Analyst calls rate cuts a foe to money funds

Money market mutual funds that invest in Treasuries could cost investors money if the Federal Reserve Bank cuts interest rates further, according to Peter Crane, president of the Westborough, Mass.-based research firm Crane Data LLC.
DEC 10, 2008
Money market mutual funds that invest in Treasuries could cost investors money if the Federal Reserve Bank cuts interest rates further, according to Peter Crane, president of the Westborough, Mass.-based research firm Crane Data LLC. Yields for Treasuries are already less than half a percent and “if the Fed cuts rates again, you will see [more] firms’ giving waivers on fees … to avoid a negative yield,” he said. “Negative yield is not akin to ‘breaking the buck.’ It just means that you are charging more expenses than you are taking in. The investor is paying a fee that is larger than what you are earning. Most firms would waive the fees to avoid paying a negative yield.” The money market mutual fund sector was hard hit in September when The Primary Fund, offered by The Reserve Management Co. Inc. of New York, fell below a $1 net asset value and broke the buck. The event sparked a run on money market funds industrywide. Following the introduction of a federal guarantee program, the top 20 fund firms that offer money market mutual funds have signed up to participate, Mr. Crane said. Money fund assets have risen for 10 straight weeks and now total $3.74 trillion, which is 4.5% higher than what they were prior to the Primary Fund’s breaking the buck, Mr. Crane reported.

Latest News

Advisor moves: Wells Fargo FiNet lands $580M Ameriprise team
Advisor moves: Wells Fargo FiNet lands $580M Ameriprise team

LPL Financial and Raymond James also add independent advisors from Osaic and Edward Jones in Michigan and Arizona.

M1 Advisor bets AI can serve clients wealth managers turn away
M1 Advisor bets AI can serve clients wealth managers turn away

The SEC-registered RIA advises on more than $1 billion in client assets, with no advisory fee through 2027 and no human financial advisors.

SEC charges Caris Investment Partners in alleged cherry-picking scheme
SEC charges Caris Investment Partners in alleged cherry-picking scheme

95.8% of house trades were winners. For clients? The SEC says just 14.9%.

Pension fund accuses Duolingo of burying user-growth crisis
Pension fund accuses Duolingo of burying user-growth crisis

The complaint says Duolingo added friction on purpose, then lied about it.

Wirehouses losing more advisors so far in 2026: Report
Wirehouses losing more advisors so far in 2026: Report

The four wirehouse firms lost 1,449 experienced advisors and recruited 932 in the first six months of the year, according to Diamond Consultants.

SPONSORED Built on insurance experience to deliver on long-term promises

Knighthead Life entered the market with a competitive MYGA. A strong launch earned advisor confidence and paved the way for FIAs.

SPONSORED In the Age of AI, Trust Becomes the Advisor's Greatest Asset

As AI makes financial information more accessible than ever, Lana Hock explains why human judgment, trust, and empathy remain the qualities clients value most in a financial advisor