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US money market funds signal tentative retreat from Eurozone in holdings

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US prime money market fund (MMF) exposure to Eurozone banks declined in March 2013, likely reflecting investor concerns over recent events in Italy and Cyprus, according to Fitch Ratings.

 
As of end-March 2013, MMF allocations to Eurozone banks represented 13.2 per cent of assets under management within Fitch’s sample, a decline of 19 per cent on a dollar basis relative to the end-February level of 16 per cent of MMF assets.
 
Despite this recent decline, Fitch notes allocations to Eurozone banks have increased by over 70 per cent since end-June 2012 when European Central Banks (ECB) actions led to relative stabilisation of market sentiment.
 
Canadian banks remained the largest single country exposure at 13.4 per cent of assets, a nine per cent increase since end-February. In aggregate, MMF allocations to Canadian, Japanese and Australian banks represented approximately one-third of total assets in Fitch’s sample versus approximately 20 per cent of assets as of end-May 2011.
 
Australian, Canadian and Japanese banks collectively represent 10 of the top-15 largest exposures of MMF assets in Fitch’s sample, with just three European institutions in the top-15.
 
The proportion of eurozone exposure in the form of repos, at slightly more than 20 per cent of these banks’ collective exposure, remains well below the levels of roughly 40 per cent of exposure experienced during the height of the crisis last summer. 

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