Does Mutual Fund Fragility Impact Primary Market Pricing? Evidence from Commercial Paper

Investor flows in open-end mutual funds, along with their inherent liquidity mismatches and potential fragility risks, can significantly impact the pricing of assets these funds invest in. While much of the existing research has focused on these effects within the secondary markets for equities and bonds, this note, based on a working paper by Li, Tibay, and Wang (2024), provides evidence on how shocks from investor flows in prime money market funds (MMFs) influence the pricing and issuance in the primary markets for commercial paper (CP).