Low%20Rates%20Hit%20Money-Market%20Funds - Wall Street...

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Wall Street Journal MUTUAL FUNDS AUGUST 19, 2011 Low Rates Hit Money-Market Funds by Mary Pilon and Randall Smith Money-market mutual funds, those havens of safety for investors during tumultuous times, are facing their own pressures as interest rates continue to decline. The funds, which historically aimed to provide higher yields than bank deposits without risk of losses, are waiving fees and consolidating—or closing their doors altogether. The drop Thursday on the 10-year Treasury to below 2% in intraday trading provided fresh bad news for the funds. Money-market funds once were profit machines, collecting $13 billion in fees at their peak in 2008. But they have seen their revenues shrivel by 65% over the past three years as short-term interest rates have fallen to near zero. The Federal Reserve's announcement last week that it would likely leave rates untouched for the next two years erased hopes for improvement anytime soon, say analysts. Despite the continued interest-rate pressures, money-market funds have seen a surge of inflows recently as investors increasingly seek the safety of cash amid the market turmoil. Some $60 billion has gone into money funds this month, according to money-fund tracker Crane Data LLC. Also, a recent announcement by Bank of New York Mellon Corp. that it might start charging customers with $50 million or more in their accounts to hold their cash could force others into money funds.
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This note was uploaded on 01/26/2012 for the course FIN 4620 taught by Professor Patriciarobertson during the Spring '12 term at Kennesaw.

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Low%20Rates%20Hit%20Money-Market%20Funds - Wall Street...

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