US money market funds, nervous about the euro zone debt crisis, are making more loans to euro zone banks in the form of short-dated repurchase agreements secured by the safest collaterals, Fitch Ratings said today.

This shift in lending away from commercial paper and other types of unsecured lending comes as the $2.6 trillion money fund industry continues to cut back on their overall exposure to the euro zone as the region's sovereign debt problem rages on.

Repurchase agreements (repos) made up 27 per cent of the 10 biggest US prime money market funds' total European exposure at the end of November, up from 17 per cent at the end of August, Fitch said in a report released today.

At the end of 2009, these funds' combined European repo holdings were 9 per cent.

"This shift to secured lending might reflect (these funds') risk aversion," the rating agency said.

Reuters