Yesterday, it was Fidelity who in conducting its fiduciary duty [6], announced it was getting out of any and all near-term risky Bill insturments, namely those that mature just around the time of a possible technical debt default. Today, while the stock market was soaring on hope that a Washington debt ceiling deal was imminent, it was another firm that was quietly doing the opposite, and was taking "action in light of a possible US government default), and as highlighted earlier [7]when we showed the ongoing divergence between stocks and Bills, was quietly "boosting" liquidity (i.e. selling short-term securities) in order to avoid breaking the buck (which as we also learned yesterday had been breached by not only the Reserve fund but by 28 other heretofore unknown money market funds [8]). The firm: JPMorgan.
From JPMorgan's Investment Management (JPMIM) group:
J.P. Morgan takes action in light of possible U.S. Government default
Although J.P. Morgan Investment Management Inc (JPMIM) continues to believe that the probability of a U.S. Government default is low, it has taken certain precautionary measures with respect to the money markets (the “Funds”)
These actions were taken in an attempt to manage the Funds in line with their objectives to seek to maintain a net asset value of $1.00 per share.
· As of October 9, 2013, the funds did not own any securities issued by the U.S. Treasury that mature or have scheduled coupon payments between October 16, 2013 and November 6, 2013.
· In addition, JPMIM has increased liquidity positions in the Funds
And now we know who was on the other end of today's equity-debt disconnect.
Full release here [9].