Index data as of Sept. 30, 2024 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Index | 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 | 3.48 | 3.42 | 33 | €230.8 | 61/39 | |||||||
S&P Global Ratings 'AAAm' sterling MMFs | 4.91 | 4.93 | 40 | £237.0 | 65/35 | |||||||
S&P Global Ratings 'AAAm' U.S. dollar MMFs | 4.92 | 5.13 | 35 | $657.1 | 73/27 | |||||||
MMF--Money market fund. WAM (R)--Weighted average maturity to reset. Source: S&P Global Ratings. |
'AAAm' Money Market Fund Indicators
S&P Global Ratings' 'AAAm' money market fund (MMF) indicators are metrics of Europe-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 MMFs with a 'AAAm' principal stability fund rating (PSFR).
The MMF indicators demonstrate the investment practices of funds conforming to S&P Global Ratings' PSFR criteria. An individual fund's metrics below those of our 'AAAm' MMF indicators may indicate a more conservative approach to investment, while risk metrics well above the average may signal a more aggressive approach, albeit undertaken within the constraints of a 'AAAm' PSFR.
Market Comment
Rated Europe-domiciled MMFs reported all-time highs as of Sept. 30, 2024, with assets under management (AUM) of €231 billion for euro-denominated funds and $657 billion for U.S. dollar-denominated funds. These are the highest AUM levels for these currencies we have recorded since 2006. Sterling-denominated funds recorded 2024 highs, with £237 billion in AUM, even though this is 10% below their record AUM level in October 2022.
Net assets in all three currencies increased over the 12 months ended Sept. 30, 2024, with euro-denominated funds up 61.3% (see chart 3), sterling-denominated funds up 14.7% (see chart 5), and U.S. dollar-denominated funds up 13.1% (see chart 7).
Since yield curves for money market maturities are inverted across all three currencies, short-dated and high-credit-quality MMFs that offer returns close to or above the respective central bank base rate remain attractive to investors. Yet this appeal may reduce as central banks cut interest rates in the third quarter. Notably, the Federal Reserve surprised the market by lowering interest rates by 50 basis points (bps). This led to a decline in U.S. dollar-denominated funds' average seven-day net yield by 34 bps (see table 1). The European Central Bank also decreased its deposit rate by 25 bps to 3.5% in early September, following a similar move in June. The Bank of England cut interest rates to 5% on Aug. 1, 2024--the first interest rate cut in over four years--with seven-day net yields declining by 17 bps in the third quarter.
The weighted average maturity (WAM) of MMFs declined by an average of five days in the third quarter. Euro-denominated funds' WAMs reduced to 33 days, from 40 days in June 2024, while the WAMs of sterling- and U.S. dollar-denominated funds decreased to 40 and 35 days, respectively, from 44 and 41 days in June 2024. Given the inverted yield curve and tight spreads, extending duration profiles does not generate any perceived value to the rate of return.
From a credit quality perspective, the French election in early July constituted a significant market event because French banks typically account for 20%-25% of euro-, U.S. dollar-, and sterling-denominated MMFs' exposure. Uncertainties about the election outcome led to a temporary reduction in some French bank investment tenors. We consider credit quality is a key factor in the stability of a fund's net asset value. For 'AAAm' rated euro-, U.S dollar-, and sterling-denominated funds, the credit quality of 'A-1+' rated portfolios remained consistent between the second and third quarter.
Macroeconomically, most large economies have expanded year to date, while inflation continued to soften in the third quarter. Upgrades outnumbered downgrades in the case of corporates, financial institutions, and sovereigns. Macro developments continue differ across the largest economies.
- The U.S. continues to outperform, with GDP growth exceeding potential growth, despite relatively high policy and market rates.
- Labor markets remain strong. Unemployment rates are close to multi-decade lows, despite a recent increase in some countries, most notably in the U.S. The softening of the U.S. labor market over the past few months represented a return to the pre-pandemic trend.
- The eurozone economy responded in a more typical fashion to higher rates. A slow recovery has replaced the recession in the manufacturing sector, which was centered in Germany.
Table 1
'AAAm' principal stability funds--Seven-day net yield (%) | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|
Index | December 2023 | March 2024 | June 2024 | September 2024 | ||||||
S&P Global Ratings 'AAAm' euro MMFs | 3.81 | 3.86 | 3.66 | 3.48 | ||||||
S&P Global Ratings 'AAAm' sterling MMFs | 5.23 | 5.16 | 5.12 | 4.91 | ||||||
S&P Global Ratings 'AAAm' U.S. dollar MMFs | 5.35 | 5.28 | 5.26 | 4.92 | ||||||
MMF--Money market fund. Source: S&P Global Ratings. |
Table 2
'AAAm' principal stability funds--Weighted average maturity (days) | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|
Index | December 2023 | March 2024 | June 2024 | September 2024 | ||||||
S&P Global Ratings 'AAAm' euro MMFs | 33 | 34 | 40 | 33 | ||||||
S&P Global Ratings 'AAAm' sterling MMFs | 34 | 44 | 44 | 40 | ||||||
S&P Global Ratings 'AAAm' U.S. dollar MMFs | 40 | 41 | 41 | 35 | ||||||
MMF--Money market fund. Source: S&P Global Ratings. |
Table 3
'AAAm' principal stability funds--'A-1+' credit quality (%) | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|
Index | December 2023 | March 2024 | June 2024 | September 2024 | ||||||
S&P Global Ratings 'AAAm' euro MMFs | 60 | 60 | 63 | 61 | ||||||
S&P Global Ratings 'AAAm' sterling MMFs | 64 | 64 | 66 | 65 | ||||||
S&P Global Ratings 'AAAm' U.S. dollar MMFs | 75 | 75 | 74 | 73 | ||||||
MMF--Money market fund. Source: S&P Global Ratings. |
Chart 1
Chart 2
Chart 3
Chart 4
Chart 5
Chart 6
Chart 7
Chart 8
Table 4
'AAAm' EUR principal stability funds | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Rating | Fund | Net assets (mil. €) | --Portfolio maturity (days)-- | 'A-1+' portfolio credit quality (%) | ||||||||
WAM (R) | WAM (F) | |||||||||||
AAAm | Institutional Cash Series plc - BlackRock ICS Euro Liquidity Fund | 65,889 | 41 | 69 | 58 | |||||||
AAAm | BNP Paribas InstiCash EUR 1D LVNAV | 29,022 | 39 | 76 | 65 | |||||||
AAAm | JPMorgan Liquidity Funds - EUR Liquidity LVNAV Fund | 25,802 | 42 | 60 | 64 | |||||||
AAAm | HSBC Global Liquidity Funds PLC - HSBC Euro Liquidity Fund | 23,612 | 19 | 69 | 60 | |||||||
AAAm | Goldman Sachs Funds, plc - Goldman Sachs Euro Liquid Reserves Fund | 23,177 | 33 | 44 | 55 | |||||||
AAAm | MS Liquidity Funds - Euro Liquidity Fund | 16,660 | 36 | 42 | 62 | |||||||
AAAm | DWS Deutsche Global Liquidity Series PLC - Deutsche Managed Euro Fund | 13,352 | 33 | 46 | 60 | |||||||
AAAm | State Street Liquidity plc - State Street EUR Liquidity LVNAV Fund | 8,306 | 30 | 52 | 65 | |||||||
AAAm | Fidelity Institutional Liquidity Fund PLC - The Euro Fund | 5,933 | 44 | 56 | 53 | |||||||
AAAm | Aberdeen Standard Liquidity Fund (Lux) - Euro Fund | 3,929 | 47 | 70 | 70 | |||||||
WAM (R)--Weighted average maturity to reset. WAM (F)--Weighted average maturity to final. Source: S&P Global Ratings. |
Table 5
'AAAm' GBP principal stability funds | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Rating | Fund | Net assets (mil. £) | --Portfolio maturity (days)-- | 'A-1+' portfolio credit quality (%) | ||||||||
WAM (R) | WAM (F) | |||||||||||
AAAm | Institutional Cash Series plc - BlackRock ICS Sterling Liquidity Fund | 39,711 | 51 | 85 | 69 | |||||||
AAAm | LGIM Liquidity Funds PLC - LGIM Sterling Liquidity Fund | 33,808 | 49 | 82 | 59 | |||||||
AAAm | Insight Liquidity Funds PLC - ILF GBP Liquidity Fund | 23,229 | 36 | 51 | 76 | |||||||
AAAm | Aviva Investors Liquidity Funds PLC - Aviva Investors Sterling Liquidity Fund | 20,737 | 46 | 74 | 54 | |||||||
AAAm | Aberdeen Standard Liquidity Fund (Lux) - Sterling Fund | 16,968 | 42 | 66 | 55 | |||||||
AAAm | JPMorgan Liquidity Funds - GBP Liquidity LVNAV Fund | 14,134 | 43 | 68 | 71 | |||||||
AAAm | Goldman Sachs Funds, plc - Goldman Sachs Sterling Liquid Reserves Fund | 14,010 | 37 | 46 | 63 | |||||||
AAAm | HSBC Global Liquidity Funds PLC - HSBC Sterling Liquidity Fund | 13,493 | 33 | 68 | 65 | |||||||
AAAm | Northern Trust Global Funds PLC - The Sterling Fund | 10,111 | 46 | 64 | 66 | |||||||
AAAm | Federated Hermes Short-Term Sterling Prime Fund | 7,792 | 51 | 78 | 54 | |||||||
WAM (R)--Weighted average maturity to reset. WAM (F)--Weighted average maturity to final. Source: S&P Global Ratings. |
Table 6
'AAAm' USD principal stability funds (EU-domiciled) | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Rating | Fund | Net assets (mil. $) | --Portfolio maturity (days)-- | 'A-1+' portfolio credit quality (%) | ||||||||
WAM (R) | WAM (F) | |||||||||||
AAAm | JPMorgan Liquidity Funds - USD Liquidity LVNAV Fund | 117,530 | 54 | 75 | 59 | |||||||
AAAm | Institutional Cash Series plc - BlackRock ICS US Dollar Liquidity Fund | 82,081 | 43 | 72 | 63 | |||||||
AAAm | Goldman Sachs Funds, plc - Goldman Sachs US$ Treasury Liquid Reserves Fund | 60,701 | 48 | 63 | 97 | |||||||
AAAm | JPMorgan Liquidity Funds - USD Treasury CNAV Fund | 60,664 | 36 | 51 | 98 | |||||||
AAAm | HSBC Global Liquidity Funds PLC - HSBC US Dollar Liquidity Fund | 45,996 | 46 | 69 | 62 | |||||||
AAAm | MS Liquidity Funds - US Dollar Liquidity Fund | 45,362 | 45 | 60 | 62 | |||||||
AAAm | Goldman Sachs Funds, plc - Goldman Sachs US$ Liquid Reserves Fund | 40,626 | 47 | 69 | 74 | |||||||
AAAm | State Street Liquidity plc - State Street USD Liquidity LVNAV Fund | 30,998 | 30 | 80 | 61 | |||||||
AAAm | Institutional Cash Series plc - BlackRock ICS US Treasury Fund | 28,052 | 31 | 46 | 100 | |||||||
AAAm | Northern Trust Global Funds PLC - The US Dollar Fund | 23,244 | 33 | 60 | 62 | |||||||
WAM (R)--Weighted average maturity to reset. WAM (F)--Weighted average maturity to final. Source: S&P Global Ratings. |
Related Research
- Global Credit Conditions Q4 2024: Policy Rates Easing, Conflicts Simmering, Oct. 1, 2024
- Economic Research: Global Economic Outlook Q4 2024: So Far, So Smooth--Can It Last?, Sept. 26, 2024
- European 'AAAm' Money Market Fund Trends (Second Quarter 2024), July 30, 2024
- Global Credit Conditions Q3 2024: Soft Landing, Fragmenting Trajectories, July 1, 2024
This report does not constitute a rating action.
Primary Credit Analyst: | Celia Bouakicha, London +44 2071766741; celia.bouakicha@spglobal.com |
Secondary Contact: | Andrew Paranthoiene, London + 44 20 7176 8416; andrew.paranthoiene@spglobal.com |
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