Last week, Fidelity Investments said it would close two institutional prime money-market funds with a total of around $14 billion in net assets. Fidelity cited volatile outflows from the funds—which invest in short-term commercial paper and certificates of deposit issued by companies—and into government money-market funds during moments of market stress.cana Fidelity’s retail prime money-market funds, whose assets run into the hundreds of billions, will remain open. To fund that longer-term lending—in the absence of dollar deposits—foreign banks have used short-term CDs. But they are still bad news for the banks, watching one of their limited avenues for profit in recent years slowly closed off. Of course, banks can always offer investors higher returns on their CDs, but that would undercut the gains from their dollar-denominated lending.

Source: Wall Street Journal June 29, 2020 08:01 UTC