Scwab dumps SIVs
Schwab, a money manager has been making some interesting moves in the financial market.
These changes have are affecting the money market’s funds exposure to SIV debt.
Marketwatch has the latest:
By year’s end, Hintz said, Schwab’s exposure to SIVs should drop to around 3.5% of assets. That’s based on typical maturity structures of the firm’s underlying money market assets, he added.
Looking out to the end of February, Hintz wrote in the report that he expects such commercial paper to represent slightly more than 2% of the funds’ total assets. Hintz also says that in the second half of 2008 almost all of Schwab’s SIV exposure should be eliminated.
Bernstein maintained its outperform rating on the stock and $27.50 target price.
“Like other large mutual fund complexes, Schwab is unlikely to ever allow its funds to drop below a dollar and would, if necessary, step in to buy the SIV commercial paper at par,” Hintz said.
A recent article in The Wall Street Journal highlighted the exposures of several money market funds to SIV debt. One of those was Schwab’s Advisor Cash Reserves Fund.
These changes will doubtlessly affect the rates on loans such as 2nd mortgage loans, which will make it harder for Americans to afford their homes.
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