Short-term T-bills are paying about .25%. This creates a problem for money market funds: their costs are barely being funded by the interest they get on short-term CD's.
They pay low rates to investors -- no better than a bank or credit union.
If we get to negative rates, where Europe is today, then money market funds will suffer losses if they do not "break the buck." They will either impose capital losses on investors or else go bankrupt.
New SEC rules go into effect in October. They will allow restrictions on withdrawals. Read about this here: //www.garynorth.com/snip/1229.htm
Print it out. Read it. Forewarned is forearmed.
Some funds are rewriting their rules. They reserve the right to limit redemptions. They are sending out new agreements.
If you have money in a money market fund, read the new fine print. You do not want your money locked in.
An FDIC-insured account has no such restrictions.
A word to the wise is sufficient.
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