U.S. money funds' euro debt exposure highest since '11 -JPMorgan

Reuters

* Money funds' euro zone holdings highest since Aug. 2011

* Funds add to more French, German bank debt in October

NEW YORK, Nov 13 (Reuters) - U.S. prime money market fundsraised their of euro zone debt holdings in October to thehighest level since August 2011 as pessimism over that region'seconomy continues to abate, a report by JPMorgan Securitiesreleased on Wednesday showed.

Prime money funds' exposure to the euro zone grew by $22billion to $251 billion last month. Since the end of 2012, thefunds have raised their holdings of that region's bank paper by$49 billion, JPMorgan said.

The bulk of the July increase was in French and German bankdebt, which grew by $10 billion to $151 billion and by $9billion to $43 billion, respectively.

Revived demand for French bank debt put them as money funds'fourth largest holdings by country, just behind Canada, JPMorgananalysts wrote in the report.

But their French holdings were some $73 billion below thepeak seen in May 2011 before the intensification of the eurozone debt crisis.

The data were collected prior to Standard & Poor's downgradeof France' debt rating on Nov. 8 to AA from AA+.

Prime money market funds are seen as slightly riskieralternatives to bank accounts. They could invest in veryshort-dated bank debt in addition to U.S. Treasury bills. Theprime funds tracked by JPMorgan had $1.08 trillion in assets atthe end of October.

These funds also raised their holdings of other Europeanbank debt last month, particularly bank paper from Norway andSweden, by $11 billion to $231 billion.

On the other hand, prime funds reduced their exposure toCanada and United States in October.

Their Canadian debt holdings fell by 5 billion to $155billion, while their U.S. holdings declined by $12 billion to$172 billion, JPMorgan said.

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