Prime money-market funds could slow redemptions as they bleed assets

BOSTON (Reuters) – U.S. prime money-market funds have lost more than 10% of their assets and the prospect of funds slowing customer redemptions is rising amid unprecedented market turmoil, top credit-rating agency Moody’s Corp said on Thursday.

“The risk of funds imposing liquidity fees or gates has risen over the last week and will remain elevated based on our expectation that stress in money markets is likely to persist,” Moody’s said in a research report.

Moody’s also said heavy withdrawals from U.S. prime money-market funds is putting downward pressure on their net asset values.

Moody’s said its global money market funds outlook has been revised to negative from stable, owing to unprecedented market volatility and economic uncertainty amid the coronavirus pandemic.

Over the last few days, the U.S. prime institutional money market fund segment has lost more than 10% of total portfolio assets. This sharp rise in daily outflow rates has reduced funds’ liquidity levels and placed downward pressure on funds’ net asset values, Moody’s said.

Despite the pressures on fund liquidity, U.S. institutional prime money market fund duration and credit profiles remain solid, Moody’s said.