breaking a buck

Breaking a Buck

A situation in which the net asset value of a money market fund drops below $1. Generally, the NAV of a money market fund remains at $1, but it may drop below if the returns on the fund's investments do not cover operating expenses. Breaking a buck occurs when interest rates drop to an unsustainably low level or when the fund has used leverage to make investments. Because money market funds are ordinarily risk-free investments, breaking a buck is relatively uncommon; the first occurrence did not happen until 1994.

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breaking a buck

A decline below $1 in the share price of a money market fund. A money market fund share price may break a dollar if a major decline occurs in the value of securities owned by the fund. For example, a corporation may default on commercial paper held by a fund.

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.