U.S. money market funds (MMFs) and banks located in peripheral European countries continued reducing their holdings of ABCP over 4Q10, according to a Fitch Ratings report.
This trend is part of the overall market reduction in ABCP outstandings. Total commercial paper outstanding, including unsecured commercial paper outstanding, has also dropped in 4Q10.
At the same time, MMFs increased their repurchase agreement (repo) allocations. According to the Fitch report, as of December 2010, repos accounted for 21% of total U.S. prime institutional MMF assets, up from 19% at the end of September 2010 and above the 17% average for the year as a whole.
Exposures to the five largest repo counterparties also increased in 4Q10, reflecting the diversification challenges faced by MMFs resulting from industry consolidation and credit deterioration of previously approved institutions.