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[NEW YORK] US money market mutual funds have reduced their exposure to short-term British bank debt ahead of the June 23 referendum on whether Britain would stay in the European Union, JP Morgan Securities said on Monday.
At the end of May, the prime money funds, which JP Morgan tracks, cut their holdings of commercial paper, certificates of deposits and other short-dated securities issued by British banks by US$4 billion from April to US$41 billion.
Year-to-date, however, the funds' holdings of British bank debt was up US$6 billion from the end of 2015, JP Morgan data showed.
"Brexit risks appear to have had a modest effect on holdings of British banks to date," JP Morgan analysts Alex Roever, Teresa Ho and John Iborg wrote in a research note.
"With the Brexit referendum vote just two weeks away, we expect volumes in short-term British bank debt to be low for the time being," they said.
Betting markets showed traders scaled back expectations Britain would remain in the EU, while recent polls showed a growing numbers of Britons would likely to vote to leave the EU.
Investors and policymakers have worried a departure would harm the British and European economy.
Rating agencies might downgrade their credit ratings on Britain if Brexit were to happen, JP Morgan analysts said.
Standard & Poor's has kept UK with its top AAA-rating since 1978, while Moody's and Fitch assigned their second-highest credit ratings to Britain.
Credit downgrade might affect the ratings of British banks, according to the JP Morgan analysts.
"However, all things considered it is important to note that British banks do not rely heavily on the US money markets," they said.
Prime money funds had US$924 billion in assets at the end of May, down US$35 billion from April.