SecProbe.io

CORRESP
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seccommentsonicp.htm

November 22, 2004

Keith O`Connell, Esquire
Securities & Exchange Commission
Division of Investment Management
450 Fifth Street, N.W.
Washington, D.C. 20549

Re:         T. Rowe Price Institutional Income Funds, Inc. ("Registrant")
              consisting of the following series:
                  T. Rowe Price Institutional Core Plus Fund
              File Nos.: 333-84634/811-21055

Dear Mr. O`Connell:

Below are our responses to your October 29, 2004 oral comments on Pre-Effective Amendment No. 3 for the T. Rowe Price Institutional Income Funds, Inc. which was filed on September 16, 2004.

Comment #1:

The objective of the fund is the fund seeks to maximize total return and provide income. I believe the definition of total return includes income, so it`s not clear how the fund intends to maximize total return and provide income. Clarify.

Response:

We have clarify the objective by changing it to read, "To maximize total return through income and capital appreciation."

Comment #2:

The second paragraph under the subheading, "What is the fund`s principal investment strategy?" states that under normal conditions, the fund expects to maintain an effective duration within
+/-20% of the Lehman Brothers U.S. Aggregate Bond Index. Please give the duration of such index.

Response:

We will revise the sentence as follows:

Under normal conditions, the fund expects to maintain an effective duration within +/-20% of the Lehman Brothers U.S. Aggregate Bond Index. As of November 1, 2004, the effective duration of this index was 4.30; however, it will change over time.

Comment #3:

The third paragraph under the subheading, "What is the fund`s principal investment strategy?" reads:

Individual bond investments in the core portfolio will be investment grade, with a minimum credit quality of BBB-. Ratings will be as determined, at the time of purchase, by at least one nationally recognized statistical rating organization (NRSRO) or, if not so rated, a comparable rating by
T. Rowe Price. If a security is split-rated (i.e. one rating below investment grade and one at or above investment grade), the higher rating will be used.

If a bond is downgraded into junk, does it shift to the "plus" portion, or does it stay in the "core" portion? If it stays in the "core" portion, then the phrase "at the time of purchase" should be moved into the first sentence after the words "core portfolio".

Response:

A bond downgraded to below investment grade will shift to the "plus" portion of the portfolio.

Comment #4:

The fourth paragraph under the subheading, "What is the fund`s principal investment strategy?" states that the plus portion of the fund`s portfolio may consist of junk bonds (not to exceed 10% of total assets), below investment-grade emerging market fixed-income securities (not to exceed 5% of total assets)...

Is the 5% of total assets that may be invested in below investment-grade emerging market fixed income securities part of the 10% of total assets that may be allocated to junk bonds?

Response:

No. We have clarified the language as follows:  "The plus portion of the fund`s portfolio may consist of junk bonds of U.S. companies (not to exceed 10% of total assets), below investment-grade emerging market fixed-income securities (not to exceed 5% of total assets)..."

Comment #5:

In the second paragraph following the bullet "Credit Risk", the term "financial risk" should be clarified or revised.

Response:

The sentence has been revised to read, "Most investment-grade (AAA through BBB) securities should have a relatively low risk of encountering financial problems and a relatively high probability of future payments."

Comment #6:

The prospectus lists derivatives risk as a principal risk. Therefore, derivatives should be a part of the fund`s principal investment strategy.

Response:

The following language has been added as the sixth paragraph under the subheading, "What is the fund`s principal investment strategy?": "The fund may also invest in other securities, including futures, options, and swaps, in keeping with its objective."

Comment #7:

The last sentence of the bullet on page 3 of the prospectus reads, "When shares are sold, money may be lost." This sentence should be revised to more closely reflect the language in Form N1-A as follows, "When shares are sold, you may lose money."

Response:

The last sentence of the bullet on page 3 of the prospectus has been revised to read, "When shares are sold, you may lose money."

Comment #8:

Under the subheading, "Rights Reserved by the Funds", please explain why it is appropriate for for the fund to have the right to cancel or rescind any purchase or exchange order upon notice to the shareholder within five business days of the trade.

Response:

In a case in which fraud, excessive trading, or market timing is involved, it may take more than a day to discover and confirm such a violation and to subsequently notify the shareholder. Five days sets forth what we believe to be a reasonable outside limit.

Very truly yours,

/s/Tawanda Cottman

Tawanda Cottman

In connection with responding to your comments, T. Rowe Price acknowledges that:

the fund is responsible for the adequacy and accuracy of the disclosure in the filings;

staff comments or changes to disclosure in response to staff comments in the filings reviewed by the staff do not foreclose the Commission from taking any action with respect to the filing; and

the fund may not assert staff comments as a defense in any proceedings initiated by the Commission or any person under the federal securities laws of the United States.

/s/Henry H. Hopkins

_______________________________

Henry H. Hopkins

Vice President

T. Rowe Price Institutional Income Funds, Inc.