US money market funds continue to increase their use of secured lending for investments in Europe. The amount of repo lending in their portfolios has been growing.
This is good news from the perspective of the safety of US money funds, but if you need some place to park your cash (that is outside a bank), be prepared to get close to zero return. Between the the near-zero rates on repo and zero rates on treasury bills, there isn't much left after fees. As an example the Fidelity Money Market Fund (ticker: SPRXX) has made less than 1 basis point for the whole year. That's right, if you deposited $100,000 with SPRXX on 2/22/11 and took it out on 2/22/12, you would have made ten dollars ($9.50 to be exact).
|SPRXX total return (Bloomberg)