Short-term credit markets are already hemorrhaging thanks to the lack of progress on the debt deal in Congress.This week, banks moved $37.5 billion from money market funds that are invested in Treasuries and other presumably safe securities, Dealbook reported — “the biggest weekly drop this year.”
Just between Monday and Wednesday, investors pulled $17 billion treasury-only funds.
Peter Crane, President of Crane Data, told Dealbook why these initial withdrawals should not be ignored:
“It’s big, no doubt about it,” he said. “Seventeen billion isn’t a run, but it’s definitely indicative that investors are shifting their assets. If this were to continue for another week or two, it would be very disturbing.”
Yields on long-term bills haven’t spiked, but bills coming due on the first Thursday after the Aug. 2 deadline have gone up by between 5 and 15 basis points.
On Wednesday, only a paltry $1 million was invested in bills that come due in 81 days or more, a sign that investors want quick access to their money. Money managers at Fidelity are steering clear of T-bills that mature in the week immediately following the August 2nd deadline. Just in case the unthinkable happens.