This weekend's Wall Street Journal writes "Euro Pain Hits Money Funds". It says, "The European debt crisis has rippled into one of the last redoubts of safety for U.S. investors: money-market funds. Money funds are thought to be low-risk because they invest in high-quality short-term debt issued by governments and big corporations. But many funds are holding big slugs of European bank debt. As of March 31, nine of the top 10 corporate issuers of short-term debt held by Moody's-rated U.S. prime money funds were big European firms. Yet that doesn't mean investors in money funds should rush for the exits, say analysts. Some funds are trimming their European holdings and changing the types of securities they buy in an effort to make their portfolios safer. Meanwhile, there might even be a silver lining from the crisis: improved yields." The article adds, "So far, investors haven't panicked. The funds attracted inflows in the week ended May 25, according to iMoneyNet. Inflows are 'a reassuring occurrence, because they're not forced to sell anything,' says Peter Crane, president of Crane Data LLC, which tracks the funds. The European debt crisis may even have a silver lining: It has prompted upticks in the London interbank offered rate, or Libor. Increases in Libor, a rate that banks charge one another to borrow, help push up money-fund yields, which lately have been close to zero. The 100 largest taxable money funds now have an average yield of 0.07%, up from 0.04% in January, according to Crane Data." In other news, see also, Investment News' "Advisers make a mad dash for cash", Boston Herald's "Money funds not worth owning", and Fidelity Investments' "Seeking Higher Yields?".
