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Less Euro risk in money funds

By Sheyna Steiner ·
Thursday, October 20, 2011
Posted: 11 am ET

U.S. prime money market funds reduced investments in European banks by 14 percent between August and September, the Wall Street Journal reported today in the story, "Money Funds Shun European Banks."

That data comes from a report from Fitch Ratings released today.

According to the press release from Fitch, European bank holdings make up 37.7 percent of the 10 largest U.S. prime money market funds.

Exposure to French banks decreased the most; down to 6.7 percent of money fund assets. There has been a 62 percent decrease in French bank investments held in money market funds since the end of May, Fitch reports.

Two of the biggest French banks, Credit Agricole and Societe Generale, were recently downgraded by Moody's Investors Service. The review was initiated on June 15 due to concerns about exposure to Greek sovereign debt and loans made to the private sector in Greece.

The fear is that a default by Greece or one of the other indebted Euro countries could cripple European banks and spiral down to money market funds. Money market funds are required to keep a $1 net asset value and are tightly regulated in the types of investments they can hold.

Of course, investors would like to earn some yield from money market funds. Those wishes are as yet unfulfilled -- according to, a provider of money market information and analysis, the 7-day yield on the top prime retail money market funds is between 2 and 7 basis points.

Does the European debt crisis concern you? Have you changed anything as a result?

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