The Investment Company Institute released its "Money Market Fund Holdings" report for October, which summarizes the aggregate daily and weekly liquid assets, regional exposure, and maturities (WAM and WAL) for Prime and Government money market funds (as of Oct. 31, 2014). ICI's "Prime and Government Money Market Funds' Daily and Weekly Liquid Assets" table shows Prime Money Market Funds' Daily liquid assets at 26.4% as of October 31, 2014, up from 25.4% on September 30. Daily liquid assets were made up of: "All securities maturing within 1 day," which totaled 22.3% (vs. 21.4% last month) and "Other treasury securities," which added 4.1% (up from 4.0% last month). Prime funds' Weekly liquid assets totaled 38.4% (vs. 37.3% last month), which was made up of "All securities maturing within 5 days" (33.5% vs. 31.5% in September), Other treasury securities (4.1% vs. 4.0% in September), and Other agency securities (0.9% vs. 1.9% a month ago). (See also Crane Data's Nov. 12 News, "Nov. Port. Holdings Show Spike in Time Deposits, CP; Drop in Repo.")
Government Money Market Funds' Daily liquid assets total 60.5% as of October 31 vs. 63.7% in September. All securities maturing within 1 day totaled 26.2% vs. 27.4% last month. Other treasury securities added 34.2% (vs. 36.3% in September). Weekly liquid assets totaled 77.3% (vs. 81.3%), which was comprised of All securities maturing within 5 days (37.3% vs. 37.1%), Other treasury securities (32.8% vs. 33.7%), and Other agency securities (7.2% vs. 10.5%).
ICI's "Prime and Government Money Market Funds' Holdings, by Region of Issuer" table shows Prime Money Market Funds with 41.2% in the Americas (vs. 48.5% last month), 20.5% in Asia Pacific (vs. 20.4%), 38.0% in Europe (vs. 30.7%), and 0.3% in Other and Supranational (same as last month). Government Money Market Funds held 86.6% in the Americas (vs. 91.1% last month), 0.9% in Asia Pacific (vs. 0.4%), 12.5% in Europe (vs. 8.4%), and 0.0% in Supranational (vs. 0.1%).
The table, "Prime and Government Money Market Funds' WAMs and WALs" shows Prime MMFs WAMs at 46 days as of October 31 vs. 46 days in September. WALs were at 79 days, up from 78 last month. Government MMFs' WAMs were at 48 days, up from 44 days last month, while WALs jumped to 77 days from 72 days.
ICI's release explains, "Each month, ICI reports numbers based on the Securities and Exchange Commission's Form N-MFP data, which many fund sponsors provide directly to the Institute. ICI's data report for October covers funds holding 94 percent of taxable money market fund assets." Note: ICI doesn't publish individual fund holdings.
Wells Fargo Securities' money market strategist Garrett Sloan also weighs in on the latest Money Fund Portfolio Holdings data with an eye toward recent European bank stress tests. In a new "Money Market Monitor" report, he writes, "Results from the recent stress tests conducted by the European Banking Authority (EBA) were compiled and published in October. Currently, U.S. taxable money market funds have aggregate exposure to European banks and related assets (i.e. ABCP) in excess of $660 billion (excluding supported VRDNs). After removing Treasury and Government-related repo, European bank holdings are currently closer to $509 billion."
He continues, "Reviewing the holdings of money market funds at October month-end, we found 31 European bank-related issuers (BPCE and Natixis were counted as one issuer) that were reviewed in the European Banking Authority stress tests.... The CET1 [Common Equity Tier 1 Capital Ratios] ratios of banks held by money market funds currently run the gamete. Of the 123 banks included in the stress tests, the top two performing banks: Nederlandse Waterschapsbank and NRW.Bank, each of which is government-related, are currently held by U.S. money market funds. Holdings fall to the low-end of the rankings as well. The lowest ranked bank, as measured by baseline CET1 ratios, currently held by money market funds is DZ Bank."
Further, Sloan explains, "Based on the 2016 adverse scenario, the lowest ranked banks held by U.S. money market funds are 103rd ranked Dexia NV, and 110th ranked AXA Bank. In the case of Dexia, while the company went through the stress test exercise, it is currently being wound down under a resolution plan approved by the European Union, and holdings by U.S. money market funds represent only that portion guaranteed by the governments of Belgium, France and Luxembourg.... Other poor-performing European bank exposures currently held by U.S. money market funds under the adverse scenario include DZ Bank (98th), Lloyds Bank (94th), Royal Bank of Scotland (91st), Groupe BPCE (84th), and Barclays (83rd). While we would reiterate that the EBA stress tests represent only one metric for credit risk analysis, the tests have created benchmarks against which investors may assess progress towards stated regulatory capital objectives."
He says, "With the July 23 re-proposal to remove NRSRO ratings from money market fund eligibility criteria, fund managers may look to increase the usage of stress test results in their credit-risk modeling frameworks. In such a context, one might question whether regulators would criticize the eligibility of certain banks in the current list of money market fund holdings based on their CET1 rankings."
Finally, Sloan adds, "The data suggest that money market fund managers are using duration as a risk mitigation tool as it pertains to money market fund holdings. Longer-dated assets that went through the EBA stress tests either performed well or contain some type of explicit government support, while issuers that ranked lower in the CET1 stress tests are primarily being funded on a short-term basis."
