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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: Les H who wrote (239113)2/23/2010 11:28:05 PM
From: Les HRead Replies (3) of 306849
 
Treasury Program Mixes Up Money Markets
By MIN ZENG
The U.S. Treasury Department's decision to increase a temporary funding program could turn into a double-edged sword for short-term money markets.

The rise in supply--even if just temporary--will increase yields and drive down prices for Treasury bills, a move already evident in the wake of the Tuesday announcement. But higher yields will be a boon for struggling money market funds that have been losing clients due to the low yields on their portfolios.

The Treasury Department said it will increase the size of the Supplementary Financing Program, or SFP, from $5 billion to $200 billion. The increase will be completed over two months in the form of eight $25 billion, 56-day Treasury bill sales. Beginning Wednesday, the sales will be held each Wednesday at 11:30 a.m. EST.

Under the program, the Treasury Dept. will sell T-bills to investors and park the receipts in the SFP account--which can't be tapped for government spending. The program was initially set up in September 2008 at the height of the financial crisis. It was used to provide funding to the Federal Reserve to support its liquidity programs to rescue banks and the credit markets. Late last year, as the federal government approached the debt ceiling, Treasury scaled back the program to $5 billion.

online.wsj.com
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