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Announcement:

Moody's: Maturities Remain Short in Anticipation of a December rate hike

17 Nov 2015

Paris, November 17, 2015 -- Weighted average maturities remain tight, especially within US dollar money market funds (MMFs) and we expect managers to continue to maintain shorter portfolio WAMs as the likelihood of a December rate hike in the US increases.

Sterling MMFs' assets under management (AUM) hit their second lowest level in twelve months in the third quarter of 2015, registering a fall of 3.8% to GBP93.1 billion. US prime funds recorded a 4% growth in AUM, on the other hand, driven by a reduced appetite for risky assets; euro-denominated funds also experienced AUM growth, albeit smaller, of 2.3% to EUR55.2 billion.

"Uncertainty about the health of the global economy led to a sharp increase in market volatility in the third quarter. This has reduced investor appetite for risky assets and driven growth in US prime funds,' AUM," said Robert Callagy, a Vice President -- Senior Credit Officer at Moody's.

"For euro prime funds, investors have adapted to the new net negative yield environment affecting those funds since the middle of Q2," added Vanessa Robert, a Vice President -- Senior Credit Officer at Moody's.

Moody's Investors Service today published three new quarterly reports highlighting the key trends affecting prime money market funds (MMFs) denominated in US dollar, euro and sterling. The reports are available to subscribers on www.moodys.com.

- US dollar-denominated MMFs

The credit profiles of European and offshore prime funds improved, while US prime funds remained stable in Q3. For US funds, exposure to Aaa-rated securities in US prime funds jumped to 22% of fund assets at the end of Q3 from 18% at the end of Q2 as usage of the Federal Reserve's reverse repo facility swelled at September month-end. Offsetting this, however, was a decrease in exposure to securities rated Aa1 and Aa2, which fell to 28% from 32% during the same period.

Obligor concentration in US prime funds reached its highest point in a year, with the average top three obligor concentration (as % of AUM) at 17% at the end of September up from 16% at the end of Q2, a reflection of the scarcity of high quality short-dated assets.

- Euro-denominated MMFs

The deterioration in France's sovereign creditworthiness led to a decline in credit quality, with a significant shift into Aa2- rated securities: 22% of AUM in Q3 from 19% at the end of the previous quarter. Investments in Aa3 or higher rated securities decreased to 60% of AUM in Q3 from 63% in Q2, driven by a decline in investments in highly rated government securities and repurchase agreements, which fell to 17% from 20%.

Exposure to securities above three months decreased to 23% of AUM at the end of Q3 from 26% making the weighted average maturities (WAMs) slightly decrease by 0.3 days to 44.6 days.

- Sterling-denominated MMFs

The credit profiles of sterling money market funds stabilised in Q3 with exposures to Aa3 or higher rated securities slightly decreasing to 65% of AUM in Q3 from 66% in Q2. This is despite a small increase in investments in highly rated government securities and repurchase agreements, which rose to 15.4% from 14%.

The WAM decreased by 2.6 days to 43.7 days on average at the end of Q3 and sensitivity to market risk fell to its second lowest level in twelve months. The reduced WAM combined with the relatively stable credit profiles contributed to the improvement of funds' resilience to market risk with the funds' stressed net asset value (NAV) rising by two basis points to 0.9921 on average at the end of Q3.

Subscribers can access the reports, titled "Prime Money Market Fund Q3 2015" via these links:

USD

https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1009967

EUR

https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1009728

GBP

https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1009729

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: London +44-20-7772-5456, New York +1-212-553-0376, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666- 3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Vanessa Robert
VP - Senior Credit Officer
Managed Investments Group
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Marc R. Pinto, CFA
MD - Managed Investments
Managed Investments Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's: Maturities Remain Short in Anticipation of a December rate hike
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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