U.S. Money Funds Increase Exposure to Eurozone Banks


 
Author: Brian Bertsch
Location: New York
Date: 2013-03-01

U.S. prime money market fund (MMF) exposure to eurozone banks increased in January 2013, with increased allocations across the rest of Europe as well, according to Fitch Ratings.

At end-January 2013, exposures to eurozone banks represented 14.5% of MMF assets under management within Fitch's sample, the highest level since end-October 2011. Eurozone exposures have increased more than 90% since the end-June 2012 low point. For the seventh straight month, MMFs increased their exposure to French banks, which at 6.8% of assets represented the highest point since end-August 2011.

Fitch notes that despite recent increases, MMF allocations to eurozone and French banks remain about 60% below end-May 2011 levels.

From the money funds' perspective, European Central Bank (ECB) actions and improved eurozone market conditions have helped to promote a more positive stance towards banks in the region. For eurozone banks, ongoing access to MMFs can enhance funding diversification and bolster liquidity.

In addition to the continuing resumption of flows to eurozone banks, several other trends also indicate an easing in MMF risk aversion. The proportion of eurozone exposure in the form of repos remains below last summer's peaks, a decline which likely reflects a greater willingness by funds to take on unsecured exposure to the region. Exposures to U.S. Treasury and agency securities also decreased slightly in January to their lowest point since end-December 2011.

The full report 'U.S. Money Fund Exposure and European Banks: Eurozone Climbs Again' is available at 'www.fitchratings.com.' Fitch's analysis is based on a sample set of the top-10 largest U.S. MMFs per each observation period and represents approximately $671 billion, or 45% of the estimated $1.49 trillion in total U.S. prime MMF assets under management.

Additional information is available at 'www.fitchratings.com'.

 

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