You are correct. Interest rates on money market funds that are invested in corporate obligations like the Reserve Fund will see their rates dramatically rise to compensate and prevent people from leaving the fund.
Funds that invest solely in government backed securities will see rates fall as people flood those.
The only problem with the whole thing is that corporate American uses those short term money market instruments to borrow from. So we’ve just added a lot more interest expense to the bottom lines of corporate America trying to compete and get strong again.
True, the market will demand that they pay a premium to compensate for the new risk level.
You cannot ignore the laws of the market, the jungle or God and expect nothing to happen, sure in the short term, long term though...
And I would bet that foreign money will avoid those instruments like the plague.