Money market funds are a significant part of the U.S. financial system, considered by investors as a safe place to put their money in the short-term. Individuals and institutional investors have roughly $2.685 trillion invested in money market funds, according to data from the Investment Company Institute.
Money market funds are typically ultrasafe places to park money. In a money market fund, investors expect to get back every dollar they invest.
Fidelity's actions underscore what traders have noticed the last week. Investors have dumped U.S. government debt that comes due this month, with the heaviest selling in one-month Treasury bills. Money market mutual fund managers don't want to be caught holding U.S. government debt that comes due around the time the government hits the debt ceiling, said Gabriel Mann at the Royal Bank of Scotland Group.