Interest Rate Roundup

Tuesday, August 14, 2007

Money market mayhem

In the past couple of days, the money markets have been roiled. For starters, a Canadian firm called Conventree Inc. said it hasn't been able to sell commercial paper. The company administers about $15 billion in commercial paper funds. Its lenders are now balking at providing emergency funding for $661 million in maturing debt, per Bloomberg.

For some perspective, Bloomberg notes that asset-backed commercial paper (of the type Coventree is involved in) accounts for about 53% of the $2.16 trillion in outstanding CP. ABCP is CP backed by things like car loans, credit card receivables, mortgages, and other similar loans.

Meanwhile, CNBC earlier reported that a firm called Sentinel Management Group is halting client redemptions from certain cash management accounts. I don't have any more details at this time, but if true, it's a sign that problems in the short-term money markets are getting worse.

UPDATE2: Here's a story from the giving more details on what exactly Sentinel is doing and here's another from AP pegging the amount under management by the firm at $1.5 billion. Reports are now that Sentinel did not halt redemptions from a money market fund like one retial investors would invest in. Rathert, it halted redemptions in a cash management fund used by institutional investors and higher net-worth individual investors. Marketwatch has some more details here.


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