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Fidelity dumps US short-term debt as default fears mount
by Dylan Lobo on Oct 10, 2013 at 08:04
Fidelity Investments' money market team has sold its entire holding in short-term US government debt as default fears mount.
The US government is currently shut down after the Treasury warned it will run out of money if Congress does not agree to raise the $16.7 trillion cap on borrowing by 17 October.
In latest developments, overnight the US Democrat president Barack Obama (pictured) accused the Republicans of blackmailing America. ‘We’re not going to pay a ransom for America to pays its bills’, he said during a press conference at the White House.
According to reports, while the Boston-based fund firm expects this issue to be resolved its money market fund managers, which control around $430 billion in assets, had taken these steps to protect investors.
Nancy Prior, president of Fidelity’s Money Market Group, is reported to have said her firm no longer holds any US debt which matures in late October or early November, the period most vulnerable if the government runs out of cash.
‘We expect Congress will take the steps necessary to avoid default, but in our position as money market managers we have to take precautionary measures,’ Prior said.
There have been concerns there could be an investor run on money market funds if the problems in the US grow.
In a statement earlier this month, Fidelity said its money market arm was preparing for range of potential market investments.
'We stress test our funds and they can withstand significant market volatility. Stress testing is an ongoing process, which we review and update as part of our portfolio management strategies. In those tests, we take into account a variety of potential market scenarios and outcomes.
It added: 'We can state unequivocally that Fidelity’s money market funds and accounts continue to provide security and safety for our customers’ cash investments. Our money market funds invest in money market securities of high quality, and our customers have full access to their investments any time they wish.'
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