Money Market Funds
Operations and Technology
Once Again, Information Moves Markets
By Sean Collins
March 18, 2015
Treasury yields fell sharply today and the stock market jumped. Wouldn’t it be nice if mutual funds could take credit? Unfortunately, they can’t. Any orders that mutual fund investors place to buy or sell shares anytime today before 4:00 p.m. won’t hit the market until 4:00 p.m., just like any other day. And, if you are reading this blog post at the time of its posting, 4:00 p.m. is still 10 minutes away.
Instead, the sharp changes in the market occurred right at 2:00 p.m. (ET) (see chart) when the Federal Reserve released the minutes of its March Federal Open Market Committee (FOMC) meeting, which indicated that it would be unlikely to raise interest rates at its upcoming April meeting.
Yield on 10-Year U.S. Treasury, March 18, 2015
This shows that new information moves the market. I emphasize this point because if things had gone the other way today—if the Fed had indicated tightening and markets had dropped—sure as the sun will shine, some commentators would have incorrectly attributed the drop to shareholders redeeming out of funds—even though that couldn’t possibly be the case because their orders aren’t executed until 4:00 p.m.
Sean Collins is ICI’s senior director of industry and financial analysis.
Bloomberg Ignores the Evidence on Bond ETFs
By Mike McNamee
September 26, 2014
In response to “Pimco ETF Probe Spotlighting $270 Billion Market Vexing FSB,” we posted the following comment on Bloomberg News’ website:
The Real Lessons to Be Learned from 1994’s Bond Market
By Brian Reid
July 29, 2014
A recent “Heard on the Street” column in the Wall Street Journal (“Heeding 1994's Bond-Market Lesson,” July 27, 2014) is correct in saying that there’s a lesson to be learned from the 1994 bond market—but it draws the wrong lesson.
“Market Tantrums” and Mutual Funds: A Second Look
By Sean Collins and Chris Plantier
May 19, 2014
Over the past year, policymakers who are focused on financial stability have pursued a theory that mutual fund investors can destabilize financial markets by redeeming from funds when markets decline. According to this theory, redemptions by fund investors lead fund managers to sell securities; those sales drive asset prices down further and, in turn, spur more investor flight, redemptions, and price declines.
ETFs Don’t Move the Market—Information Does
By Shelly Antoniewicz
March 11, 2014
There they go again.