Money Market Funds (MMFs) function as key liquidity providers in short-term debt markets, but their structure makes them vulnerable to sudden investor runs during periods of market stress.

[Market Panic Spikes] ---> Short-Term Credit Assets Devalue ---> Fund Breaks the Net Asset Value Floor ---> Run Triggered

If an MMF’s underlying short-term credit assets experience significant downgrades, the fund risks falling below its stable Net Asset Value floor (known as “breaking the buck”). This event can prompt institutional investors to withdraw capital rapidly, causing wholesale funding markets to freeze and forcing the central bank to provide emergency liquidity support.