Some Mutual Fund Somewhere Is Getting Fitted For A Grinch Costume

We wish you a Merry Bond Run.

Don't be this guy.

So Uncle Carl may have gotten a little carried away when he called the high-yield debt market “a keg of dynamite that sooner or later will blow up” and take everyone else with it. At the very least, it’s looking a little more like later.

That means that your other investments are safe and there’s no reason to perhaps pull a few bucks from your money-market account, right?

Not exactly.

The Treasury Department recommends pulling some last-minute Christmas shopping cash, or bracing yourself for handing out semantic arguments and lessons in liquidity late next week.

The OFR’s report, however, sees broader mutual fund fragility. In particular, the OFR points to money market mutual funds and so-called stable-value funds as being vulnerable to the problem of liquidity mismatch—where investors can attempt pull money from a fund faster than its managers can raise cash by selling assets.

The risks may be particularly high over the next couple of weeks.

The Government’s Financial Watchdog Just Warned Us That Another Third Avenue-Style Bond Fund Run Is Likely [WSJ MoneyBeat blog]
U.S. Watchdog Warns Distress in Junk Bonds Could Spread [WSJ]