August 12, 2013 / 3:33 PM / in 4 years

UPDATE 1-U.S. money funds raise European holdings in July -JPMorgan

NEW YORK, Aug 12 (Reuters) - U.S. prime money market funds raised their holdings of European bank debt in July as investors moved some cash back into money funds from government securities at the start of the third quarter, according to a report by JPMorgan Securities released on Monday.

U.S. prime money funds’ exposure to euro zone banks increased by $12 billion to $212 billion last month after a $18 billion decline in June. Since the end of 2012, the funds have raised their holdings of that region’s bank paper by about $16 billion, JPMorgan said.

The bulk of the July increase was in French bank debt, which grew by $8 billion to $123 billion.

U.S. prime money market funds are seen as slightly riskier alternatives to bank accounts. They could invest in very short-dated bank debt in addition to U.S. Treasury bills.

The U.S. prime money market funds tracked by J.P. Morgan had $1.437 trillion in total assets at the end of July.

These funds also raised their holdings of other European bank debt last month, particularly bank paper from Sweden and the United Kingdom by $11 billion to $230 billion.

On the other hand, prime funds reduced their exposure to Swiss, Canadian, Australian and U.S. banks in July.

The combined $15 billion decline in Canadian and Australian exposure last month brought the year-to-date drop in those two countries to $36 billion, J.P. Morgan analysts said. They attributed the decrease to “how rich they still trade relative to other banks.”

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