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Announcement:

Moody's says MMF changes to counteract negative yields are credit neutral

Global Credit Research - 13 Mar 2013

Paris, March 13, 2013 -- In response to negative trading yields in the past six months, a number of money market funds (MMFs) have implemented structural changes, says Moody's Investors Service in a new Special Comment published today. The overall effects of these changes are credit neutral. Moody's report summarises the structural and legal changes asset management companies have implemented in their Euro-denominated MMFs to address the negative yield concerns.

The new report, entitled "Money Market Funds: Structural Changes to Combat Negative Yields are Credit Neutral", is now available on www.moodys.com. Moody's subscribers can access this report via the link provided at the end of this press release.

Asset management firms -- including Royal Bank of Scotland, Morgan Stanley, Goldman Sachs, BlackRock, Inc. and HSBC Global Asset Management -- have amended the structures of their respective funds (the Funds) to enable them to continue operating as constant net asset value (CNAV) funds during periods of sustained ultra-low or negative interest rates. This follows the European Central Bank (ECB) decision to lower its deposit facility rate to zero in July 2012. As a result, a number of high-quality credits that are standard MMF holdings have traded at negative yields at times during the past six months.

Despite the structural changes, the asset-management companies aim to keep the gross yields of their Funds above zero, unless a trigger event pushes levels further down.

In Moody's view, the changes to the Funds' structures are credit neutral because: (1) the Funds' promise to investors regarding principal preservation and provision of liquidity was not breached; (2) the Funds sought and obtained investors' approval before implementing the structural changes; dissenting investors had the right to redeem their shares at par prior to the conclusion of the restructuring; and (3) neither the Funds' investment strategy nor their portfolio composition changed as a result. Based on the current portfolio characteristics of the Funds, Moody's continues to rate them Aaa-mf.

In addition, Moody's notes that these asset managers maintained sufficient liquidity during the structural transition to ensure that all redemption requests from investors could be settled timely at par.

Subscribers can access this report via this link: http://www.moodys.com/research/Money-Market-Funds-Structural-changes-to-combat-negative-yields-are--PBC_151296

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: London +44-20-7772-5456, New York +1-212-553-0376, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

Vanessa Robert
VP - Senior Credit Officer
Managed Investments Group
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Yaron Ernst
MD - Managed Investments
Managed Investments Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's says MMF changes to counteract negative yields are credit neutral
No Related Data.

 

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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