When interest rate drops, bond prices do increase but that is dependent on the duration of the bond. If you have a long duration say 30 years, a small change in interst rate can really affect the price. For MM, most are legally obligated to stick to short term instruments so their bonds may have a duration of a few months so there is little or no asset gain when the interest rate drops. If the interest rate drops, so does the MM's return and vice versa. If the rate drops to near zero, it may not have enough money to pay the bills.
Statistics: Posted by gavinsiu — Wed Jun 19, 2024 7:45 pm