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Fitch: European MMFs Lengthen Maturities; Increase Sovereign Exposures
May 12, 2014 / 1:37 PM / in 3 years

Fitch: European MMFs Lengthen Maturities; Increase Sovereign Exposures

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: European MMF Quarterly - Euro - 1Q14 here PARIS/LONDON, May 12 (Fitch) Fitch Ratings says in new reports that European-domiciled money market funds (MMFs) in 1Q14 have lengthened average portfolio maturities and increased their allocations to sovereigns and government agencies, mostly from France, the US and the UK. During the first quarter of the year European MMFs have been more willing to seize yield-picking and investment opportunities by increasing their allocation to assets with maturity of more than three months. The maturity of portfolios extended as a result, with MMFs' weighted average lives (WAL) reaching 58 days on average at end-March 2014, six days longer than in December 2013. The move was more pronounced for euro- and US dollar-denominated funds. MMFs have increased their exposure to sovereigns and government agencies over the quarter, reaching 12%, 11% and 8% in US dollar, euro and sterling funds respectively. The increase as mostly concentrated in exposure to the French, US, and UK governments as well as related government agencies. This, combined with larger allocation to 'F1+' (or equivalent) rated banks such as Nordea Bank, DZ Bank, Standard Chartered Bank and HSBC, resulted in MMFs improving their credit profile through the quarter. On average at end-March 2014, MMFs portfolios were almost evenly split between 'F1+'- and 'F1'-rated issuers. European MMFs' allocation to banks whose Outlooks have been revised to Negative as part of Fitch's review of sovereign support assumption in bank ratings primarily include ING Bank, Deutsche Bank, Lloyds, Societe Generale, Bank of America and ABN Amro Bank. Fitch expects to review these banks ratings within one to two years so that their Long-Term IDRs will likely be based on the Viability Ratings, currently 'a' for ING and Deutsche Bank and 'a-' for the latter four. Average MMF exposure to these four banks stood at 8% at end-March 2014. Dispersion among top-held issuers has increased through 1Q14 with notable reduced exposures to Societe Generale (in euro funds) and Deutsche Bank (in sterling and US dollar funds), although they remain important issuers for MMFs. The full reports, "European MMF Quarterly - Euro - 1Q14", "European MMF Quarterly - Sterling - 1Q14", and "European MMF Quarterly - US Dollar - 1Q14", are available at Contacts: Charlotte Quiniou, CFA Director +33 1 44 29 92 81 Fitch France S.A.S. 60 rue de Monceau 75008 Paris Richard Woodrow, CFA Associate Director +44 203 530 1388 Francois Vattement, CFA Associate Director +33 1 44 29 92 75 Alastair Sewell Senior Director +44 203 530 1147 Media Relations: Hannah Huntly, London, Tel: +44 20 3530 1153, Email: Additional information is available at Applicable Criteria and Related Research: European MMF Quarterly - Sterling - 1Q14 here European MMF Quarterly - US Dollar - 1Q14 here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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