U.S. prime money market funds (MMFs) exposure to eurozone banks
increased slightly during the month of August, with eurozone bank
holdings accounting for approximately 9.2% of total MMF assets,
according to Fitch Ratings.
This represents an increase of 8% on a dollar basis since end-July 2012, although Fitch notes that overall MMF exposure to eurozone banks remains 74% below the end-May 2011 level. For comparison, exposure to Japanese banks - which has steadily and consistently increased since May 2011 - are almost one-and-a-half times that of total eurozone bank holdings.
The proportion of MMF exposure to European banks in the form of repurchase agreements (repos) continues to rise, with repos comprising 37% of MMF allocations to European banks and 39% of allocations to eurozone banks as of end-August. Each of these ratios represents a new high during Fitch's period of study dating back to end-2006.
As a further sign of ongoing MMF caution, holdings of short-term U.S. Treasuries increased by 5% while holdings of agencies decreased by 12%. Together, MMF holdings of these securities continue to exceed 20% of assets despite persistent low yields.
The 15 largest exposures to individual banks, collectively, comprise approximately 43% of total MMF assets. Only one Eurozone institution remains in the top-15 while Australian, Canadian and Japanese banks represent nine of the top-15.
The full report 'U.S. Money Fund Exposure and European Banks: Repos Reflect Caution' is available at www.fitchratings.com.
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