London – European non-government short-term money market funds (MMFs) account for a limited share of European commercial paper (ECP) issued by non-financial corporates, according to the first iteration of Fitch Ratings’ ECP monitor. The monitor details ECP holdings by Fitch-rated European short-term non-government MMFs and complements Fitch’s US CP monitor report. Fitch will publish the monitor quarterly.
Fitch-rated European short-term non-government MMFs had combined ECP holdings of EUR88 billion at end-April 2020 (13% of total assets). EUR75 billion was in ECP issued by financial institutions and EUR12 billion issued by non-financial corporates, with the remainder issued by regional governments. Fitch estimates that European short-term non-government MMFs, in aggregate, owned around EUR96 billion of financial ECP and EUR15 billion of corporate ECP as of 30 April 2020, based on the total assets under management of all European short-term (non-government) MMFs according to iMoneyNet.
The European short-term market had around EUR1,370 billion of securities outstanding at end-March 2020, according to ECB data. However, public data availability on total ECP outstanding is limited, particularly in currencies other than euros. Banque de France data indicated outstanding negotiable ECP – known as NEU CP – of EUR253 billion. However, this data relates primarily to euro-denominated issues and only to issuance in France – a major ECP market.
Fitch obtained ECP market size estimates from two short-term market dealers, whose data was based on datasets from Dealogic and CMD Portal. The average amount of ECP outstanding across these two data points was USD529 billion as of end-June 2020. However, estimates ranged by USD118 billion. These data sets suggested ECP issued by financial institutions represented an average of USD145 billion (range of USD46 billion) and by non-financial corporates represented USD77 billion (range of USD22 billion). Conversely, BlackRock recently reported total non-financial corporate ECP outstanding of EUR134 billion as of end-June 2020.
Across all data sets, it is evident that short-term non-government MMFs have limited holdings of ECP issued by non-financial corporates. This is consistent with short-term non-government MMFs’ primary focus on securities issued by financial institutions and deposits with these entities. Fitch therefore believes that facilities launched recently by central banks to support non-financial corporate ECP did not provide material direct support to short-term non-government MMFs, although there were probably secondary, indirect effects as a result of improved market liquidity and reduced risk aversion.