Despite the new rules that the SEC imposed on money market funds in January – or perhaps because of them – managers are challenged to find an adequate supply of investments. The scarcity of debt with a maturity of less than seven days, combined with low yields, is pushing money market fund managers into areas of the fixed income and cash management markets they previously would not seek out, The Wall Street Journal reports this morning.

Two of the critical measures the Commission imposed on money market funds are requiring them to undergo stress tests and to reveal their holdings every month. They must also hold higher-quality instruments and at least 30% of their assets in securities with maturities of no more than seven days.

Memory of the disruption in the capital and credit markets following Reserve Primary Fund’s breaking the buck in September 2008 is still fresh, so the trouble is that corporations are reluctant to issue these short-term securities for fear of being unable to refinance.

As Carol Wolf, senior vice president and money fund portfolio manager at OppenheimerFunds, told The Journal: “There’s an awful lot of money fund assets chasing limited supply.”

A look into the actual holdings of money market funds shows an increase in repurchase agreements, or repos, that might be hard to sell should a fund be faced with large redemptions. Fund managers have also moved a disproportionate amount of money into paper from financial companies; 36% of the assets of prime money funds are in the issues of the top 20 issuers of debt in the financial sector, according to Moody’s. Many of these are European banks, which are still plagued by the European debt crisis.

For their part, money fund investors are well aware of these dangers. Tom Milner, director of treasury services at Wakefern Food Co., moved 80% of his company’s money into cash. “If there’s one problem with one money fund,” he explained, citing the Primary Fund fiasco, “all of a sudden, there’s panic everywhere.”