of risk-on short-end exuberance that investors are supposed to infer from the headlines. Just as we have seen everywhere, collateral is king and secured credit is the preferred way - even if it comes at a premium. It seems that while the tail-risk is supposedly gone, even short-duration funds are not comfortable with the conditionality. Isn't it odd how headlines (from Reuters: U.S. money funds add euro zone debt in August) can be so different from reality?

Secured preferred over unsecured - trust remains elusive...


though the shift into European banks has been material (though entirely secured and core)...


The increase in secured holdings has been driven by repo and particularly those collateralized by Treasuries and agency MBS. Backed by high quality collateral and executed via triparty, repo provides additional layers of safety for MMFs over unsecured forms of debt, which given the macro risk uncertainty makes repo especially attractive. Combined with elevated repo rates since the start of Operation Twist, it’s no wonder funds have favored repo.


Charts: JPMorgan

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Wed, 09/12/2012 - 12:15 | 2786197 NotApplicable
NotApplicable's picture

"Secured?" Is that what they're calling the scams these days?

Wed, 09/12/2012 - 12:33 | 2786286 Winston Churchill
Winston Churchill's picture

Good collateral.


Would that be like finding  a virgin woman  in a whorehouse,right now.

Wed, 09/12/2012 - 12:43 | 2786313 LawsofPhysics
LawsofPhysics's picture

According to the theiving paper-pushers of today, collateral and wages don't matter.  This is part of problem.

Wed, 09/12/2012 - 13:08 | 2786401 Nothing To See Here
Nothing To See Here's picture

Here's the real collateral, and its all on paper:
- retirement age = 80
- work week = 6 days
- taxes on the rich = 75%
- rich = anyone employed except bankers with offshore accounts and state officials

Wed, 09/12/2012 - 13:29 | 2786489 LawsofPhysics
LawsofPhysics's picture

In other words, "rich" becomes a very exclusive club of people close to the "free money" who can spend it before inflation crushes the purchasing power.  Not sustainable.  WWIII more likely.

Wed, 09/12/2012 - 13:06 | 2786349 Zero Govt
Zero Govt's picture

"Good Collateral" would of course be Govt debt

the entire European and US banking systems balance sheets are 'secured' on the stuff and, if your heads not already spinning, based on this collateral (debt) is yet more leveraging-up for even more fun and games (dizzy-drunk yet?)

best ask our ingenious leaders of politics, banking and accountancy why they built this asylum on quick sand as no fuker out here has a clue how this works

Wed, 09/12/2012 - 12:19 | 2786221 Dr. Engali
Dr. Engali's picture

I pulled this off of Drudge....Egyptian rioters were wearing Guy Fawkes masks.



Wed, 09/12/2012 - 12:29 | 2786272 Winston Churchill
Winston Churchill's picture

Maybe they deserve his fate.

Burning at the stake.

Wed, 09/12/2012 - 12:39 | 2786305 resurger
resurger's picture

This is pretty much messed up, the MSM wants to show that "Anonymous" is behind the terrorist embassy attacks in Egypt, tomorrow maybe we will see some Guy Fawkes masked Libyans as well.

This will label all Guy Fawkes guys in the USSA as potential terrorists.


Wed, 09/12/2012 - 12:53 | 2786332 Dr. Engali
Dr. Engali's picture

That's the way I see it.  The photo looks  staged to me. Why don't they have any shots of the rioters in action wearing the masks?

Wed, 09/12/2012 - 13:48 | 2786572 mkhs
mkhs's picture

Isn't it just a case of monkey see, monkey do. 

Wed, 09/12/2012 - 12:50 | 2786325 resurger
resurger's picture

I dont know what is the use of the REPO when you collateralize 10 Year AAA US bonds with at least 20% haircut + Margin call if the credit ratings and the value of the bond drops below a minimum threshold . You still have to pay interest on the REPO which does not offset the yield you get.

If the REPO market dries up (which is the thing that central planners is afraid of) it's pretty much the end of this cancerous financial system (The REPOer and the Reverse REPOers are both doomed)

 That's why under Basel III LCR, the Government REPO's recieve 0% haircut which is a total and utter fraud.

Wed, 09/12/2012 - 13:03 | 2786383 philosophers bone
philosophers bone's picture

"Money Market Venture Funds"

Wed, 09/12/2012 - 13:15 | 2786428 caimen garou
caimen garou's picture

more like money market"VULTURE" funds

Wed, 09/12/2012 - 14:19 | 2786693 max2205
max2205's picture

Yankee bonds back to finish us off... thanks Ben and your swaps

Wed, 09/12/2012 - 17:45 | 2787575 Rainman
Rainman's picture

I'm almost completely out of MMFs and off to the warm safe bosom of CD protection by the FDIC

(bad MDB imitation )

Wed, 09/12/2012 - 19:14 | 2787757 Whiner
Whiner's picture

This makes my .06% MMF look even better! Thanks! I'll deposit another $2M tonight.

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