Allspring MMFs on Debt Ceiling
Allspring Money Market Funds writes on the "debt ceiling in its latest "Portfolio Manager Commentary." They comment, "However the timing works out and however messy it seems to get, holders of U.S. Treasury securities should know they are very, very likely to be repaid. Although it hasn't happened before, it's possible that politicians may fail to act before the Treasury's stated x-date, but even if this were to happen, the Treasury may still have resources available, having declared a conservative x-date. Taking it a step further, it's possible there will be no resolution with the Treasury completely tapped, but even if this were to happen, the Treasury could prioritize debt service over other outlays to avoid affecting securities. Taking it one more step, it's possible in the absence of a resolution that the Treasury would be forced to delay payment on a security, but even if this were to happen, the holder would eventually, after what would likely be a short delay, receive its payment from the government. As the volume gets turned up, it'll be good to remember that U.S. Treasuries are still the closest thing to a risk-free investment that exists in the world." They add, "Another worthwhile thing to remember is that government money market funds and Treasury repurchase (repo) funds typically have access to the Fed's reverse repo (RRP) program and collectively are responsible for most of the more than $2 trillion parked in the RRP every day. So, while there may be some unease about Treasury securities, the government money market fund complex is sitting on the greatest stockpile of liquidity the economy has ever seen -- liquidity that is available to shareholders as they need. Treasury-only funds, which don't invest in repos, will necessarily have some Treasury exposure, but holders of those funds do so because they want the perceived nearly risk-free quality that comes with Treasuries, despite the turbulence that may come when the debt ceiling needs to be addressed every few years."
