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The worry has other parts of the market showing signs of stress. Like Fidelity, other investors have tried to limit their exposure to U.S. government debt that comes due this month, with the heaviest selling occurring in one-month Treasury bills. The yield on the one-month T-bill jumped to 0.27 percent Wednesday, its highest level since the 2008 financial crisis. The yield was nearly zero at the beginning of the month. 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. They fear that the government may not be able to pay back bond holders, said Gabriel Mann at the Royal Bank of Scotland Group. "Investors are buying protection," Mann said, referring to growing demand for insurance against the U.S. defaulting on its debt
-- a security known on Wall Street as a credit default swap. Overnight interest rates in the repo market, used by banks to fund day-to-day lending, shot up to 0.12 percent Wednesday from 0.04 percent at the beginning of the month. The increase is partly because some banks have stopped accepting some U.S. Treasurys as collateral, or are requiring more collateral, to borrow. Not all investors are worried though. "We're doing just the opposite ... probably buying what Fidelity is selling," Bill Gross, co-founder of PIMCO, the world's largest bond fund manager, said Wednesday in an interview with CNBC. Gross said the odds of the U.S. defaulting on its debt are a million to one.
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