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 | 2.95 | 3.07 | 36 | €263.0 | 62/38 | |||||||
S&P Global Ratings 'AAAm' sterling MMFs | 4.67 | 4.67 | 44 | £239.1 | 64/36 | |||||||
S&P Global Ratings 'AAAm' U.S. dollar MMFs | 4.43 | 4.53 | 40 | $680.9 | 71/29 | |||||||
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
Europe-domiciled MMFs concluded 2024 on a strong note, with significant asset growth. By December 2024, euro-denominated funds reached a record €262 billion, while U.S. dollar-denominated funds hit $680 billion. Sterling-denominated funds ended the year at £239 billion, just below the November peak of £243 billion. Over the past year, net assets increased across all three currencies: euro funds rose 31%, sterling funds 9%, and U.S. dollar funds 11%.
In fourth-quarter 2024, the European Central Bank (ECB) and the U.S. Federal Reserve each implemented two interest rate cuts. The ECB's deposit rate settled at 3.00%, while the effective federal funds rate target range is now 4.25%-4.50%. The Bank of England (BoE) reduced its rate to 4.75%, from 5.00%, with the next decision scheduled for Feb. 6, 2025. Following these cuts, seven-day yields fell by 53 basis points (bps) for euro MMFs, 24 bps for sterling MMFs, and 49 bps for U.S. dollar MMFs (see table 1). The decline in seven-day net yields prompted U.S. dollar MMFs to extend their weighted average maturity (WAM) profiles during the fourth quarter, while euro and sterling MMFs remained stable (see table 2 and chart 1). However, any WAM extension must be considered against ongoing geopolitical and economic uncertainties.
Table 1
'AAAm' principal stability funds--Seven-day net yield (%) | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|
Index | March 2024 | Jun. 2024 | Sep. 2024 | Dec. 2024 | ||||||
S&P Global Ratings 'AAAm' euro MMFs | 3.86 | 3.66 | 3.48 | 2.95 | ||||||
S&P Global Ratings 'AAAm' sterling MMFs | 5.16 | 5.12 | 4.91 | 4.67 | ||||||
S&P Global Ratings 'AAAm' U.S. dollar MMFs | 5.28 | 5.26 | 4.92 | 4.43 | ||||||
MMF--Money market fund. Source: S&P Global Ratings. |
Table 2
'AAAm' principal stability funds--Weighted average maturity (in days) | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|
Index | March 2024 | June 2024 | September 2024 | December 2024 | ||||||
S&P Global Ratings 'AAAm' euro MMFs | 34 | 40 | 33 | 32 | ||||||
S&P Global Ratings 'AAAm' sterling MMFs | 44 | 44 | 40 | 39 | ||||||
S&P Global Ratings 'AAAm' U.S. dollar MMFs | 41 | 41 | 35 | 41 | ||||||
MMF--Money market fund. Source: S&P Global Ratings. |
From a credit quality perspective, U.S. dollar MMFs continued to hold a higher percentage of 'A-1+' securities in 2024, compared with their euro and sterling counterparts (see table 3 and chart 2). We believe credit quality is crucial for a fund's net asset value (NAV) stability. Given the financial sector exposure in rated MMFs, we anticipate relative stability in bank ratings for 2025, with stable outlooks on about 80% of global banking groups. Positive rating movements are likely to stem from country-specific and bank-specific factors, rather than macroeconomic tailwinds.
Table 3
'AAAm' principal stability funds--'A-1+' credit quality (%) | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|
Index | March 2024 | June 2024 | September 2024 | December 2024 | ||||||
S&P Global Ratings 'AAAm' euro MMFs | 60 | 63 | 61 | 62 | ||||||
S&P Global Ratings 'AAAm' sterling MMFs | 64 | 66 | 65 | 64 | ||||||
S&P Global Ratings 'AAAm' U.S. dollar MMFs | 75 | 74 | 73 | 7 | ||||||
MMF--Money market fund. Source: S&P Global Ratings. |
The macro-credit outlook would appear more favorable if the geopolitical situation was less uncertain. Rating actions and outlooks in Europe have largely normalized after the COVID-19 pandemic and the energy crisis. Inflation is nearing target levels and the rate cycle is shifting. Disinflation will enable central banks to gradually ease monetary policy, with the ECB deposit rate projected to reach 2.5% by third-quarter 2025 and the BoE base rate at 3.0% by January 2026. Notably, the outlook for European banks remains stable, supported by solid fundamentals. While declining net interest margins due to lower interest rates may pose challenges, increases in lending, fee-earning activities, and stable credit costs should help mitigate these effects.
Chart 1
Chart 2
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Chart 4
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Chart 7
Chart 8
Top 10 Europe-Domiciled 'AAAm' Euro, Sterling, And U.S. Dollar MMFs By Assets--Key Statistics
Table 4
'AAAm' euro principal stability funds | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Rating | Fund name | Net assets (mil. €) | --Portfolio maturity (days)-- | Portfolio credit quality (%) | ||||||||
WAM (R) | WAM (F) | 'A-1+' | ||||||||||
AAAm | Institutional Cash Series plc--BlackRock ICS Euro Liquidity Fund | 88,381 | 32 | 57 | 64 | |||||||
AAAm | BNP Paribas InstiCash EUR 1D LVNAV | 32,236 | 41 | 77 | 64 | |||||||
AAAm | JPMorgan Liquidity Funds--EUR Liquidity LVNAV Fund | 26,277 | 37 | 57 | 63 | |||||||
AAAm | HSBC Global Liquidity Funds PLC--HSBC Euro Liquidity Fund | 23,997 | 30 | 78 | 59 | |||||||
AAAm | Goldman Sachs Funds, plc--Goldman Sachs Euro Liquid Reserves Fund | 21,896 | 41 | 58 | 55 | |||||||
AAAm | MS Liquidity Funds--Euro Liquidity Fund | 18,018 | 34 | 58 | 57 | |||||||
AAAm | DWS Deutsche Global Liquidity Series PLC--Deutsche Managed Euro Fund | 16,692 | 28 | 49 | 55 | |||||||
AAAm | State Street Liquidity plc--State Street EUR Liquidity LVNAV Fund | 7,846 | 32 | 60 | 61 | |||||||
AAAm | Fidelity Institutional Liquidity Fund PLC--The Euro Fund | 6,618 | 36 | 61 | 55 | |||||||
AAAm | Institutional Cash Series plc--BlackRock ICS Euro Government Liquidity Fund | 4,322 | 15 | 15 | 100 | |||||||
WAM (F)--Weighted average maturity to final. WAM (R)--Weighted average maturity to reset. Source: S&P Global Ratings. |
Table 5
'AAAm' sterling principal stability funds | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Rating | Fund name | Net assets (mil. £) | --Portfolio maturity (days)-- | Portfolio credit quality (%) | ||||||||
WAM (R) | WAM (F) | 'A-1+' | ||||||||||
AAAm | Institutional Cash Series plc--BlackRock ICS Sterling Liquidity Fund | 43,709 | 34 | 60 | 64 | |||||||
AAAm | LGIM Liquidity Funds PLC--LGIM Sterling Liquidity Fund | 33,525 | 38 | 71 | 65 | |||||||
AAAm | Insight Liquidity Funds PLC--ILF GBP Liquidity Fund | 21,695 | 33 | 55 | 77 | |||||||
AAAm | Aviva Investors Liquidity Funds PLC--Aviva Investors Sterling Liquidity Fund | 21,426 | 48 | 77 | 50 | |||||||
AAAm | Aberdeen Standard Liquidity Fund (Lux)--Sterling Fund | 17,233 | 42 | 83 | 58 | |||||||
AAAm | JPMorgan Liquidity Funds--GBP Liquidity LVNAV Fund | 15,661 | 41 | 66 | 69 | |||||||
AAAm | Goldman Sachs Funds, plc--Goldman Sachs Sterling Liquid Reserves Fund | 13,683 | 48 | 58 | 59 | |||||||
AAAm | HSBC Global Liquidity Funds PLC--HSBC Sterling Liquidity Fund | 13,426 | 32 | 61 | 64 | |||||||
AAAm | Northern Trust Global Funds PLC--The Sterling Fund | 9,941 | 36 | 63 | 62 | |||||||
AAAm | Institutional Cash Series plc--BlackRock ICS Sterling Government Liquidity Fund | 7,007 | 30 | 30 | 100 | |||||||
WAM (F)--Weighted average maturity to final. WAM (R)--Weighted average maturity to reset. Source: S&P Global Ratings. |
Table 6
'AAAm' U.S. dollar principal stability funds (EU-domiciled) | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Rating | Fund name | Net assets (mil. $) | --Portfolio maturity (days)-- | Portfolio credit quality (%) | ||||||||
WAM (R) | WAM (F) | 'A-1+' | ||||||||||
AAAm | JPMorgan Liquidity Funds--USD Liquidity LVNAV Fund | 88,056 | 50 | 71 | 55 | |||||||
AAAm | Institutional Cash Series plc--BlackRock ICS US Dollar Liquidity Fund | 63,860 | 42 | 71 | 61 | |||||||
AAAm | JPMorgan Liquidity Funds--USD Treasury CNAV Fund | 62,340 | 51 | 61 | 99 | |||||||
AAAm | Goldman Sachs Funds, plc--Goldman Sachs US$ Treasury Liquid Reserves Fund | 51,708 | 53 | 74 | 97 | |||||||
AAAm | MS Liquidity Funds--US Dollar Liquidity Fund | 50,063 | 54 | 88 | 59 | |||||||
AAAm | HSBC Global Liquidity Funds PLC--HSBC US Dollar Liquidity Fund | 41,455 | 48 | 70 | 57 | |||||||
AAAm | Goldman Sachs Funds, plc--Goldman Sachs US$ Liquid Reserves Fund | 28,426 | 48 | 69 | 66 | |||||||
AAAm | State Street Liquidity plc--State Street USD Liquidity LVNAV Fund | 24,801 | 39 | 76 | 59 | |||||||
AAAm | Institutional Cash Series plc--BlackRock ICS US Treasury Fund | 22,392 | 42 | 53 | 100 | |||||||
AAAm | Northern Trust Global Funds PLC--The US Dollar Fund | 17,785 | 34 | 62 | 61 | |||||||
WAM (F)--Weighted average maturity to final. WAM (R)--Weighted average maturity to reset. Source: S&P Global Ratings. |
Related Research
- German Banking Outlook 2025: Resilient In The Face Of Adversity, Jan. 23, 2025
- U.S. Bank Outlook 2025: Entering A New Phase Under A New Administration, Jan. 15, 2025
- Credit Conditions Europe Q1 2025: Fusion Or Fission?, Dec. 3, 2024
- Global Banks Outlook 2025: Cautiously Confident, Nov. 13, 2024
- European 'AAAm' Money Market Fund Trends (Third Quarter 2024), Nov. 5, 2024
This report does not constitute a rating action.
Primary Credit Analyst: | Andrew Paranthoiene, London + 44 20 7176 8416; andrew.paranthoiene@spglobal.com |
Secondary Contact: | Celia Bouakicha, London +44 7815 018880; celia.bouakicha@spglobal.com |
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