Crane Data's latest Money Fund Intelligence International shows that assets in European or "offshore" money market mutual funds surged higher over the past 30 days to a record $1.117 trillion, as yields also continued higher. Assets for USD and EUR MMFs rose over the past month while GBP MMFs fell. European MMF assets just recently broke above their previous record high of $1.101 trillion set in mid-December 2021 and they now have passed last month’s record of $1.103 trillion. These U.S.-style money funds, domiciled in Ireland or Luxembourg and denominated in US Dollars, Pound Sterling and Euros, increased by $14.6 billion over the 30 days through 10/13. The totals are up $86.4 billion (8.4%) year-to-date. (Note that currency moves in the U.S. dollar cause Euro and Sterling totals to shift when they're translated back into totals in U.S. dollars. See our latest MFI International for more on the "offshore" money fund marketplace. These funds are only available to qualified, non-U.S. investors.)
Offshore US Dollar money funds increased $11.8 billion over the last 30 days and are up $62.8 billion YTD to $612.3 billion. Euro funds increased E3.9 billion over the past month. YTD, they're up E21.0 billion to E201.4 billion. GBP money funds decreased L1.1 billion over 30 days, and they're still down L34.0 billion YTD at L229.5B. U.S. Dollar (USD) money funds (206) account for over half (54.8%) of the "European" money fund total, while Euro (EUR) money funds (115) make up 19.3% and Pound Sterling (GBP) funds (139) total 25.8%. We summarize our latest "offshore" money fund statistics and our Money Fund Intelligence International Portfolio Holdings (which went out to subscribers Monday), below.
Offshore USD MMFs yield 5.30% (7-Day) on average (as of 10/13/23), up from 5.28% a month earlier. Yields averaged 4.20% on 12/30/22, 0.03% on 12/31/21, 0.05% on 12/31/20, 1.59% on 12/31/19 and 2.29% on 12/31/18. EUR MMFs finally left negative yield territory in the second half of 2022 and should keep moving higher again in coming days following the ECB's latest rate hike. They're yielding 3.83% on average, up from 3.62% a month ago and up from 1.48% on 12/30/22, -0.80% on 12/31/21, -0.71% at year-end 2020, -0.59% at year-end 2019 and -0.49% at year-end 2018. Meanwhile, GBP MMFs broke the 5.0% barrier 3 months ago and now yield 5.22%, up 5 bps from a month ago, and up from 3.17% on 12/30/22. Sterling yields were 0.01% on 12/31/21, 0.00% on 12/31/20, 0.64% on 12/31/19 and 0.64% on 12/31/18.
Crane's October MFI International Portfolio Holdings, with data as of 9/30/23, show that European-domiciled US Dollar MMFs, on average, consist of 23% in Commercial Paper (CP), 16% in Certificates of Deposit (CDs), 28% in Repo, 19% in Treasury securities, 13% in Other securities (primarily Time Deposits) and 1% in Government Agency securities. USD funds have on average 52.1% of their portfolios maturing Overnight, 7.0% maturing in 2-7 Days, 9.1% maturing in 8-30 Days, 10.2% maturing in 31-60 Days, 6.0% maturing in 61-90 Days, 11.0% maturing in 91-180 Days and 4.5% maturing beyond 181 Days. USD holdings are affiliated with the following countries: the US (41.4%), France (11.9%), Canada (9.5%), Japan (9.0%), Sweden (4.8%), the Netherlands (4.5%), the U.K. (4.0%), Germany (2.7%), Australia (2.6%) and Abu Dhabi (1.5%).
The 10 Largest Issuers to "offshore" USD money funds include: the US Treasury with $127.2 billion (19.3% of total assets), Fixed Income Clearing Corp with $44.1B (6.7%), Federal Reserve Bank of New York with $21.8B (3.3%), BNP Paribas with $21.2B (3.2%), Sumitomo Mitsui Banking Corp with $18.5B (2.8%), RBC with $17.4B (2.6%), Bank of America with $15.6B (2.4%), Credit Agricole with $15.4B (2.3%), Barclays with $14.8B (2.2%) and Citi with $14.1B (2.1%).
Euro MMFs tracked by Crane Data contain, on average 43% in CP, 22% in CDs, 21% in Other (primarily Time Deposits), 11% in Repo, 2% in Treasuries and 1% in Agency securities. EUR funds have on average 40.7% of their portfolios maturing Overnight, 8.9% maturing in 2-7 Days, 10.8% maturing in 8-30 Days, 12.7% maturing in 31-60 Days, 6.5% maturing in 61-90 Days, 13.3% maturing in 91-180 Days and 7.0% maturing beyond 181 Days. EUR MMF holdings are affiliated with the following countries: France (32.1%), Japan (12.5%), the U.S. (9.1%), Canada (6.9%), the U.K. (6.9%), Germany (5.7%), Sweden (4.9%), Austria (4.6%), Belgium (4.1%) and the Netherlands (3.9%).
The 10 Largest Issuers to "offshore" EUR money funds include: Republic of France with E11.6B (6.7%), Credit Agricole with E9.1B (5.2%), Credit Mutuel with E7.7B (4.4%), BNP Paribas with E7.5B (4.3%), Mitsubishi UFJ Financial Group Inc with E6.7B (3.9%), BPCE SA with E6.1B (3.5%), Erste Group Bank AG with E5.9B (3.4%), KBC Group NV with E5.8B (3.3%), Societe Generale with E5.7B (3.3%) and Barclays PLC with E5.3B (3.0%).
The GBP funds tracked by MFI International contain, on average (as of 9/30/23): 38% in CDs, 19% in CP, 25% in Other (Time Deposits), 16% in Repo, 2% in Treasury and 0% in Agency. Sterling funds have on average 38.2% of their portfolios maturing Overnight, 11.4% maturing in 2-7 Days, 10.9% maturing in 8-30 Days, 12.0% maturing in 31-60 Days, 4.1% maturing in 61-90 Days, 15.2% maturing in 91-180 Days and 8.1% maturing beyond 181 Days. GBP MMF holdings are affiliated with the following countries: France (17.5%), Japan (14.9%), Canada (14.3%), the U.K. (13.5%), the U.S. (8.3%), Australia (6.8%), the Netherlands (5.0%), Sweden (4.3%), Spain (3.0%) and Singapore (2.6%).
The 10 Largest Issuers to "offshore" GBP money funds include: Toronto-Dominion Bank with L9.3B (4.4%), BNP Paribas with L8.7B (4.1%), Mitsubishi UFJ Financial Group Inc with L8.6B (4.1%), Sumitomo Mitsui Trust Bank with L8.0B (3.8%), UK Treasury with L7.7B (3.6%), BPCE SA with L6.8B (3.2%), RBC with L6.5B (3.1%), Nordea Bank with L6.2B (2.9%), Commonwealth Bank of Australia with L6.2B (2.9%) and Banco Santander with L6.1B (2.9%).
In other news, the Bank of England published a "Financial Policy Summary recently, which tells us, "The Bank is continuing to work with other UK authorities to improve the resilience of money market funds (MMFs). The UK authorities will publish a consultation paper on MMF regulation later this year. Significantly more liquid assets than currently required is likely to be the most effective way to increase MMF resilience and so reduce risks to financial stability, since higher levels of liquidity increase the range of stresses MMFs are resilient to. Bank staff analysis suggests that weekly liquid asset levels in the region of 50-60% of assets would give a high level of assurance that sterling denominated MMFs would be resilient to severe but plausible stresses."
Discussing the "Resilience of money market funds," they write, "The FPC discussed money market funds (MMFs) in the context of a consultation paper on MMF regulation that the UK authorities would publish later this year, following the discussion paper issued in May 2022. The FPC welcomed the UK authorities' commitment to consult on strengthening the resilience of MMFs. Increasing the resilience of MMFs was necessary to reduce systemic risk in the UK and global financial system.... As set in out in the Record of the Committee's meeting in March 2023, MMFs should be able to withstand severe but plausible levels of investor outflows without amplifying stress and increasing risks to financial stability. MMFs should be resilient to outflows at least as large as those seen in the dash for cash and LDI stress events, when central bank actions also helped to limit outflows. Such central bank interventions increased risks to public funds and should not be relied upon."
The BoE explains, "The FPC judged that significantly more shorter-maturing assets than currently required was likely to be the most effective way to increase MMF resilience and so reduce risks to financial stability. Higher liquidity would increase the range of stresses to which MMFs were resilient.... Bank staff analysis suggested that weekly liquid asset levels in the region of 50-60% of assets would give a high level of assurance that sterling denominated MMFs would be resilient to severe but plausible stresses. These issues would be explored in the forthcoming consultation paper."
They continue, "The analysis built in assumptions around contagion given the failure of a single fund or funds could lead to wider concerns or confidence effects in the sector more widely. This could exacerbate outflows, and increase the stress on other funds. The modelling focused on weekly liquid asset requirements to assess the ability of MMFs to withstand stresses over extended periods, and to ensure that funds have a stream of maturing assets to generate liquidity without having to resort to asset sales.... Alongside weekly maturing assets, MMF resilience also appears to depend on other factors. The staff analysis showed that daily liquid assets of 15% or greater would be sufficient to meet the largest daily redemption seen by sterling MMFs in the dash for cash in March 2020, and greater levels of weekly liquid assets would ensure daily liquid assets levels were replenished in stress.... The FPC noted that the consultation paper would explore stakeholder views on the appropriate balance of these factors for ensuring resilience."
The Bank of England adds, "To address vulnerabilities in the global MMF sector, a robust and coherent package of international reforms needed to be implemented. The best way of doing that was by working collaboratively across jurisdictions to ensure that reforms globally meet the Financial Stability Board's (FSB) objectives and strengthen the resilience of the global financial system.... The FPC noted that the FSB was currently undertaking a stocktake of progress by member jurisdictions in adopting reforms to enhance MMF resilience.... The combined impact of both international and UK policies would determine the nature and extent of systemic risk posed by MMFs.... As set out in the May 2022 discussion paper, UK authorities would need to be confident that MMFs that undertake liquidity transformation, primarily in sterling, face sufficiently robust regulatory requirements if they are to market to UK investors, and if risks to financial stability were to be addressed."
