Crane Data's MFI International shows total assets in "offshore" money market mutual funds, U.S.-style funds domiciled in Ireland or Luxemburg and denominated in USD, Euro and GBP (sterling), rising in May after also rising in April. Offshore US Dollar MMFs have been rising and falling in waves since December 2017. They rose sharply in January, fell in February and March, rose in April, but fell again in early May. Last year, assets of all three currencies combined increased by $100 billion, or 13.7%, to $831 billion. Year-to-date in 2017 (through 5/11/18), MFII assets are up $5.7 billion to $836.5 billion, but USD assets are down slightly. U.S. Dollar (USD) funds (158) account for about half ($421.6 billion, or 50.4%) of the total, while Euro (EUR) money funds (98) total E87.8 billion and Pound Sterling (GBP) funds (110) total L215.5 billion. USD funds are down $3.6 billion, YTD, but were up $27B in 2017. Many are watching these totals closely for signs of possible "repatriation" of US dollar assets held in Europe, but the data only shows minimal outflows so far.

Euro funds are down E10.2 billion YTD but were up E3B in 2017, while GBP funds are down L3.4B YTD after rising L29B in 2017. USD MMFs yield 1.67% (7-Day) on average (as of 5/11/18), up from 1.19% at the end of 2017 and 0.56% at the end of 2016. EUR MMFs yield -0.49 on average, up from -0.55% on 12/29/17 and -0.49% on 12/30/16, while GBP MMFs yield 0.38%, up from 0.24% at the end of 2017 and 0.19% at the end of 2016. We review our latest MFI International Portfolio Holdings statistics, and also excerpt from a recent Capital Advisors piece on repatriation, below.

Crane's latest MFI International Money Fund Portfolio Holdings, with data (as of 4/30/18), shows that European-domiciled US Dollar MMFs, on average, consist of 18% in Treasury securities, 27% in Commercial Paper (CP), 21% in Certificates of Deposit (CDs), 16% in Other securities (primarily Time Deposits), 15% in Repurchase Agreements (Repo), and 3% in Government Agency securities. USD funds have on average 30.4% of their portfolios maturing Overnight, 11.3% maturing in 2-7 Days, 20.0% maturing in 8-30 Days, 12.5% maturing in 31-60 Days, 12.2% maturing in 61-90 Days, 11.2% maturing in 91-180 Days, and 2.4% maturing beyond 181 Days. USD holdings are affiliated with the following countries: US (27.8%), France (15.9%), Japan (9.5%), Canada (9.5%), United Kingdom (6.1%), Sweden (5.0%), Australia (4.9%), Germany (4.8%), The Netherlands (4.5%), China (2.7%), Singapore (2.6%) and Switzerland (1.9%).

The 10 Largest Issuers to "offshore" USD money funds include: the US Treasury with $84.8 billion (18.0% of total assets), BNP Paribas with $22.6B (4.8%), Credit Agricole with $14.4B (3.1%), Wells Fargo with $12.8B (2.7%), Societe Generale with $12.0B (2.5%), Toronto-Dominion Bank with $11.7B (2.5%), Mitsubishi UFJ Financial Group Inc with $10.7B (2.3%), Mizuho Corporate Bank Ltd with $10.3B (2.2%), Barclays PLC with $10.2B (2.2%), ING Bank with $9.7B (2.1%), and Australia & New Zealand Banking Group Ltd with $9.2B (2.0%).

Euro MMFs tracked by Crane Data contain, on average 49% in CP, 25% in CDs, 20% in Other (primarily Time Deposits), 5% in Repo, 0% in Treasuries and 1% in Agency securities. EUR funds have on average 3.6% of their portfolios maturing Overnight, 22.7% maturing in 2-7 Days, 17.6% maturing in 8-30 Days, 25.1% maturing in 31-60 Days, 11.2% maturing in 61-90 Days, 16.2% maturing in 91-180 Days and 3.6% maturing beyond 181 Days. EUR MMF holdings are affiliated with the following countries: France (25.7%), Japan (14.5%), The US (10.7%), The Netherlands (9.3%), Sweden (7.1%), Germany (7.0%), Belgium (5.2%), Switzerland (4.9%), the United Kingdom (4.7%), and Canada (3.2%).

The 10 Largest Issuers to "offshore" EUR money funds include: Credit Agricole with E3.7B (4.3%), BNP Paribas with E3.6B (4.2%), ING Bank with E3.5B (4.1%), Mizuho Corporate Bank Ltd with E3.3B (3.8%), Svenska Handelsbanken with E3.3B (3.8%), Rabobank with E3.2B (3.6%), Credit Mutuel with E3.0B (3.5%), KBC Group NV with E2.8B (3.3%), Sumitomo Mitsui Banking Co with E2.5B (2.9%), and Nordea Bank with E2.5B (2.9%).

The GBP funds tracked by MFI International contain, on average (as of 4/30/18): 42% in CDs, 25% in Other (Time Deposits), 23% in CP, 8% in Repo, 1% in Treasury, and 1% in Agency. Sterling funds have on average 22.0% of their portfolios maturing Overnight, 5.2% maturing in 2-7 Days, 26.9% maturing in 8-30 Days, 17.3% maturing in 31-60 Days, 11.5% maturing in 61-90 Days, 13.2% maturing in 91-180 Days, and 3.9% maturing beyond 181 Days. GBP MMF holdings are affiliated with the following countries: France (18.9%), Japan (15.6%), United Kingdom (12.9%), The Netherlands (10.0%), Canada (6.7%), Germany (5.2%), the US (4.9%), Sweden (4.7%), Singapore (4.2%), and Australia (4.1%).

The 10 Largest Issuers to "offshore" GBP money funds include: UK Treasury with L6.9B (4.3%), Rabobank with L6.6B (4.1%), BPCE with E6.5B (4.1%), Mitsubishi UFJ Financial Group Inc. with L5.8B (3.6%), BNP Paribas with L5.8B (3.6%), Sumitomo Mitsui Banking Co. with L5.4B (3.4%), Sumitomo Mitsui Trust Bank with L5.3B (3.3%), Mizuho Corporate Bank Ltd with E5.3B (3.3%), Toronto-Dominion Bank with L5.3B (3.3%), and DZ Bank AG with L4.9B (3.1%).

Capital Advisor Group wrote a piece entitled, "Offshore Money Market Funds in an Age of Change," which says, "Even for U.S.-centric institutional cash investors, developments in the offshore money market fund space are difficult to ignore. The interconnectedness of global financial markets results in domestic and offshore liquidity funds sharing a common set of debt issuers and market liquidity. Many U.S.-based treasury organizations also have offshore subsidiaries or affiliates with investments in offshore funds that require attention."

The paper explains, "Interest in offshore liquidity has intensified in recent months due to several key developments: the passage of MMF reform in Europe, a new tax law in the U.S., and Great Britain's imminent exit from the European Union (Brexit).... Compared to the $2.7-trillion domestic US MMF market, the combined dollar, sterling (GBP) and euro offshore fund market is a modest $833 billion in size as of March 2018, according to fund data firm iMoneyNet."

It continues, "The Tax Cuts and Jobs Act (TCJA) Congress passed in December 2018 received widespread attention with respect to repatriation of foreign profits. However, the impact of the new law on offshore MMF balances is hard to quantify. How the multiple cross currents from the new law will shape the future of this market remains a mystery. Still, this is an important puzzle for both U.S. and offshore fund investors to solve as the two markets are often intertwined.... Conventional wisdom says that repatriation of offshore earnings should cause offshore prime balances to decline as corporations bring their foreign profits homebound.... [But] U.S. government vs. offshore prime fund levels before and after the tax reform have yet to validate the conventional wisdom."

The piece concludes, "While MMF reform dominated U.S. fund discussions for much of the last decade, offshore funds largely sat in the periphery for U.S.-centric liquidity investors. With imminent implementation of European fund reform and repatriation of overseas profits, offshore funds are bracing for transformational changes. Investors in the offshore markets will no doubt be impacted. Domestic investors without an offshore presence should also take note because of the overlap of common debt issuers and market liquidity in these markets." (See also, today's Wall Street Journal article, "China's Giant Money-Market Fund Sharply Lowers Daily Withdrawal Limits.")

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