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Templeton Euro Liquid Reserve Fund - News
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Templeton Euro Liquid Reserve comment - Mar 11
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Tuesday, 14 June 2011
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Fund Manager Comment
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FTIF Templeton Euro Liquid Reserve Fund produced a net return of 0.22% (A [Ydis] shares in euros) for the quarter ended 31 March 2011, compared to a return of 0.17% for its customized benchmark. While risk aversion drove global fixed income market performance during the closing weeks of 2011's first quarter, due to unrest in the Middle East and natural disasters in Japan, the global fixed income markets remained relatively unchanged from an economic perspective. Sovereign credit fundamentals in core Europe and the U.S. were helped by relatively positive economic news that emerged over the quarter. Overall government bond yields in the UK, the U.S. and Germany rose modestly as a result. Consequently, the key three-month Euribor rate, traditionally the main gauge of interbank euro lending, rose from 1.00% on 3 January 2011 to 1.23% on 31 March 2011. Such a rise needs to be seen in perspective though-the rate briefly touched 5.39% in October 2008, shortly after the collapse of Lehman Brothers. Macro risks and uncertainties clearly increased throughout the quarter, and we expect they will likely cause some spread volatility going forward. But at this point we still believe that the economic environment should remain supportive for most investment-grade issuers. Spreads continue to be wider than historical averages, particularly for the financial sector, while fundamental credit trends are broadly positive. As a result, the fund's security selection in floating-rate notes (FRNs), the vast majority of which are issued by banks, slightly benefited relative returns. The FRNs in the portfolio have slightly more credit risk than standard euro commercial paper and thus are subject to more mark-to-market volatility. Many securities in the portfolio, however, were purchased at prices below par, when the financial markets were in severe difficulty. Moreover, we remain firm in the view that although sovereign tensions tend to edge up money market rates, improvements in the fundamentals of certain parts of the global economy make us less concerned that Euribor rates could widen out to post-Lehman-Brothers-collapse levels.
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Templeton Euro Liquid Reserve comment - Jun 10
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Thursday, 26 August 2010
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Fund Manager Comment
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FTIF Templeton Euro Liquid Reserve Fund produced a net return of -0.23% (A [Y dis] share class in euros) for the quarter ended 30 June 2010, compared with a return of +0.07% for its customized benchmark.
Concerns rose in the markets as the key three-month Euribor rate, traditionally the main gauge of interbank euro lending, rose from 0.63% at the end of March to around 0.8% three months later. Such a rise needs to be seen in perspective-the rate briefly touched 5.391% in October 2008, shortly after the collapse of Lehman Brothers. Yet, even the second quarter's modest rise in interbank rates was taken as a sign that fears about the creditworthiness of European financial institutions were on the rise again, especially as central banks had supplied abundant liquidity to the banking system over a long period. According to this interpretation, worries about counterparty risk were prompting more banks to park cash with the European Central Bank (ECB) even though it was offering just 0.25%. An alternative and more benign explanation held that the Euribor rate rose because of falling demand for funds from the ECB. The resultant fall in cash within the system automatically forced interbank rates higher. Indeed, as the quarter drew to a close, the ECB revealed that many European banks had decided against rolling over loans from a record Ç442 billion one-year tender that matured on 1 July. This was taken as a sign of improving market conditions. Volatility in government debt markets also showed signs of easing slightly. It was hoped that the publication of the results of European bank stress tests near the end of July would help lift sentiment in European interbank markets just as similar tests did in the U.S. last year.
The portfolio suffered slightly from the renewed tensions in the interbank market. In particular, the fund's significant investments in floating-rate notes (FRNs), the vast majority of which are issued by banks, hurt relative returns. The FRNs in the portfolio have slightly more credit risk than standard euro commercial paper and thus are subject to more mark-to-market volatility. In particular, top FRNs in the portfolio proved temporarily less attractive than euro commercial paper due to the credit effects of slightly longer-term final maturities.
Yet many securities in the portfolio were purchased at prices below par, when the financial markets were in severe difficulty. And while the fund is restricted in the maturities in which it can invest, a possible relaxation in the interbank offered rate could support attractive medium- and long-term performance. Indeed, by late July, the announced results of the ECB bank stress tests suggested that recent credit concerns were most probably misplaced. We believe diminishing money market tensions following the tests are likely to lead to a recovery in FRN prices.
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Templeton Euro Liquid Reserve comment - Mar 05
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Friday, 29 April 2005
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Fund Manager Comment
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For the quarter in review the FTIF Templeton Euro Liquid Reserve Fund generated a positive return of 0.22%. During the period, the 3-month Euro Benchmark yield was relatively unchanged from the prior quarter at 2.16% and the 6-month yield declined slightly to 2.16% from 2.17%.
The European Central Bank (ECB) left interest rates unchanged at 2.00% during the quarter amid declining growth expectations and mixed inflation data. Fourth quarter data released during the month showed the Euro Area economy slowed further to 1.6% y/y from 1.8% in the third quarter and 2.1% in the second quarter. Weakness was particularly evident in the German economy, with real GDP growth declining 0.2% from the third quarter. The European Commission lowered their 2005 growth forecast to 1.6%. Additionally, while headline inflation remained slightly above the ECB's target, core inflation rates slowed significantly in the first quarter. The lack of underlying inflation pickup in the Euro Area is unsurprising given the weak domestic economy along with the strength in the currency containing tradable goods prices, such as oil.
Given a relatively slow pace of economic growth and a soft labor market, we anticipate underlying inflation conditions to remain tempered and hence, the Euro Area will lag other major central banks in tightening monetary policy into the current global economic cycle. As of quarter-end, the Fund's actual days to maturity were 49 days, compared to 29 days at the end of the prior quarter. The Fund consists of high quality money market securities with maturities ranging from overnight to one-year, with 23.03% in cash and cash equivalents, 0% in corporate debt and 76.97% developed sovereign government/agency debt.
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Templeton Euro Liquid Reserve comment - Sep 04
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Wednesday, 23 March 2005
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Fund Manager Comment
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For the quarter in review the FTIF Templeton Euro Liquid Reserve Fund generated a positive return of 0.22%. During the period, the 3-month Euro Benchmark yield was unchanged from the prior quarter at 2.15% and the 6- month yield rose slightly from 2.12% to 2.16%.
During the quarter, the European Central Bank (ECB) left interest rates unchanged at 2.00%. While overall inflation rates picked up during the third quarter on rising energy costs, underlying inflationary pressures remained contained. The firming economic growth trend in the first half of the year appeared to pause in the third quarter with real GDP growth slowing from 2.0% in the second quarter to a preliminary estimate of 1.9%. While Euro Area exports expanded over the period on continued global growth, domestic demand remained weak on slow investment growth and as soft labour market conditions hampered a recovery in consumer spending.
Given a relatively slow pace of economic growth, a soft labor market and renewed currency strength in the third quarter, we anticipate underlying inflation conditions to remain tempered and hence, the Euro Area will lag other major central banks in tightening monetary policy into the current global economic cycle. As of quarter-end, the Fund's actual days to maturity were 55 days, compared to 62 days at the end of the prior quarter. The Fund consists of high quality money market securities with maturities ranging from overnight to one-year, with 36.43% in cash and cash equivalents, and 63.57% developed sovereign government/agency debt.
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Templeton Euro Liquid Reserve comment - Jun 04
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Friday, 13 August 2004
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Fund Manager Comment
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For the quarter in review the FTIF Templeton Euro Liquid Reserve Fund generated a positive return of 0.22%. Over the period, the 3-month Euro Benchmark yield rose from 2.02% to 2.15% and the 6-month yield rose from 1.90% to 2.12%.
During the quarter, the European Central Bank (ECB) left interest rates unchanged at 2.00%. Yields rose, however, on the back of rising rates in the U.S. The dichotomy between the pace of external and domestic growth remained. Export growth from rising global demand continued to support overall aggregate economic growth, having reached only 1.3% y/y in the first quarter. Slack in the labour market and slow gains in confidence continued to hamper domestic demand, particularly with regard to the household sector, limiting underlying inflationary pressures.
Looking forward, we anticipate the Euro Area to continue to lag most other major economies both in terms of pace of economic recovery as well as beginning a monetary tightening cycle. As of quarter-end, the Fund's actual days to maturity were 62 days, compared to 61 days at the end of the prior quarter. The Fund consists of high quality money market securities with maturities ranging from overnight to one-year, with 39.13% in cash and cash equivalents, and 60.87% developed sovereign government/agency debt.
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