Moody's Investors Service published a report entitled, "Prime Money Market Funds -- Sterling Money Funds Keep Attracting Assets Despite Lower Yields," and one entitled, "Prime Money Market Funds -- Euro: Temporary Reversal of Flows in Prime Funds." A press release entitled, "Moody's: Political risk will drive assets toward sterling, euro money funds in 2017, despite declining yields," explains, "In 2017, euro CNAV and sterling prime money funds (MMFs) will attract assets, amid potential volatility driven by political risk, says Moody's Investors Service." We review their release below, and also give an update on the latest assets and holdings of European or "offshore" money funds.
The release states, "Moody's says sterling prime money market funds' (MMF) assets under management (AUM) reached a 12 month-high of GBP142 billion (+GBP3.7 billion, or +2.7%) in Q4 2016, despite a slow-but-steady decrease in yields. Seven-day net yield of 0.26% was down by six basis points from end of Q3 2016. Liquidity of 26.5% is below the annual average of 28%. Sterling funds have also taken on more credit risk, with 63% shifting to securities rated Aa3 or lower in Q4 2016. However, a shortening in average durations offsets the additional credit risk."
It continues, "Moody's says yields on euro MMFs, being at record lows, will likely fall even further, amid the European Central Bank's accommodative monetary policy. In Q4 2016, seven-day net yields fell to -43 basis points, 4 bps lower than the previous quarter. Euro assets fell in Q4 2016, but remained above the average for the year. AUM fell by 2.3% to 67.6 billion during the final quarter of 2016, but remained above the 62 billion average for the year as a whole. However, in 2017, Moody's expects euro CNAV MMFs to continue attracting assets, amid volatility driven by political risk."
Finally, Moody's comments, "Euro CNAV MMFs increased their credit, liquidity and obligor risk profiles in Q4. In Q4 2016, 76% of AUM in euro prime funds shifted into securities rated Aa3 or lower. Liquidity fell to a 12-month low (23.5% of assets), driven by a reduction in repos and government securities. The top three obligor concentration ratio rose to a 12-month high of 23.4% of assets, illustrating the difficulty of finding counterparties at year-end."
Crane Data's Money Fund Intelligence International shows assets in "offshore" money market mutual funds, U.S.-style funds domiciled in Dublin or Luxemburg and denominated in USD, Euro and GBP (sterling), flat (-$2 billion) year-to-date in 2017 at $729 billion as of 1/31/17, but assets increased in 2016 by $32 billion. U.S. Dollar (USD) funds (156) account for over half ($404.4 billion, or 55.5%) of the total, while Euro (EUR) money funds (97) total E91.2 billion and Pound Sterling (GBP) funds (107) total L185.8.
USD funds are up $6 billion YTD in 2017, and were up $6 billion in 2016. Euro funds are down E4 billion YTD through 1/31/17, but up E19 billion in 2016. GBP funds are down L4B in 2017, but they jumped by L39 billion in 2016. USD MMFs now yield 0.62% (7-Day) on average (1/31/17), up 6 bps YTD and up 46 basis points from 12/31/15. EUR MMFs yield -0.49% on average, unchanged YTD but down 30 basis points since 12/31/15. GBP MMFs yield 0.19%, unchanged YTD but down 18 bps since 12/31/15.
Crane's latest Money Fund Intelligence International Portfolio Holdings data (as of 12/31/16) shows that European-domiciled US Dollar MMFs, on average, consist of 25% in Treasury securities, 22% in Commercial Paper (CP), 21% in Certificates of Deposit (CDs), 15% in Other securities (primarily Time Deposits), 14% in Repurchase Agreements (Repo), and 3% in Government Agency securities. USD funds have on average 33.3% of their portfolios maturing Overnight, 10.4% maturing in 2-7 Days, 18.0% maturing in 8-30 Days, 13.5% maturing in 31-60 Days, 9.8% maturing in 61-90 Days, 11.4% maturing in 91-180 Days, and 3.6% maturing beyond 181 Days. USD holdings are affiliated with the following countries: US (38.0%), France (12.3%), Canada (10.7%), Japan (9.6%), Australia (5.4%), Germany (4.7%), Sweden (3.5%), Great Britain (2.9%), The Netherlands (2.8%), Singapore (2.6%) and China (2.3%).
The 15 Largest Issuers to "offshore" USD money funds include: the US Treasury with $113.9 billion (25.5% of total assets), BNP Paribas with $17.1B (3.8%), Mitsubishi UFJ with $13.7B (3.1%), Federal Reserve Bank of New York with $11.9B (2.7%), Toronto-Dominion Bank with $10.0B (2.2%), Bank of Nova Scotia with $9.1B (2.0%), Wells Fargo with $9.1B (2.0%), RBC with $8.1B (1.8%), Natixis with $8.1B (1.8%), Credit Agricole with $7.7B (1.7%), Sumitomo Mitsui Banking Co with $7.6B (1.7%), Bank of Montreal with $7.6B (1.7%), Societe Generale with $7.4B (1.6%), Nordea Bank with $7.4B (1.6%), Canadian Imperial Bank of Commerce with $7.2B (1.6%), and Sumitomo Mitsui Trust Bank with $7.2B (1.6%).
Euro MMFs tracked by Crane Data contain, on average 42% in CP, 33% in CDs, 17% in Other (primarily Time Deposits), 4% in Repo, 3% in Treasury securities and 1% in Agency securities. EUR funds have on average 18.6% of their portfolios maturing Overnight, 6.0% maturing in 2-7 Days, 20.1% maturing in 8-30 Days, 19.3% maturing in 31-60 Days, 16.9% maturing in 61-90 Days, 16.6% maturing in 91-180 Days and 2.4% maturing beyond 181 Days. EUR MMF holdings are affiliated with the following countries: France (27.0%), Japan (14.6%), US (13.6%), Germany (8.0%), Netherlands (7.4%), Sweden (6.3%), Belgium (6.1%), Switzerland (3.8%), Great Britain (3.0%), China (2.0%), and Finland (1.8%).
The 15 Largest Issuers to "offshore" EUR money funds include: BNP Paribas with E4.4B (4.8%), Proctor & Gamble with E3.9B (4.2%), Rabobank with E3.8B (4.1%), Mitsubishi UFJ Financial Group Inc with E3.6B (3.9%), Sumitomo Mitsui Banking Co. with E3.6B (3.8%), Credit Agricole with E3.2B (3.5%), Credit Mutuel with E3.2B (3.4%), BPCE SA with E3.1B (3.3%), Nordea Bank with E2.8B (3.1%), Societe Generale with E2.8B (3.0%), Credit Suisse with E2.7B (2.9%), DZ Bank AG with E2.7B (2.9%), Republic of France with E2.6B (2.8%), Dexia Group with E2.4B (2.6%), and KBC Group NV with E2.3B (2.4%).
The GBP funds tracked by MFI International contain, on average (as of 12/31/16): 43% in CDs, 23% in Other (Time Deposits), 21% in CP, 8% in Repo, 5% in Treasury, and 0% in Agency. Sterling funds have on average 21.0% of their portfolios maturing Overnight, 7.5% maturing in 2-7 Days, 15.9% maturing in 8-30 Days, 19.6% maturing in 31-60 Days, 15.3% maturing in 61-90 Days, 17.0% maturing in 91-180 Days, and 3.7% maturing beyond 181 Days. GBP MMF holdings are affiliated with the following countries: Japan (17.4%), France (14.7%), Great Britain (13.7%), Netherlands (7.9%), Australia (7.6%), Germany (7.1%), US (6.6%), Sweden (6.0%), Canada (5.7%), and Belgium (2.2%).
The 15 Largest Issuers to "offshore" GBP money funds include: UK Treasury with L8.2B (5.7%), Mitsubishi UFJ Financial Group Inc. with L7.8B (5.5%), Sumitomo Mitsui Banking Co. with L6.1B (4.3%), Credit Mutuel with L5.0B (3.5%), Nordea Bank with L4.7B (3.3%), Bank of America with L4.5B (3.1%), Sumitomo Mitsui Trust Bank with L4.4B (3.1%), DZ Bank AG with L4.3B (3.0%), Commonwealth Bank of Australia with L4.2B (3.0%), Rabobank with L4.0B (2.8%), BNP Paribas with L3.8B (2.7%), BPCE SA with L3.5B (2.5%), ABN Amro Bank with L3.4B (2.4%), Credit Agricole with L3.4B (2.4%), and Erste Abwicklungsanstalt with L3.3B (2.3%).
