Although the money market assets still exceed $2.6 trillion, more than $62 billion has been moved out of market funds over the past two weeks with about $37.5 billion during the past week alone, according to Investment Company Institute.
Fund managers are withdrawing to ensure enough liquidity to pay investors in case they cash out investments en masse if Congress cannot reach a compromise before the Aug. 2 deadline. Many are concerned the Treasury will not be able to make payments on short-term Treasuries – yield has jumped to 0.1 percent from nearly zero percent at the beginning of July as investors have begun to disappear.
Lingering concerns from the European debt crisis could also be contributing to the overall feeling of tension among money market investors. However, long-fund Treasury rates are steadily declining, which is promising.
“It's pretty inconceivable that the debt ceiling debate won't get sorted out at some point soon,” Cameron Brandt director of research at EPFR, a global fund tracker, told CNN. “Investors are confident that Congress will get something done for the long haul, but there's just some uncertainty for the moment.”
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