NEW YORK Oct 21 Investors poured cash back into
U.S. money market funds the day after Washington reached an
agreement to raise the federal debt ceiling temporarily and
avert a default, J.P. Morgan Securities analysts said on Monday.
Prior to Wednesday's debt deal, money funds, which are seen
as alternative to bank accounts, had heavy redemptions as
investors fretted over a possible U.S. default on the interest
rates on Treasury bills and its impact on the rest of the
short-term credit market.
Interest rates on one-month Treasury bills briefly rose
above 0.70 percent last week before President Barack Obama and
top Republican lawmakers reached a deal to increase the federal
borrowing cap and to end the first partial government shutdown
in 17 years.
More than $26 billion returned to money funds on Thursday,
the day after the deal to raise the statutory debt limit to
$16.7 trillion, J.P. Morgan analysts said.
Based on data from iMoneynet, they estimated the one-day
rise in money fund assets was nearly 40 percent of all the cash
investors pulled from money funds in the days leading up to the
Roughly $8 billion of the money made its way to money funds
that invest only in short-term Treasury debt, while about $9
billion returned to those that fund government and agency
securities. The rest of the inflows went into prime funds that
can invest in commercial paper and corporate debt, they said.
The White House and lawmakers have agreed to work on a
long-term budget deal before the next debt ceiling deadline of
"We suspect by early this week (money fund) balances would
be fully recovered to pre-debt ceiling levels," the J.P. Morgan
analysts wrote in their report.