Index Data | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Index name | Seven-day net yield (%) | 30-day net yield (%) | WAM (R) (days) | Total net assets (bil.) | Credit quality (%) (A-1+/A-1) | |||||||
S&P Global Ratings ‘AAAm’ euro MMFs | (0.76) | (0.72) | 42 | € 126.80 | 64/36 | |||||||
S&P Global Ratings ‘AAAm’ sterling MMFs | 0.02 | 0.02 | 45 | £238.30 | 61/39 | |||||||
S&P Global Ratings ‘AAAm’ U.S. dollar MMFs | 0.03 | 0.03 | 39 | $506.1 | 76/24 | |||||||
WAM (R)--Weighted average maturity to reset. |
'AAAm' Money Market Fund Indicators
The S&P Global Ratings 'AAAm' money market fund (MMF) indicators are metrics of European-domiciled funds that seek to maintain principal value and limit exposure to principal losses due to credit risk, as defined in our principal stability fund ratings criteria. These MMF indicators provide a benchmarking tool of the 'A-1+' credit quality, portfolio composition, maturity distribution, net asset movements, and yields of 'AAAm' principal stability rated funds.
The MMF indicators demonstrate the investment practices of funds conforming to the principal stability fund rating criteria. An individual fund's metrics below those of S&P Global Ratings' 'AAAm' MMF indicators may indicate a more conservative approach to investment, while a fund's risk metrics well above the average may signal a more aggressive approach, albeit undertaken within the constraints of a 'AAAm' principal stability fund rating.
Market Comment
European-domiciled MMFs rated by S&P Global Ratings closed out 2021 strong, as all three currencies had inflows in the fourth quarter. Euro MMFs saw the largest quarter-on-quarter growth, rising 18%, followed by an 8% increase in pounds sterling, and a 3% increase in U.S. dollar MMFs. Over the year, euro-denominated MMFs increased 1% from December 2020 to €126.8 billion, the highest level since July 2012, which ominously was the month the European Central Bank lowered its deposit rate to 0.00%. Net assets for U.S dollar MMFs also saw year-over-year growth of 4.7% to $506.1 billion, whereas sterling declined 5.3% to £238.3 billion since peaking at £252 billion in December 2020.
While seven-day net yield averages have remained relatively flat throughout 2021, the fourth quarter displayed mixed results across the three currencies. U.S. MMFs remained consistent, averaging a 0.03% yield, while euro MMFs trended lower, to -0.76%. The seven-day net yield average for 'AAAm' sterling principal stability funds increased to 0.02% in December, the first time in a positive yield environment for S&P Global-rated funds since September 2020. The increase in sterling seven-day yield averages can be attributed to rising market rates leading into the Bank of England's (BOE's) decision to increase the bank rate by 15 basis points to 0.25% after the Monetary Policy Committee meeting on Dec. 15, 2021, with an increasing likelihood of more sterling rate rises throughout 2022.
Table 1
'AAAm' Principal Stability Funds Seven-Day Net Yield (%) | |||||
---|---|---|---|---|---|
Index | December 2020 | March 2021 | June 2021 | September 2021 | December 2021 |
S&P Global Ratings ‘AAAm’ euro MMFs | (0.61) | (0.65) | (0.64) | (0.65) | (0.76) |
S&P Global Ratings ‘AAAm’ sterling MMFs | (0.01) | (0.01) | 0.00 | 0.00 | 0.02 |
S&P Global Ratings ‘AAAm’ U.S. dollar MMFs | 0.03 | 0.03 | 0.03 | 0.02 | 0.03 |
In the fourth quarter, weighted-average maturities (WAMs) declined across the rated euro, sterling, and U.S dollar MMFs. The U.S Federal Reserve (Fed) is expected to raise interest rates multiple times in 2022 to combat high inflation, following the announcement in November 2021 that it would taper its bond buying program. With additional rate hikes on the horizon, WAMs are likely to continue their downward trend as fund managers look to take advantage of the potential lift-off throughout 2022.
Table 2
'AAAm' Principal Stability Funds Weighted Average Maturity (In Days) | |||||
---|---|---|---|---|---|
Index | December 2020 | March 2021 | June 2021 | September 2021 | December 2021 |
S&P Global Ratings ‘AAAm’ euro MMFs | 46 | 45 | 45 | 45 | 42 |
S&P Global Ratings ‘AAAm’ sterling MMFs | 45 | 48 | 46 | 48 | 45 |
S&P Global Ratings ‘AAAm’ U.S. dollar MMFs | 43 | 43 | 42 | 42 | 39 |
The share of 'A-1+' credit quality in rated MMFs increased slightly in the fourth quarter for U.S. dollar and euro MMFs, at 76% and 64% respectively, while slightly lower for sterling MMFs, averaging 61%. Euro and sterling MMFs continue to contain a larger proportion of credit securities, such as bonds, certificates of deposits, commercial paper, and floating-rate notes. Credit allocation (non-government) accounts for over 64% in sterling and euro MMFs, as opposed to just over 41% in U.S. dollar MMFs, which explains the higher credit quality of U.S. dollar MMFs. Throughout the year, 'A-1+' credit quality has remained consistent, and MMFs in all three currencies are still well above the minimum 50% required for a 'AAAm' principal stability fund rating.
Table 3
'AAAm' Principal Stability Funds 'A-1+' Credit Quality (%) | |||||
---|---|---|---|---|---|
Index | December 2020 | March 2021 | June 2021 | September 2021 | December 2021 |
S&P Global Ratings ‘AAAm’ euro MMFs | 67 | 64 | 66 | 63 | 64 |
S&P Global Ratings ‘AAAm’ sterling MMFs | 64 | 62 | 65 | 63 | 61 |
S&P Global Ratings ‘AAAm’ U.S. dollar MMFs | 76 | 74 | 73 | 75 | 76 |
Since the well-documented market turmoil of March 2020, S&P Global-rated Europe-domiciled MMFs have all seen significant rises in net asset levels with:
- euro-denominated funds up 46%,
- sterling-denominated funds up 10%, and
- U.S. dollar-denominated funds up 22%.
This demonstrates the continued investor demand for cash management products, such as investing in rated money market funds despite the unprecedented low interest rates across the three currencies. With multiple rate hikes on the horizon for both the Fed and BOE, and given their high credit quality investments, diversification, and liquidity, MMFs should remain an important short-term investment vehicle for investors to place their cash. In the past 12 months, we affirmed all our 'AAAm' ratings on MMFs.
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Top 10 European-Domiciled 'AAAm' MMFs--Euro, Sterling, And U.S. Dollar--By Assets--Key Statistics
Table 4
'AAAm' Euro Principal Stability Funds | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
--Portfolio maturity (days)-- | ||||||||||||
Rating | Fund Name | Net assets (mil. €) | WAM (R) | WAM (F) | Portfolio credit quality (% A-1+) | |||||||
AAAm | Institutional Cash Series plc - BlackRock ICS Euro Liquidity Fund | 41,207 | 36 | 36 | 62 | |||||||
AAAm | Goldman Sachs Funds, plc - Goldman Sachs Euro Liquid Reserves Fund | 16,061 | 29 | 29 | 65 | |||||||
AAAm | BNP Paribas Insticash EUR 1D Short Term VNAV | 13,925 | 46 | 70 | 60 | |||||||
AAAm | MS Liquidity Funds - Euro Liquidity Fund | 11,362 | 48 | 48 | 65 | |||||||
AAAm | DWS Deutsche Global Liquidity Series PLC - Deutsche Managed Euro Fund | 10,224 | 54 | 55 | 67 | |||||||
AAAm | HSBC Global Liquidity Funds PLC - HSBC Euro Liquidity Fund | 8,664 | 48 | 63 | 65 | |||||||
AAAm | State Street Liquidity plc - State Street EUR Liquidity LVNAV Fund | 6,437 | 43 | 43 | 61 | |||||||
AAAm | Aberdeen Standard Liquidity Fund (Lux) - Euro Fund | 5,259 | 47 | 47 | 61 | |||||||
AAAm | Insight Liquidity Funds PLC - ILF EUR Cash Fund | 4,700 | 42 | 51 | 80 | |||||||
AAAm | Northern Trust Global Funds PLC - The Euro Liquidity Fund | 2,166 | 42 | 45 | 62 | |||||||
WAM (R)--Weighted average maturity to reset. WAM (F)--Weighted average maturity to final. |
Table 5
'AAAm' Sterling Principal Stability Funds | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
--Portfolio maturity (days)-- | ||||||||||||
Rating | Fund name | Net assets (mil. £) | WAM (R) | WAM (F) | Portfolio credit quality (% A-1+) | |||||||
AAAm | LGIM Liquidity Funds PLC - LGIM Sterling Liquidity Fund | 41,984 | 45 | 51 | 56 | |||||||
AAAm | Institutional Cash Series plc - BlackRock ICS Sterling Liquidity Fund | 38,282 | 49 | 56 | 63 | |||||||
AAAm | Insight Liquidity Funds PLC - ILF GBP Liquidity Fund | 26,476 | 48 | 56 | 66 | |||||||
AAAm | Aviva Investors Liquidity Funds PLC - Aviva Investors Sterling Liquidity Fund | 25,739 | 49 | 77 | 53 | |||||||
AAAm | Aberdeen Standard Liquidity Fund (Lux) - Sterling Fund | 19,173 | 52 | 54 | 63 | |||||||
AAAm | JPMorgan Liquidity Funds - GBP Liquidity LVNAV Fund | 14,861 | 47 | 71 | 71 | |||||||
AAAm | Goldman Sachs Funds, plc - Goldman Sachs Sterling Liquid Reserves Fund | 12,278 | 39 | 39 | 60 | |||||||
AAAm | Northern Trust Global Funds PLC - The Sterling Fund | 9,562 | 48 | 54 | 61 | |||||||
AAAm | DWS Deutsche Global Liquidity Series PLC - Deutsche Managed Sterling Fund | 8,847 | 60 | 78 | 61 | |||||||
AAAm | HSBC Global Liquidity Funds PLC - HSBC Sterling Liquidity Fund | 8,551 | 45 | 68 | 64 | |||||||
WAM (R)--Weighted average maturity to reset. WAM (F)--Weighted average maturity to final. |
Table 6
'AAAm' U.S. Dollar Principal Stability Funds (EU-Domiciled) | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
--Portfolio maturity (days)-- | ||||||||||||
Rating | Fund name | Net assets (mil. $) | WAM (R) | WAM (F) | Portfolio credit quality (% A-1+) | |||||||
AAAm | JPMorgan Liquidity Funds - USD Liquidity LVNAV Fund | 107,077 | 44 | 56 | 57 | |||||||
AAAm | Institutional Cash Series plc - BlackRock ICS US Dollar Liquidity Fund | 60,311 | 44 | 57 | 66 | |||||||
AAAm | JPMorgan Liquidity Funds - USD Treasury CNAV Fund | 55,713 | 49 | 49 | 93 | |||||||
AAAm | Goldman Sachs Funds, plc - Goldman Sachs US$ Treasury Liquid Reserves Fund | 53,158 | 46 | 63 | 98 | |||||||
AAAm | HSBC Global Liquidity Funds PLC - HSBC US Dollar Liquidity Fund | 33,617 | 39 | 57 | 70 | |||||||
AAAm | Goldman Sachs Funds, plc - Goldman Sachs US$ Liquid Reserves Fund | 29,351 | 46 | 49 | 98 | |||||||
AAAm | MS Liquidity Funds - US Dollar Liquidity Fund | 17,393 | 33 | 66 | 68 | |||||||
AAAm | BNY Mellon Liquidity Funds, PLC - BNY Mellon U.S. Treasury Fund | 17,137 | 51 | 53 | 95 | |||||||
AAAm | State Street Liquidity plc - State Street USD Liquidity LVNAV Fund | 17,060 | 36 | 54 | 64 | |||||||
AAAm | Institutional Cash Series plc - BlackRock ICS US Treasury Fund | 16,267 | 43 | 45 | 100 | |||||||
WAM (R)--Weighted average maturity to reset. WAM (F)--Weighted average maturity to final. |
This report does not constitute a rating action.
Primary Credit Analyst: | Andrew Paranthoiene, London + 44 20 7176 8416; andrew.paranthoiene@spglobal.com |
Secondary Contact: | Michael Mango, Centennial 1-303-721-4181; michael.mango1@spglobal.com |
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