US prime money market fund exposures to eurozone banks declined 33% in June, according to Fitch Ratings.
The ratings agency studied exposures of the ten largest players in the market and found allocations to eurozone banks had fallen to 8% from 12% of total assets. This is the lowest level since the study began in 2006.
Aggregate money market fund allocations to the rest of Europe declined moderately, Fitch said, with decreasing exposure to UK banks partially offset by increased allocations to Nordic banks.
Meanwhile, exposures to Japanese banks have doubled since May last year. With 12% of total fund assets, they are now at the highest level.
“Money fund disengagement stems from both ongoing risk aversion and heightened caution by some European banks and their regulators on using this potentially volatile form of funding,” said Robert Grossman, managing director, Fitch macro credit research.
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