JPMorgan Cuts Exposure to Short-Term U.S. Debt

JPMorgan Chase (NYSE: JPM  ) says that as of Oct. 9 -- as a precautionary measure as the U.S. government heads toward its debt ceiling -- its Asset Management Business no longer holds any U.S. Treasury Securities with a maturity or coupon payment date between Oct. 16 and Nov. 6 of this year in its money market funds.

JPMorgan Investment Management noted in a statement that although it "continues to believe that the probability of a U.S. Government default is low," it had "taken certain precautionary measures with respect to the money markets." In addition to selling the U.S. Treasuries, JPMorgan has also increased its liquidity positions in its funds. These moves were all "taken in an attempt to manage the Funds in line with their objectives to seek to maintain a net asset value of $1.00 per share."

JPMorgan's announcement comes just days after the news that Fidelity, the largest manager of money market funds, noted that it no longer held "any U.S. government debt that comes due around the time the nation could hit its borrowing limit."

This all comes as the government shutdown drags on, but seemingly some concessions have been made as Bloomberg reports that "House Republicans offered a plan to raise the debt limit and end the shutdown that would require the president to accept policy conditions attached to a spending measure."

Money market funds like JPMorgan and Fidelity have been cutting back their exposure to short-term U.S. government debt for the last three weeks. Investors have concerns that if the U.S. government were to hit the debt ceiling, it would not be able to promptly pay back bondholders. Money market funds are typically ultra-safe places to park money, investing primarily in short-term debt that can be easily bought and sold. In a money market fund, investors expect to get back every dollar they invest.

JPMorgan also announced today a loss of approximately $400 million in the third quarter of this year, its first quarterly loss since 2004, following $7.2 billion it had set aside for legal and other regulatory expenses.

-- Material from The Associated Press was used in this report.


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