Money Fund Yields Slide to Record Low
How much more pain can owners of money market mutual funds take?
Capping a dismal year for savers who depend on money funds for income, taxable money fund yields sank this week to an average 1.58%, the lowest ever, Imoneynet.com of Westborough, Mass., said Wednesday.
The average was down from 1.64% a week ago.
Tax-free money market funds, which invest in short-term debt of states and cities, yielded an average 1.15% in the latest survey, up from 0.93% a week ago. Tax-free fund yields tend to be more volatile on a weekly basis.
Money fund yields tend to closely track the Federal Reserve’s key short-term interest rate. The Fed has cut that rate 11 times this year, trying to boost the struggling economy.
Despite the record low yields on money funds, analysts note that many investors who kept assets in those funds avoided what could have been deep losses in the stock market.
The blue-chip Standard & Poor’s 500 index is down 13% year to date; the Nasdaq composite index is down nearly 21%.
“It has been a bad year for savers, rate-wise, but asset-wise it has been a good year to be in savings because of market turmoil elsewhere,” said Peter Crane, Imoneynet.com’s vice president and managing editor.
Still, there have been some signs that American investors are beginning to shift cash from money funds to other assets, including stocks.
Led by institutions, investors pulled a net $10.4 billion from money funds in the latest week, leaving total assets at $2.29 trillion, Imoneynet.com said.
Single-Stock Futures Trading May Start Soon
The Securities and Exchange Commission and the Commodities Futures Trading Commission are working to allow trading of single-stock futures by early in the second quarter of 2002, the agencies said Wednesday.
In a joint news release, the SEC and the CFTC pledged to seek prompt adoption of rules that must be in place before the trading can begin. The rules address margin requirements and the protection of customer funds.
SEC Chairman Harvey Pitt and CFTC Chairman James E. Newsome “expressed confidence that they would promptly achieve consensus on remaining issues to allow security futures products to trade in a fair and competitive manner at the earliest possible date,” the release said.
Single-stock futures are contracts to purchase or sell shares of a stock at a specific price, by a specific date. Congress voted last year to end a two-decades-old moratorium on trading such futures.
Because futures can be purchased with relatively little money down, the contracts could be attractive to speculators and to investors wanting to hedge portfolio bets. Some investors may prefer to use futures rather than stock “put” and “call” option contracts, which serve a similar purpose for speculators and hedgers.
Congress had expected full-scale trading of single-stock futures to begin by Dec. 21. Because of September’s terrorist attacks, however, regulators decided to give the public more time to comment on the proposed rules enacting the legislation. The rules would also permit trading of futures based on narrow stock indexes.
The rules include a joint SEC and CFTC proposal to set at 20% the amount of cash or securities a client must deposit with a broker when buying on margin, or borrowing, to buy single-stock futures.
Bloomberg News
