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Crane 100 Money Fund Index
A press release entitled, "Fitch 'AAAmmf' Rated European MMFs Face 'What If' Scenarios for Eurozone
" says, "Fitch Ratings has considered several scenarios for the eurozone to perform a 'what if' analysis on the resiliency and stability of 'AAAmmf'-rated money market funds (MMFs)
. Fitch considers three distinct scenarios in order to analyze potential implications for '
rated MMFs. Fitch's base case remains that the eurozone will muddle through the sovereign debt crisis as a currency union and that no country will abandon the euro
. SCENARIO 1: Eurozone Exit by one Peripheral Country. Based on this analysis, Fitch believes that 'AAAmmf'-rated European money market funds are resilient in the hypothetical scenario of orderly exit from the eurozone by a peripheral country
. As a result, Fitch-
rated MMFs may continue to be rated '
AAAmmf' under this scenario. 'AAAmmf' rated European MMF are not directly exposed to peripheral eurozone countries, i.e. Greece, Ireland, Italy, Portugal and Spain
. As of May 2012, euro and sterling denominated funds have an average of 70% of assets invested in issuers from core European countries and 30% outside the eurozone.... A more disorderly scenario, involving material contagion to banks and core eurozone countries, could lead to a severe market stress, that may include a shutdown of interbank markets affecting the liquidity of MMFs, similar to that experienced in 2008. In this more stressful scenario in which the EU/ECB policy response fails to control the situation, a 'flight to quality' by depositors and investors in other peripheral countries could precipitate bank runs, capital flight and a loss of government market access
. In this second, more severe scenario, Fitch believes redemption restrictions by some weaker MMFs, or those without well-
resourced sponsors, is a possibility and could be implemented by fund sponsors or imposed by regulators to protect remaining investors and avoid forced selling."