Draghi's Zero Deposit Rate Policy Put An End To Euro Money Market Funds
Sober Look | Jul 08, 2012 04:09AM ET
There has been some confusion as to why the biggest US mutual fund operators are closing euro denominated money market funds to additional investments. The decline in euro cash fund products is not a new trend (updated post on the topic ).
Without the ability to invest via term repo, money market funds (as well as other cash holders) moved funds into the only thing they felt was safe in the euro world: German government paper. That pushed German notes with maturities of two years and under deep into negative yield territory. Such conditions simply make it impossible to operate a euro denominated money market fund, causing these firms to pull such products off the market.
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