The role of the Fed - Deepstash

The role of the Fed

The role of the Fed

Money market mutual funds receive the reverse repurchase agreement, a.k.a. the reverse repo rate, for funds held by the Fed overnight, so it functions as a rough floor on yields.

That rate stands at 0.8 percent. It was close to zero for many months. 

At the moment, short-term Treasury bills, with yields in the 0.85 - 1.05 percent range, provide a practical ceiling for funds that hold government securities.

If the operating expenses of money market funds exceed the income they bring in, the funds could theoretically pay negative yields.

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