MMFs should increase public debt investment – ECB paper

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Money market funds should increase their public debt holdings to be better prepared for liquidity shocks, a paper published by the European Central Bank argues.

The research paper by Laura-Dona Capotă et al says the current regulatory framework for MMFs was designed to mitigate liquidity shocks. Nonetheless, it finds “a number of remaining fragilities”.

Regulators should deal with these problems by enhancing requirements for low volatility net asset value, or LVNAV, funds, the researchers

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