Money market fund assets based in the United States recorded their greatest decline since August 2011. This comes as investors pulled an estimated USD43 billion out of fear of a possible US default in loan payments. This conclusion comes from Thomson Reuters' Lipper Service last Thursday.
The money market fund outflows, most coming from short term securities investments like 30day US Treasury bills, came before the deadline passed in raising the nation's USD16.7 trillion debt ceiling. Without the debt ceiling increase, the government would have defaulted on its debts such as those short term Treasury bills funded by the pulled out money. Many traders were calling gloom and doom scenarios for the global economy as a whole.
Late last Wednesday, the US Congress had passed a deal to avoid the United States from being in default and also, ending the government's partial shutdown. Large money fund managers such as BlackRock, Fidelity, JPMorgan and Pimco sold off their holdings in Treasury bills with maturity dates of late October to mid-November. These were the most vulnerable Treasury bills if the debt default occurred.
Many analysts say that funds pulled from the money market would return after the passage of the crisis. The issue now is the damage done to investor confidence in the political leadership affecting the overall economic well-being of the country.
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