Money-Fund Withdrawals Accelerate as Debt Cap Approaches

Investors pulled $41.6 billion from U.S. money-market mutual funds in the past week, or 1.6 percent of total assets, as concern grew over lawmakers’ inability to strike a budget deal that would avert a default on Treasury securities.

The exodus in the seven days through yesterday was punctuated by the withdrawal of $21.6 billion on Oct. 11, according to research firm Crane Data LLC in Westborough, Massachusetts. Investors pulled $15.7 billion in the preceeding seven days.

While the spike appeared connected to the approaching debt ceiling, it was exacerbated by companies moving cash to make bi-monthly payroll and meet a quarterly tax payment deadline on the next business day, Peter Crane, president of Crane Data, said in an interview.

“The outflows are still quite manageable,” Crane said. “They’d be worrisome if they continued for a number of weeks.”

U.S. Senate leaders are rushing to lock up an agreement to end the fiscal impasse, stepping in after House Republicans’ last-minute plan to avert a U.S. government default collapsed. Some Republican lawmakers have vowed not to approve an increase in the government’s debt limit unless President Barack Obama and his Democratic Party agree to change the Patient Protection and Affordable Care Act of 2010, known as Obamacare. They have also refused to approve new funding for government operations, triggering a partial government shutdown since Oct. 1.

Several of the largest money-fund providers, including Fidelity Investments and JPMorgan Chase & Co., have said they have sold Treasuries maturing in the next few weeks and are building extra liquidity to meet potential client withdrawals.

To contact the reporter on this story: Christopher Condon in Boston at ccondon4@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

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