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US Money Market Funds Increase Eurozone Bank Exposure: Fitch

Sept. 28, 2012
euros and dollars

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

Source: Copyright Business Wire 2012

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