The US Treasury Department has announced that it will keep guaranteeing money market funds until the end of April 2009. The Temporary Guarantee Program for Money Market Funds was created because of worries that the funds’ net asset values would fall under $1 (a value drop known as “breaking the buck”).
The money market fund program guarantees a $1 minimum share price and insures the holdings of any publicly offered eligible funds that pay to take part in this temporary plan. The program, which covers over $3 million in assets, covers the participating funds’ shareholders up to the amounts that they held when business closed on September 19, 2008.
Only mutual funds that are currently taking part in the plan and meet the extension requirements can continue to participate in the program. To avail of the extended coverage, funds must submit a payment based on their net asset value since September 19. The extension notice must be sent by December 5.
The Temporary Money Market Fund Guarantee Program offers four kinds of Guarantee Agreements:
• Guarantee Agreement • Guarantee Agreement (Single Fund)
• Guarantee Agreement (Stable Value)
• The Guarantee Agreement (Stable Value Single Fund)
It is important to investors hat the standard $1 net value asset for money market mutual funds remain. Worries that money market funds would “break the buck” increased global market turmoil and resulted in serious liquidity strains. These repercussions resulted in greater volatility in exchange markets and caused certain short term interest and funding rates to spike.
Related Web Resources:
Treasury’s Temporary Guarantee Program for Money Market Funds
Read the Extension Notice (PDF)
Stockbroker fraud law firm Shepherd Smith Edwards & Kantas LTD LLP represents investors that have lost money as a result of securities fraud or broker misconduct.