French Connection

14 May 2010 By Agnes Crane

It’s doubtful that Barack Obama urged European leaders to pass a showstopping Greek bailout package simply because he loves the grand idea of a single currency. A more plausible explanation lies in the weeds of the U.S. money market funds business.

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The U.S. money market industry manages around $3 trillion in assets, down about $1 trillion from its peak. Prime money market funds that invest in a variety of shortterm paper including that issued by banks and companies represent about half of the market.

U.S. prime money market funds pump more than $500 billion of funding into the euro area financial system, with roughly 70 percent of that going to France, the Netherlands and Germany, according to JPMorgan.

The top 20 issuers of shortterm corporate debt obligations are banking institutions, with BNP Paribas, Societe Generale, Groupe Credit Agricole, Banco Bilboa Vizcaya Argentaria and ING in the top 10, according to Moody's Investors Service. Including repurchase agreements, banks represented around 50 percent of total net assets of prime money market funds.

So far this month, about 81 percent of commercial paper issued would mature within 9 days, according to Federal Reserve data. In 2009, only 73 percent of such shortterm debt issued would expire in less than 10 days.

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