Opinions on fidelity money market funds for short term cash parking > $500k

[er999]

We recently sold our house and are under contract to buy a new house in a few weeks (tentative closing 6/20 but might be moved up if mortgage is completed sooner) pending inspection and mortgage (we’re getting a small mortgage $100k). We’ll be putting $735k down and I have around $820k that was wired into my fidelity brokerage account as of yesterday from our house sale. I picked our fidelity account to hold the money since that amount is over the $500k fdic limit. I picked the Fidelity Money Market Fund Premium Class (FZDXX) to hold the cash based on recommendations on here to get access to the fund with > $100k balance.

It is somewhat stressful holding this large amount of cash with the debt ceiling news. Questions:

1. Since FZDXX holds commercial paper, is it potentially less of a problem with a debt ceiling default that a 100% treasuries fund? I know that normally a 100% treasuries is safer but I read about 10 day liquidity gates (that could apply to fzdxx as well) and wonder if I might have trouble withdrawing the money on time to close mid June as that is right around the time of the potential debt ceiling issues (maybe earlier 6/1 if the news reporting is accurate)

2. Should I put the money is a 100% treasury fund instead? I don’t want to buy 1 month t bills as might need the money beforehand and don’t want to sell in a time of potential market disruption. I think treasury money market funds can have a 10 day gate as well.

3. Should I try to wire money to the closing company 1-2 weeks before the sale or would this be a big mistake since then I’m relying on the closing company to not go out of business in a massive market disruption and should continue with the usual practice of wiring money same day or day before.

Any other thoughts? Am I being too anxious? Thanks for any comments.

[anon_investor]

We recently sold our house and are under contract to buy a new house in a few weeks (tentative closing 6/20 but might be moved up if mortgage is completed sooner) pending inspection and mortgage (we’re getting a small mortgage $100k). We’ll be putting $735k down and I have around $820k that was wired into my fidelity brokerage account as of yesterday from our house sale. I picked our fidelity account to hold the money since that amount is over the $500k fdic limit. I picked the Fidelity Money Market Fund Premium Class (FZDXX) to hold the cash based on recommendations on here to get access to the fund with > $100k balance.

It is somewhat stressful holding this large amount of cash with the debt ceiling news. Questions:

1. Since FZDXX holds commercial paper, is it potentially less of a problem with a debt ceiling default that a 100% treasuries fund? I know that normally a 100% treasuries is safer but I read about 10 day liquidity gates (that could apply to fzdxx as well) and wonder if I might have trouble withdrawing the money on time to close mid June as that is right around the time of the potential debt ceiling issues (maybe earlier 6/1 if the news reporting is accurate)

2. Should I put the money is a 100% treasury fund instead? I don’t want to buy 1 month t bills as might need the money beforehand and don’t want to sell in a time of potential market disruption. I think treasury money market funds can have a 10 day gate as well.

3. Should I try to wire money to the closing company 1-2 weeks before the sale or would this be a big mistake since then I’m relying on the closing company to not go out of business in a massive market disruption and should continue with the usual practice of wiring money same day or day before.

Any other thoughts? Am I being too anxious? Thanks for any comments.

I suggest using FZCXX (Fidelity Government Money Market Fund - Premium Class). It has a $100k minimum initial investment but a current yield around 4.85% and very safe, no commerical paper, also no treasuries, so less direct impact from t-bill defaults.

[er999]

Thanks. The money right now is actually in SPAXX (fidelity government money market fund) as I had a pending order to buy FXDXX (money market fund premium class) at end of day today that I cancelled while I await replies here and will research FZCXX, government money market premium fund. That fund doesn’t have t bills but does hold 66% us government repurchase agreements (same as SPAXX) that presumably could be affected with some crisis with a us default. From looking at the composition FDCXX and SPAXX look like identical holdings only yield is 4.5% vs 4.6%.

Obviously for 1 month even with this large amount even an extreme difference in interest of say 1% would only be ~$600 and the difference in the money market funds is much less FZDXX 4.68 vs 4.5% in SPAXX would be only 0.18% interest which is even less maybe $100. Maybe just leave in SPAXX since that’s the default fund?

[vaylie]

If the FDIC limit is your only concern, do you have a Fidelity CMA account? You can be FDIC insured up to $1M+ on that and won't have to worry about money market funds. If you don't have it yet though, I feel the risk of moving too much money into a new account and risking hold times/security freezes would be larger than the debt ceiling though, so I wouldn't do it.

[er999]

No fidelity CMA account and you’re probably right that it’s too late to open one with potential holds, need to add to mortgage application etc.

[bb]

I find it hard to believe there is a distinction between FDIC insured funds and treasury debt - in my mind they all come down to being backed by the full faith and credit of US.