November 13, 2013 / 6:02 PM / 4 years ago

U.S. money funds' euro debt exposure highest since '11 -JPMorgan

* Money funds’ euro zone holdings highest since Aug. 2011

* Funds add to more French, German bank debt in October

NEW YORK, Nov 13 (Reuters) - U.S. prime money market funds raised their of euro zone debt holdings in October to the highest level since August 2011 as pessimism over that region’s economy continues to abate, a report by JPMorgan Securities released on Wednesday showed.

Prime money funds’ exposure to the euro zone grew by $22 billion to $251 billion last month. Since the end of 2012, the funds have raised their holdings of that region’s bank paper by $49 billion, JPMorgan said.

The bulk of the July increase was in French and German bank debt, which grew by $10 billion to $151 billion and by $9 billion to $43 billion, respectively.

Revived demand for French bank debt put them as money funds’ fourth largest holdings by country, just behind Canada, JPMorgan analysts wrote in the report.

But their French holdings were some $73 billion below the peak seen in May 2011 before the intensification of the euro zone debt crisis.

The data were collected prior to Standard & Poor’s downgrade of France’ debt rating on Nov. 8 to AA from AA+.

Prime money market funds are seen as slightly riskier alternatives to bank accounts. They could invest in very short-dated bank debt in addition to U.S. Treasury bills. The prime funds tracked by JPMorgan had $1.08 trillion in assets at the end of October.

These funds also raised their holdings of other European bank debt last month, particularly bank paper from Norway and Sweden, by $11 billion to $231 billion.

On the other hand, prime funds reduced their exposure to Canada and United States in October.

Their Canadian debt holdings fell by 5 billion to $155 billion, while their U.S. holdings declined by $12 billion to $172 billion, JPMorgan said.

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