The Central Bank of Ireland released its latest "Money Market Fund Statistics" for Q2 2017. Its summary says, "The net asset value of Irish money market funds (MMFs) fell to E472.4 billion at end-June 2017, from E482.6 billion at end-March 2017.... Across sectors, central government and bank debt saw the largest quarter-on-quarter reductions in their holdings: E11.1 billion and E13.9 billion respectively. Central government debt security holdings have decreased by 35 per cent since end-December 2016." We review their latest statistics, and also quote from a Dow Jones article on European Treasurers, below. (Note: Just two weeks to go until Crane's European Money Fund Symposium, which will take place Sept. 25-26 in Paris and which will discuss issues involving Irish, French and European money market funds in depth. We're still accepting registrations!)

The Irish Central Bank writes, "The net asset value (NAV) of MMFs resident in Ireland at end-June 2017 was E472.4 billion, down from E482.6 billion at end-March 2017. Despite positive net transactions of E8.9 billion, negative revaluations of E19.1 billion drove a E11.2 billion decrease in NAV over the quarter. Total debt securities held by MMFs at end-June 2017 amounted to E350 billion, 9 per cent lower than the previous quarter. The decrease consisted of E19 billion in net sales of debt securities and a E14 billion negative revaluation."

They tell us, "The decrease was driven by holdings of US debt securities: they account for 84 per cent of net sales and 36 per cent of negative revaluations. The trend of net sales and negative revaluations of debt securities was consistent across most issuer countries. The most notable exception was France, which had a E1.6 billion increase in holdings of its debt securities despite negative revaluations of E1.4 billion. The increase was driven by E4.7 billion in purchases of French bank debt."

The report continues, "Across sectors, central government and bank debt saw the largest reductions in their holdings: E11.1 billion and E13.9 billion respectively. Central government securities have seen a 35 per cent decrease in their holdings since end-December 2016, standing at €40.4 billion at end-June 2017. The residual maturity of outstanding debt changed across maturity buckets. Net sales and negative revaluations of debt were concentrated in debt with residual maturity of less than one month and residual maturity between 3 to 6 months. The net impact is a minor shortening of the average maturity."

It adds, "The stock of negative yielding debt decreased by E6 billion to E54 billion at end-June 2017. However, as a percentage of the total stock of debt it only declined by less than 0.2 per cent.... Nearly all negative yielding debt is euro denominated, and correspondingly the overwhelming majority of euro denominated debt is negative yielding."

Finally, the Central Bank of Ireland comments, "The British Pound retained its status as the currency with the largest share of NAV.... Net inflows of E7.2 billion exceeded negative revaluations of E6 billion, leading sterling denominated MMF equity to reach a net NAV of E210 billion. MMF equity denominated in USD experienced a negative revaluation of E13 billion, to stand at E189 billion at end Q2. Money Market funds statistics are collected on the basis of monthly security by security reporting. The reporting population is comprised of those money market funds resident and authorised in Ireland."

In related news, Dow Jones Newswires writes about, "A European Treasurer's Mission: Losing the Least Amount of Money When Storing Cash." The article, featured on Fox Business' website, says, "Claire Bechaux doesn't have a lot of options. The treasurer of Veolia Environnement SA can only store limited amounts of money in bank deposits without having to pay for it. So, she is forced to park around two-thirds of the French environmental services company's cash in European money-market funds."

The piece explains, "Since December 2016, returns on investments in money-market funds have been negative. Investors and companies like Veolia use money-market funds as an alternative to bank deposits because they can quickly be converted into cash. European banks no longer want to hold as much corporate cash, and negative interest rates and regulatory changes make it less attractive for banks to accept large corporate deposits. This presents treasurers and finance chiefs with a daunting task: to lose the least amount possible when storing cash."

It tells us, "Company holdings of constant net asset value euro funds in Europe rose to EUR209.4 billion ($252 billion) at the end of 2016, from EUR139.3 billion at the end of 2012, according to the Institutional Money Market Fund Association. In France -- a big market for variable net asset value funds -- corporate holdings rose to EUR95 billion in the first quarter of 2017, compared with EUR72 billion in the first quarter of 2016, according to the AFG asset management association."

Dow Jones writes, "Overall, holdings of European money-market funds stood at EUR1.21 trillion at the end of March, according to the European Central Bank, an increase compared with previous quarters. Still, total holdings are slightly below their March 2009 peak of EUR1.32 trillion. Changes to European money-market funds, kicking in next year and 2019, could further dent returns, as they prescribe mandatory liquidity fees as well as redemption hurdles. But, the changes are expected to be less dramatic than the reforms that went into effect in the U.S. in October 2016."

The article adds, "Similar to other companies, Veolia's first priority for its cash investments isn't yield, but liquidity, coupled with security. Longer-term investments with a higher risk profile therefore don't serve as alternatives. This is also the case for Royal Dutch Shell PLC. The company held most of its cash -- $24 billion at the end of June -- in European money-market funds denominated in U.S. dollars. A small proportion sat in sterling and euro-funds."

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