The $400 Billion Money-Fund Exodus With Banks in Its Crosshairs
- Push to make money markets safer transforms industry
- Investors set to exit prime funds, which buy commercial paper
A view of Royal Bank in Toronto, Canada.
Photographer: Reynard LiThis article is for subscribers only.
Banks and other companies that have seen borrowing costs rise in the past year are about to feel more pressure in a $1 trillion market for short-term IOUs.
Investors are poised to pull as much as $400 billion from U.S. money-market funds that buy such debt, known as commercial paper, JPMorgan Chase & Co. predicts. The looming exodus, a consequence of steps to make money markets safer after the financial crisis, is set to accelerate before October. That’s when Securities and Exchange Commission rules take effect mandating that so-called institutional prime funds, among the main buyers of commercial paper, report prices that fluctuate. Traditionally, those funds have stuck to $1 per share.