The American Securitization Forum's ASF 2010 conference concludes today in Washington DC. The asset-backed security organization's annual event attracts thousands, and this year's agenda included two sessions focused on asset-backed commercial paper. Crane Data attended the ABCP Market Developments and Outlook and ABCP Investor and Issuer Roundtable panels on Monday, along with a surprisingly sizeable and upbeat contingent of money fund managers, securities issuers, and ABCP servicers.
ABCP Investors on the panel included Wells Fargo's Matthew Grimes and Federated Investors Debbie Cunningham, and issuers included PNC Capital Markets' Reginald Imamura and HSBC's Richard Burke. The Market Developments panel featured Credit Suisse's Maureen Coen and Orrick's James Croke, among others.
Grimes and others bemoaned the lack of supply. He said, "We've seen our primary investment base shrink. Right now, more than ever, we need issuers who are going to be consistent short-term issuers on the short end of the curve. We have money that needs to go to work every day." He also noted that, "The money fund balances for prime have held up very well.... They are in there [funds] because it's a stable investment."
Cunningham explained, "Prime money market funds have invested about one-half of their assets historically in commercial paper. It's now down to about one-third." Funds have been investing in government agencies and bank CDs to make up for the decline, she explained. (ABCP now totals about $440 billion and makes up about 40% of the CP market.) Cunningham added, "Historically, MMFs have loved the diversification of ABCP."
The two noted that the recent SEC rule changes for money funds don't have much impact on the ABCP market. The SEC "removed rating requirements for ABCP paper" but that's about it noted Cunningham.
Participants expressed concerns about pending regulatory changes, and the money fund liquidity mandates being at odds with the FAS (166 and 167) and bank's potential new lliquidity buffer and coverage rules. JP Morgan Securities' said, "The industry is hopefully not done discussing these roles with regulators."
Look for more coverage on this and regulatory issues in the upcoming February issue of Money Fund Intelligence, and watch for the SEC's Final Money Market Fund Reform rules to be released very soon.
