Sunday's New York Times writes "Greek Debt Woes Ripple Outward, From Asia to U.S.". It says, "The fear that began in Athens, raced through Europe and finally shook the stock market in the United States is now affecting the broader global economy, from the ability of Asian corporations to raise money to the outlook for money-market funds where American savers park their cash.... American money-market investors are already feeling nervous about hundreds of billions of dollars in short-term loans to big European banks and other financial institutions." The Times quotes J.P. Morgan's Alex Roever, "Apparently systemic risk is still alive and well." The article continues, "With so much uncertainty about Europe and the euro, managers of these ultra-safe investment vehicles are demanding that European borrowers pay higher rates. These funds provide the lifeblood of the international banking system. If worries about the safety of European banks intensify, they could push up their borrowing costs and push down the value of more than $500 billion in short-term debt held by American money-market funds. Uncertainty about the stability of assets in money market funds signaled a tipping point that accelerated the downward spiral of the credit crisis in 2008, and ultimately prompted banks to briefly halt lending to one other." For more on money funds' exposure to Europe, see JPMorgan's latest "Short-Term Fixed Income", the Federal Reserve's Commercial Paper Outstandings (which lists "Foreign CP" totals) or our latest Money Fund Intelligence XLS Portfolio Composition figures. Also, see the release "Federal Reserve, European Central Bank, Bank of Canada, Bank of England, and Swiss National Bank announce re-establishment of temporary U.S. dollar liquidity swap facilities".
