Pensions & Investments writes "U.K. money market funds suffer outflows amid bond market chaos." They tell us, "Certain sterling-denominated money market funds experienced 'substantial' outflows as a result of the decline in U.K. gilt prices over recent weeks, with some strategies potentially forced to convert to a different model, Moody's Investors Service said. The ratings agency said in a market note Wednesday that low-volatility net asset value money market funds -- a type of short-term money market fund -- are at risk of needing to convert to a variable net asset value model, which would be a credit negative. Outflows were not immediately available." The piece explains, "The outflows partly reflect moves by U.K. pension funds to sell assets to meet collateral calls on LDI-related derivatives positions, Moody's said. 'The combination of extreme volatility in the price of short-dated government bonds and investor outflows has put downward pressure on the mark-to-market (net-asset values) of the affected' money market funds." It adds, "Intervention by the Bank of England to temporarily buy long-dated gilts 'brought some stability, but the scale of the initial NAV declines demonstrate the stress the U.K. bond market was under,' Moody's said. The threat of forced conversions for low-volatility strategies is further adding to the money market fund industry's 'anxiety,' Moody's said." Crane Data's Money Fund Intelligence International shows GBP money market fund assets increasing substantially over the past week. They've risen by L41.4 billion to L245.0 billion for the week ended October 4. They had declined by L11.9 billion the prior week, and market NAVs are currently 0.9994 on average.

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