Bloomberg writes "Once Shunned, Money Market Funds Are Proving to Be an Unlikely Haven." They tell us, "Cash is flowing into short-term U.S. government debt funds at the fastest pace in more than six months, just when you might expect investors to be running for the exits. Demand is surging even as lawmakers wrangle with a looming debt-ceiling deadline and investors become concerned about Treasury missing payments on the securities held in most of the funds. More than $75 billion has been deposited in government money-market funds in the four weeks ended Aug. 16, compared with outflows of about $18.5 billion from U.S. exchanged-traded and mutual funds, Investment Company Institute data show.... As of July, taxable money-markets funds, which includes Treasury funds, held about $679 billion of short-term U.S. government debt. Of that, $111 billion is maturing in October, or about 11 percent of all Treasury holdings in the funds and 2 percent of all government money-markets assets, according to a J.P. Morgan Securities note." The piece quotes Dreyfus Corp.'s Patricia Larkin, "I'm not frightened by those numbers or scale as we have many options to invest during this general time frame that people discuss as the problematic time. The Fed's RRP is a very welcome tool from the capacity perspective, especially in a situation like this." Bloomberg adds, "For those risk-averse investors, remaining in money market funds may be the best bet since they don't have many options. Banks may be unwilling to take on more deposits as they are near a record $11.8 trillion, according to Fed data since 1973."

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