US MMFs transmitted Covid-19 stress to banks – BIS research

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Money market funds (MMFs) in the US served to channel dollar funding stresses to the banking sector during the Covid-19 shock in March and April, research by Bank for International Settlements economists finds.

In the bulletin article, Egemen Eren, Andreas Schrimpf and Vladyslav Sushko find stresses in commercial paper and certificate of deposit markets led to outflows from MMFs. As prime MMFs are a key source of funding for banks, this ended up transmitting stress to the banking sector even

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