Fitch Ratings today published a new report highlighting recent developments in rated U.S. money market funds (MMFs).
Fitch-rated prime MMFs have recently been reallocating investments in search of relative value among higher-rated European credits, following a period when portfolio allocations were driven by country-specific credit concerns in the Eurozone. For example, between June 2012 and Feb. 2013 Fitch-rated prime MMFs increased portfolio allocations to the three largest French banks (BNP Paribas, Societe Generale, and Credit Agricole) from a combined 3.2% to 8.0%, but the trend has been more nuanced since then.
Exceptionally low yields in short-term money markets in recent weeks have prompted prime MMFs to seek new repo counterparties and increase use of non-government collateral. MMFs have also been reducing concentration to repo counterparties, partly in response to prodding by the Federal Reserve. Allocations to the top three repo counterparties in prime funds fell from 34.9% in June 2012 to 29.6% in April 2013.
Fitch-rated prime MMFs continue to maintain high levels of liquidity, but have modestly lengthened WAL and to a lesser degree WAM.
The full report, 'U.S. Money Market Funds Dashboard', is available at Fitch Ratings
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