"You don't get high yield in short-term paper," he said.

"They are going to be coming with a lot more short-term paper," one trader said.

"Over time, that means the money they might save by selling fewer bonds will probably be lost due to higher rates on short-term paper."

Yet the funds can respond quickly to rising interest rates because they own short-term paper.

To minimize credit risk, they hold government securities and high-quality short-term corporate paper.

But holders are expected to view it as short-term paper, because the interest rate is reset at an auction every 49 days.

He started buying short-term commercial paper and long-term provincial government bonds.

Why didn't she tap into the fat returns of foreign short-term paper?

That amount has been reduced since then to about $6.2 billion yesterday, as the short-term paper matured.

Even today, investment in short-term paper remains the strategy for the vast majority of countries.