Loading ...How much of your MMKT Mutual Fund is NOT comprised of Gov’t Repo Facility Assets
2013 seems like a long time ago but worth revisiting this (4 minute) memo from Reuters about the purpose of the Reverse Repo Facility (now over $2.3tril) and explains what your current MMKT Mutual Fund is currently comprised of.
“In an overnight reverse repo transaction, the Fed would sell a Treasury bond to a U.S. primary dealer or a large money market fund and buy it back the next day for a slightly higher price. The transaction temporarily takes cash out of the banking system, while the dealer or fund earns interest on the deal.”
So basically as I understand it – while you should be earning say 2% APR on your MMKT holdings in (today’s) rising rate environment, you are actually only earning say .75% while the gov’t gives (kicks back) the mutual fund .75% and the remaining .5% is ‘disappeared’ from the system (QT).
There is also the possibility the RRP could suddenly stop (on the Fed side) at say the depths of a depression, and when maximum paper is held in MMKT’s – they then (to save the system of course) replace those $’s with FedCoin or some other form of CBDC. Just sharing some thoughts on possible outcomes for this $#!t$#0w.
Seriously Tenters, take a look at the composition of what your MMKT Mutual funds holdings are.
Good reminder YYZ. Better not to keep money in a fund nor in the bank. Whatever you don’t need for monthly expenses should be kept in physical precious metals, can always sell some for fiat if you need. (yes down most of this year but over any multiple year period you are doing better than a mm fund or bank.)