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Money Funds Cut European Bank Debt

U.S. funds reduce holdings of European bank assets to lowest since 2006.

By Christopher Condon, Bloomberg, John Glover, Charles Stein, Bloomberg | Updated on September 23, 2011

Money-market mutual funds reduced lending to European banks further last month, with the biggest U.S. funds cutting their holdings to the lowest in at least five years, as the region’s sovereign debt crisis worsened.

The 10 biggest U.S. funds eligible to purchase corporate debt, with a combined $676 billion, reduced European bank assets to 42 percent of holdings, the lowest level since at least 2006, Fitch Ratings said today in a report. European funds also are cutting holdings of Spanish and Italian assets and shortening the maturities of the investments they keep, Fitch said in a separate report this week.

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