US dollar funding markets during the Covid-19 crisis - the money market fund turmoil

Egemen Eren, Andreas Schrimpf and Vladyslav Sushko

No 14, BIS Bulletins from Bank for International Settlements

Abstract: Short-term dollar funding markets experienced severe dislocations in mid-March 2020, with funding diverted from unsecured funding markets as investors withdrew and switched to secured funding markets and government MMFs. Outflows from US prime MMFs led to a loss of funding for banks and a significant shortening of funding maturities; this precipitated spikes in indicators of bank funding costs, such as the LIBOR-OIS spread, despite banks not being at the epicentre of the liquidity squeeze. The turmoil highlights broader lessons for MMF regulation, the role of non-banks for monetary policy implementation, and the role of the central bank during stress.

Pages: 9 pages
Date: 2020-05-12
New Economics Papers: this item is included in nep-cba and nep-mon
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Citations: View citations in EconPapers (21)

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