.... Money Funds Boosted Fed Reverse Repo Participation: The test of the Federal Reserve Bank of New York's (FRBNY) overnight reverse repurchase agreement (RRP) facility since last September drove significant shifts in investment allocations by money funds that invest exclusively in Treasury and agency securities, either directly or through repos (government MMFs). Between September 2013 and May 2014, total FRBNY RRP investments by government MMFs (repos) rose by $65 billion, while combined Treasury and agency repo holdings with broker-dealers as counterparties fell by $38 billion. RRP Replaced Some Dealer Funding: The dollar volume of government MMF repo transactions with counterparties other than the FRBNY declined as interest in the RRP program picked up over the last nine months. This likely reflected growing comfort with the operations of the RRP program and more attractive rates. Decreasing reliance on repo funding among dealers also reflected the impact of Basel III regulatory considerations,...
