NEW YORK, April 9 U.S. prime money market funds
reduced their holdings of euro zone bank debt in March as
Cyprus' bank troubles rekindled worries about the region's
festering debt crisis, according to a report by JPMorgan
Securities released on Tuesday.
The report showed the funds cut their ownership of euro zone
securities by $44 billion to $203 billion last month, led by
broad declines in all types of debt, including commercial paper,
repurchase agreements and time deposits issued by those banks.
The drop in euro zone bank debt in March was the largest
monthly decline since last June, JPMorgan said.
March's fall nearly erased the prior two months' increases
in euro zone bank exposure among prime money funds. Their euro
zone exposure was up $1 billion at the end of the first quarter.
"Fund managers likely chose to allow these holdings to roll
off on the back of some concerns arising from the Cypriot
headlines toward the end of March," JPMorgan analysts said in
Investors feared that a meltdown of Cyprus' banking sector
due to bad loans could ripple across the euro zone. The island
nation eventually clinched a deal to secure a 10 billion euro
($13 billion) bailout from international lenders.
The JPMorgan analysts reckoned these short-term funds, which
are seen only slightly more risky than bank accounts, were not
engaging in an "active reduction" of euro zone debt.
Prime money funds also reduced their holdings of U.S. bank
debt by $15 billion, to $170 billion, in March.
On the other hand, they raised their stakes in Canadian and
Norwegian bank debt in March by $11 billion, to $172 billion,
and $12 billion, to $34 billion, respectively, JPMorgan said.