* Companies lock low rates with longer-term debt * Tough proposals seen paring commercial paper appetite * Commercial paper outstanding shrinks 3rd straight week By Richard Leong NEW YORK, March 1 (Reuters) - The U.S. commercial paper market is under pressure as companies issue longer-dated debt to lock in historically low interest rates rather than relying on short-term debt. Uncertainties about the future of the $2.6 trillion U.S. money fund industry, which is a major buyer of commercial paper, might have also caused corporations to refrain from issuing the short-term debt, analysts and investors said on Thursday. "With long rates this low, you are seeing corporations terming out their debt to get rid of their rollover risks," said Bret Barker, portfolio manager at TCW, which oversees nearly $118 billion. Analysts expect investment-grade corporate bond supply to flirt with the $100 billion mark in March, according to IFR, a unit of Thomson Reuters. In February, companies raised $97.2 billion through high-grade debt sales. On the other hand, U.S. commercial paper outstanding fell $45 billion in February to $927.2 billion on a seasonally adjusted basis, according to U.S. Federal Reserve data released Thursday. The size of the commercial paper market, which companies rely on to finance payrolls, inventories and daily operations, contracted for a third straight week. Also, companies are wary of relying on commercial paper for cash as the money market funds, which own roughly one-half of the short-term debt, face tough reform proposals. "There are still questions about money market funds," TCW's Barker said. The proposed overhaul of the funds that includes letting share value float could reduce appetite for commercial paper and other debt seen riskier than U.S. government paper, analysts said. The money fund industry has argued against more regulatory changes, aimed at averting the same turmoil that hit the sector after the collapse of Lehman Brothers in September 2008. Fidelity Investments, the biggest U.S. money fund sponsor, in a letter to the Securities and Exchange Commission, said proposals that include requiring more capital and placing restrictions on investor redemptions would be disruptive to the money fund industry. They would put even greater strain on the federal guarantees that back bank deposits. "In particular, we continue to believe that proposals such as floating (net asset value), imposing onerous capital requirements or adding burdensome redemption restrictions will ultimately destroy the money market fund industry," said Fidelity. Its money funds have about $432 billion in assets.